Guarantees of Origin (GO): What it is and why it needs an update

In the realm of renewable energy, the European Guarantees of Origin (GO) scheme, is defined by EU Directive 2018/2001 (RED II). It serves as the established framework for tracking renewable energy.

Each Member State (MS) has incorporated RED II into its national legislation. This, is to ensure compliance with the EU technical standard CEN – EN 16325. The primary objective of GOs is to furnish end consumers with precise information about their energy supply. It is playing a critical role in environmental, social, and governance (ESG) reporting.

These certificates also function as market-based tools to drive down carbon emissions and stimulate further expansion of renewable energy.

The Structure of the Guarantees of Origin Scheme

Each Member State (MS) operates its own Issuing Bodies and Registries. While some independent decisions can be made by each MS regarding GO issuance criteria, alignment among different registries is essential for GO exchange between MS.

The Association of Issuing Bodies (AIB) facilitates this exchange. It does so through a central data space employing its standardized European Energy Certificate System (EECS).

Presently, 28 countries are integrated into this EECS network. GOs are primarily traded Over The Counter (OTC) by authorized brokers acting on behalf of energy suppliers and other entities.

Auction Systems in Some Countries

Certain countries employ auction systems for GOs. For example, the European Energy Exchange (EEX) initiated GO auctions in September 2019. This was followed by the launch of the first pan-European Guarantees of Origin market by the European Power Exchange (EPEX SPOT) SE in 2022.

Weaknesses of the EU Guarantees of Origin Scheme

While the EU GO scheme provides reliable information for energy-related disclosures and ESG reporting, there are opportunities for improvement. Particularly in two key areas:

Temporal Match Information:
The GO scheme currently lacks data on the alignment between production and consumption times. This is hindering corporate consumers seeking to optimize their energy procurement strategies.

Transportation Capacity Oversight
The mechanism overlooks the electrical grid’s transportation capacity. This potentially enables suppliers to purchase GOs from countries with limited or no electrical connection to end consumers.

The Energy Track and Trace team advocates for addressing these opportunities promptly through either regulatory or market-driven solutions. This enables us to capitalize on the existing momentum toward decarbonizing energy consumption.

Anticipated Changes to the Guarantees of Origin Scheme

Ongoing negotiations to revise RED II indicate an acknowledgment by EU legislators of the necessity for GO scheme reform. The European Parliament’s (EP) recent approval of proposed amendments underscores this understanding. These changes aim to introduce supplemental information for guarantees of origin, enhancing their granularity and accuracy. While these proposed adjustments are promising, the market demands swifter solutions and further refinement in several areas, including:

Temporal Matching Extension for Consumption Data
To validate temporal matching between production and consumption, the GO scheme must encompass electricity consumption data. This development is not presently outlined in RED III.

Fundamental IT System Redesign
Transitioning from a volume-based to a time-based system requires a substantial overhaul, involving more frequent, automated transfers with smaller certificates.

Immediate Market Demand Response
Current changes in the established GO scheme may not align with short-term demands from corporate consumers seeking 24/7 Carbon-Free Energy (24/7 CFE). A more accurate and reliable tracking solution is imperative in the short term.

Energy Track and Trance stands prepared to offer  this solution to the market, ushering in a new era of energy tracking and certification.