Friday, 08 April 2022
Last week, the EnergyTag initiative unveiled the first version of the organization's framework that provides guidelines and standards in building a market for timestamped Granular Certificates (GCs) so that energy consumers have a choice in sourcing their electricity on a more granular level.
What are the current standards?
Currently, there are different types of Energy Attribute Certificates, in Europe, there are Guarantees of Origin, Renewable Energy Certificates in the United States and internationally there are I-RECs all of which are tools used to verify the source of electricity consumed. These certificates are credible ways that corporations and energy consumers can claim renewable energy use and that the former can use to offset Scope 2 emissions and raise their sustainability ratings.
Currently, these EACs are used to track/claim renewable energy use on an annual basis. For example, every year corporations calculate their final annual electricity consumption and then proceed to purchase the equivalent amount of EACs to show that the same amount of renewable energy was injected into the grid. Currently, EACs do not track more granular information on the time when the energy was generated not taking into account the variability of renewable electricity on the grid due to an array of variables like time of day, location and weather conditions etc.
The emergence of Granular Certificates
The EnergyTag Initiative has developed a more granular certificate that would take the existing format of EACs but modify it by adding an hourly or half-hour timestamp to the electricity generated. This would then allow consumers to accurately visualise their consumption profiles to see whether or not they do consume renewable energy every hour irrespective of claiming annual 100% renewable energy use.
In EnergyTag's webinar launching, founder Toby Ferenczi, said "As more renewable energy comes onto the grid timing becomes more important, as renewable shares increases temporal volatility in the carbon intensity of the grid increases and that means that annual matching no longer reflects the reality of the grid essentially with annual matching you can claim to use solar energy that may have been produced last summer during the daytime against consumption at night in the winter. This also means that the EAC certificates are priced the same regardless of time of day which is less inefficient as a price level" he further added "More and more organisations are recognising the importance of hourly matching and 24/7 has been widely discussed and we believe it to be the next big development in how people source energy."
EnergyTag's intention is to develop a harmonized global framework for the development of the granular certificates market while providing consumers the choice between different GCs sourcing methods such as temporal or geographical consumption matching.
Growth in hourly renewable energy sourcing support
Globally, there has been continued growth in organizations and initiatives that support 24/7 clean energy tracking. EnergyTag initiative itself is backed by over 100 organisations such as Google and Microsoft.
According to the United Nations, there is an urgent need to swiftly progress the global energy transition to mitigate the effects of climate change and provide clean and sustainable electricity in line with the UN's Sustainability Goal 7 (SDG7). This urgency has given rise to the UN's "24/7 Carbon-Free Energy Compact" a movement also coordinated by Google and is a consortium of energy buyers, energy suppliers, governments, system operators, solutions providers, investors, and other organizations that has "has joined together to accelerate the decarbonization of electricity grids by adopting, enabling, and advancing 24/7 Carbon-free Energy (CFE)".
Last year in December 2021, United States President Joe Biden signed an executive order to accelerate America's energy transition and reduce it's emissions across federal operations. The executive order listed five ambitious goals for the administration the first being "100 percent carbon pollution-free electricity (CFE) by 2030, at least half of which will be locally supplied clean energy to meet 24/7 demand."
In the EU, amendments to the Renewable Energy Directive (REDII) have been underway with some proposals for the REDIII (Article 15 & 19) aimed at providing further support to the Guarantees of Origin markets extending provisions to subsidised plants and green gas markets. While the current REDII does not make provisions for granular certification, some European market players have called for the inclusion of GCs within the REDIII with the EU Commission having also recognized its growth.
Across the globe, there has been continued growth in institutions already providing 24/7 carbon-free matching and expanding the market. In the UK for example the energy exchange NordPool with the U.K. National TSO GridESO and a start-up called Granular are expected to launch a centralized auction system for GCs between Q2-Q3 of this year.
Snapshot of Standards and Guidelines
EnergyTag's latest standards and guidelines were published in the hopes of providing a solid framework for the implementation and expansion of granular certificates. At the moment, granular certificates are expected to supplement existing EAC schemes that do not provide temporal matching themselves while also taking into account the prevention of double counting across different schemes and markets.
EnergyTag proposes two configurations in the relationships between GCs and existing national EAC schemes:
Within the first configuration, the issuer of Granular Certificates is the EAC issuing body and evolves from issuing standard EACs to issuing GCs based on granular measurement data.
In the second configuration, the Granular Certificate is issued on a GC platform that may also provide registry services. In this instance, double counting is avoided as the GC issuance is linked to the underlying EAC system. According to the standard, this GC platform may be operated by a third party or by the EAC issuing body.
According to EnergyTag the advantage of the first configuration is that it is easier in avoiding double-counting however its adoption in a country with an already well-established EAC scheme might be slower. Meanwhile, the advantages of the second configuration are that it complements existing EAC schemes therefore potentially allowing for faster adoption while creating a free market for GCs platforms however this way has a more complex double-counting mitigation process.
The accuracy in which electricity consumed is accounted for has been a hot topic within the market. Many global organisations, corporations, and countries are working on improving current EACs systems so as to accurately represent what is happening on the grid.
In France, since January 2021 an update to the French Energy Code (L'Article R314-66 du Code de L'Energie) launching monthly disclosure periods has been in force. The purpose behind this voluntary regulatory change was to bring more transparency and accuracy in the declaration of electricity production and consumption and also reinforce the French GO market. We also expect having more real-time claiming of consumption would result in more even issuance and cancellation patterns over the year as opposed to the spikes witnessed in certain times of the year such as March or October partly due to disclosure deadlines.
For the impact on EAC prices, on-time tracking of electricity production and consumption could potentially cause seasonal and time price variations of EACs which currently are priced the same regardless of the time of day. For instance, the price of a renewable EAC would be potentially higher when generated at an hour where renewable energy production is low and vice versa when production is high. This could potentially allow these consumers to better tackle their carbon footprint