The European market for renewable energy certificates broke new records in 2018
03 October 2019 | Markets
The European market for renewable energy certificates broke new records in 2018, with the supply of Guarantees of Origin for hydro, wind and solar electricity reaching nearly 600 terawatt hours (TWh) last year.
At the moment, the market for GOs is almost entirely focused on corporate purchases of green electricity, with hydro clearly dominating the European market. But wind power is now the fastest-growing sector while interest in solar and – surprisingly – biomass is also picking up.
For years, demand for biomass certificates has been sluggish. Corporate buyers of electricity remained cautious due to fierce public debates about sustainability and fuel accounting – what actually goes into biomass power plants. However for the first time, demand in 2018 has caught up with supply.
In Europe, informatic and digital services companies are increasingly turning to corporate renewable Power Purchase Agreements (PPAs) as part of zero-carbon power supply objectives. One way to trace and prove their renewable energy consumption is to buy both the renewable power and the accompanying Guarantees of Origin (GOs).
“The rise of corporate renewable Power Purchase Agreements (PPAs) has been a game-changer, providing energy-intensive consumers with a cheap, clean and reliable power supply,” said WindEurope, a trade association.
GOs for gas
But while the market for green power certificates is already mature and growing, the issuing of GOs for biogas, hydrogen, and heating & cooling only started since December last year, when the EU formally adopted its revised Renewable Energy Directive.
Green Gas Certificates enable companies to make 100% renewable gas claims. In Europe, these are documented by the European Renewable Gas Registry (ERGaR), which brings together national registries across Europe.
ERGaR currently has members in ten countries, enabling cross-border trading of gas certificates between Austria, Belgium, Denmark, France, Germany, Ireland, Italy, the Netherlands, Switzerland, and the UK.
“What ERGaR is trying to do is making sure the system works across borders within the European market. So that what’s injected into the grid in Italy can be used in Sweden and certified as biomethane across borders,” said Susanna Pflüger, secretary-general of the European Biogas Association (EBA).
However, membership is purely voluntary and, with growing demand for gas certificates, calls for a harmonised EU system are becoming louder.
“What we’re asking for is that all countries producing biomethane put in place national registries,” Pflüger said. “The national certificates for biomethane should be aligned all over Europe, issuing similar certificates that are accepted by all European registries and in our view, they should also name the feedstocks used for biomethane production,” she said.
Indeed, the environmental footprint of biomethane can vary depending on the feedstocks – whether those came from dedicated energy crops like maize, agricultural and forestry waste or livestock manure, for instance.
“This is where definitions matter. Regulators need to know what’s meant exactly by sustainable biogas. And those definitions aren’t there yet,” Fischer said.
According to Pflüger, the problem actually goes beyond the environmental traceability of gas – it’s also about avoiding fraud.
“Once biomethane is injected into the grid, you can’t separate it from natural gas, the molecule is the same. So we need to trace what goes in and what goes out of the pipeline in order to avoid double counting,” Pflüger said.
In order to validate the “renewable origin” claim, the green gas producer and the green gas consumer should be attached to the same pipeline network so that a physical link between producer and consumer can be ascertained.
But the system works best if every country is hooked to the same hub and has the same accounting methods in place. And part of the problem is that the Renewable Energy Directive doesn’t say much about guarantees of origin.
Certification is more developed on the electricity side, where the issuing of GOs is done in a standardised way, under oversight from the Association of Issuing Bodies (AIB), which brings together national registries under a harmonised system.
However, it took years for the AIB to take shape, starting on a voluntary basis.
Moreover, even though the AIB is widely recognised, membership is not mandatory and some countries are still not hooked to the system, Lindberg points out, with only 22 countries currently registered as active members, including some outside of the EU.
On the gas side, developments are following the same pattern, with ERGaR membership still voluntary for the time being. And the vague definitions in the Renewable Energy Directive don’t help speed things up.
While the directive obliges member states to issue GOs for renewable gas, it makes it optional to issue GOs for non-renewable, decarbonised gases, such as hydrogen produced from fossil gas with Carbon Capture and Storage (CCS).
For some in the industry, the two must be clearly distinguished. “Where GOs are issued also for non-renewable, decarbonised gas, a clear distinction between renewable and non-renewable GOs must be possible,” one industry source said.