This article is part of our special report Biomethane in the EU.
The market for Guarantees of Origin (GOs) linked to renewable gas is currently in its infancy. But with demand building up, industry figures – and environmentalists – are calling for existing certification schemes to be harmonised and made mandatory across the European Union.
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.
That’s according to ECOHZ, a Norwegian company that trades renewable electricity certificates, mainly in Europe and North America.
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, according to Tom Lindberg, managing director at ECOHZ.
“As a percentage, demand for biomass GOs has almost doubled in 2018. And that was also a bit surprising to us,” Lindberg told EURACTIV.
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, Lindberg said.
“We don’t know why this happened,” he admits, suggesting that over time, consumers and buyers of Guarantees of Origin (GOs) may have “come to grips with biomass being a sensible fuel”.
In Europe, companies like Microsoft, Google, and Facebook 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.
“That opens a platform for commercialising GOs for gas that’s injected in the pipeline network,” Lindberg told EURACTIV, saying the details are laid out in article 19 of the 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 told EURACTIV.
Environmental activists share the same view. A harmonised system of GOs for gas “would be desirable,” said Lisa Fischer from E3G, a climate think tank. However, she insists that any certification scheme needs to rely on “good definitions of the product,” making clear how the gas was produced, including the feedstocks used.
“And we haven’t cracked that yet,” Fischer 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, ECOHZ said.
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.
“The directive says nothing about harmonisation, also on the power side,” Lindberg explains. “And that’s unfortunate because it took 15 years to get these countries to harmonise on the electricity side”.
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. “It was all driven by market players until a sufficiently large number of countries started to cooperate,” Lindberg explains. “And this is how the AIB came about – it was afterwards”.
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.
“And that to me seems very strange – they shouldn’t have a choice. So I’m pretty sure the Commission is after them,” Lindberg said.
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.
GO further: Linking up electricity, gas and hydrogen
Others go even further, saying an ideal system of GOs should be interoperable to allow trading of certificates between different energy carriers – electricity, gas and hydrogen – as well as between countries.
Such a system, they argue, should be based on an EU-wide methodology on how to issue, register, transfer and cancel GOs or convert them between energy carriers.
“Rules must be clear and avoid double counting or fraud,” the industry source said, calling for “standardised minimum information on GOs across Europe” to reflect things like the types of installations used, their location, the energy carrier, or whether the installation received financial support.
If regulators and the gas industry are successful in putting together a reliable system for GOs, it could go a long way to decarbonise the gas sector – and help the European Union reach its climate objectives for 2030 and 2050.
“It can be a super impactful incentive for green investments,” said Tom Lindberg of ECOHZ, saying GO trading could add a revenue stream to biogas producers, like it did for producers of renewable electricity.
What’s more, there seems to be strong appetite on the market. “About 50% of renewable power production in Europe in 2020 will be certified,” Lindberg said. “And that’s going to increase – we’re looking at 1,600 TWh certified power in 2030.”
Considering that each GO sells for around €1-2.5 per megawatt hour, “over the next ten years, we’re looking at a huge revenue stream,” Lindberg points out.
“And if the gas market looks at this, they might choose a more rapid path to the GO market than the power sector did ten years ago,” he said.
[Edited by Zoran Radosavljevic]