Utilities

Are All GOs Equal, Or Are Some GOs More Equal Than Others?

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<p style="text-align: justify;">As in every market, renewable energy producers want their products to stand out. It is not just wind power, it is local community owned wind power. It is not just solar power, it is solar power that you can generate on your own roof. This product specific promotion is a great sign of a growing market with increasingly well-informed consumers who can find an option that meets their needs and matches their values.</p><p style="text-align: justify;">In order to link their consumers with the particular type of power that they are selling, EU based suppliers have only one option. They must certify the power by requesting, transferring, and cancelling guarantees of origin (GOs) &ndash; the EU&rsquo;s system of Renewable Energy Certificates.</p><p style="text-align: justify;">Unfortunately, sometimes, GOs are cast not as the hero of the piece but as the villain. This is because GOs do not discriminate. They function in the same way for a new wind farm in sight of its target market as they do for a hydro plant build decades ago, and hundreds of miles from its customers. Indeed, GOs are not limited to renewable power. Any electricity can be certified, including that from fossils or nuclear. GOs are simply a tool for informing consumers about the power they are buying. On a standard commodity contract the buyer consumes the standard or residual power mix. On a product specific contract, backed by guarantees of origin, the amount of power the customer consumes is linked back, through the certificate, to the specific generation technology and/or location that they have chosen to buy from.</p><p style="text-align: justify;">In this way the guarantee of origin makes no judgement about what power source may be more equal than another, it simply makes the contractual connection between generator, supplier, and consumer. The GO informs and empowers consumers to realise the choices they are making based on the values they hold &ndash; just as a label in your jeans tell you where they were made and with what materials.</p><p style="text-align: justify;">It is not the label itself that matters but the information that it communicates. So, if all GOs are inherently equal, what about the power that they are tracking? Obviously, renewables like wind and solar avoid the climate change causing emissions of fossil fuels and have none of the waste and potential disaster concerns of nuclear. But what about the differences between renewables? The negative impacts on natural habitats of the damming of rivers for hydropower are well known. Equally, some bioenergy has been shown to be at least as, if not more, polluting than the fossil fuels it seeks to replace. What is more, if we are to transform our energy systems to eliminate all emissions we cannot only rely on the renewables we already&nbsp;have &ndash; we need more, a lot more.</p><p style="text-align: justify;">These considerations give renewables suppliers the chance, through guarantees of origin, to promote the power they sell as being the best for both the consumer and the society and environment in which they live. For my part, I live in Belgium and buy power from some of Eneco Belgium&rsquo;s 96 wind turbines and 275,000 solar panels. This contract meets my values for having a convenient and affordable power contract with electricity sourced from relatively new wind and solar based in the country in which I live. This is one way in which I can support the energy transition and I can trust the contract I have because it is backed with guarantees of origin that are overseen by regulators. I know that I pay for the value I attach to this power source, and I am happy to do so.</p><p style="text-align: justify;">However, others might not be so informed or concerned. After all, I have worked on climate and energy issues for my whole professional life. Someone else might only be concerned about buying renewable power and not look any further into it. Does this make their choice less &lsquo;impactful&rsquo; than mine? Some would say yes. If they are not specifying a type of renewable power or a location from which it must come then the chances are they are getting the cheapest green power in the market &ndash; in the EU that means Nordic hydropower. Big hydro was built long before the need for an energy transition was acknowledged. It was built because it was cheap and because the impact on natural habitats was either ignored or not sufficiently taken into account.</p><p style="text-align: justify;">So, are guarantees of origin from old hydro equal to those from new wind and solar? From a technical perspective, unequivocally yes. As made clear above, the GO itself is just a tracking tool and can be applied to any power generation. It has no intrinsic value other than the information it contains. From an economic perspective, a more nuanced yes. The GO itself may be equal, but the value a buyer or seller applies to it may be different. As with any product, the more we value it the more we will ask for it or will be willing to pay for it. From a social and environmental perspective more nuance. The urgent need for a comprehensive energy transition means that we need a lot of new wind and solar and the more this is supported by consumer demand the better. But the energy transition is not only about the new power generation that is being built. It is also about the power that is already there and may or may not be used. Every megawatt-hour of Nordic hydro that is generated and consumed is a megawatt of gas or coal power that is not. Also, a unit of power, as certified by the GO, can only be consumed once. So once a consumer takes it out of the market, it is not available to the next buyer who may instead have to look tobuy more &lsquo;impactful&rsquo; renewables.</p><p style="text-align: justify;">In summary. All GOs are equal because they are simply an informational tool that empowers consumer choice for types of power. Whether all renewables are equal is a matter of opinion. But even the consumption of less &lsquo;impactful renewables will a) avoid the consumption of fossil fuels and b) move the market as a whole to the use and construction of the newer renewables that are needed for the energy transition.</p><p style="text-align: justify;">Every consumer must make their choice as to what is &lsquo;green enough&rsquo;, and it is thanks to guarantees of origin that they have the opportunity to do so.</p><p style="text-align: justify;">&nbsp;</p>
KR Expert - Adam White