8. March 2017
Greenfact had a chat with Phil Moody from the Association of Issuing Bodies (AIB) and Jared Braslawsky from RECS International about the proposed revised Renewable Energy Directive, RED II, from the European Commission. We asked them about the controversial suggestions and their effect on the Guarantees of Origin market.
Greenfact: In article 19 in the proposed directive, it is written that “Member States shall ensure that no guarantees of origin are issued to a producer that receives financial support from a support scheme”. How will this affect the GO market?
Phil Moody, Secretary General, AIB: The likely result is that producers will prefer subsidies to GOs, which result in them receiving much more money per unit of energy produced, and that they will simply buy GOs from other countries.
Jared Braslawsky, Secretary General, RECS International: This will have an incredible impact on the market, in any market when the supply is reduced the price will increase enormously. This is however not necessarily a benefit to consumers and is part of our concern with the proposed directive. Generally we are very supportive of the draft of the Renewables Directive, it is a move in the right direction but this section is cause for significant concern. We believe that governments must be careful in making these big changes in the regulations as it can cause significant distortions in the market. A long-term view on the market for renewables is needed and governments should focus on this.
The primary problem with the proposal is that it doesn’t say when this is to be implemented or how it is to be implemented. It would be beyond destructive for existing projects if this was implemented for renewables that are already online. It would make existing long-term agreements and PPAs invalid. It would also go against the preamble of the Renewables Directive which suggest no regulation should affect the finances of existing renewables production.
“There have been some negative vibes with arguments of high costs, but our view, based on the experience of members, is that these are not justified” Phil Moody, AIB
GF: The discussion of full disclosure, providing guarantees of origin for all sources of energy, including dirty fuel, spurred discussions and complaints of financial burdens among others. What is your stand on this issue? And will it be enforced?
PM: Imagine going to a super market and buying an apple. It has a sticker on it saying it is certified organic, so you are happy to eat it. But when it is an apple with no explanation, you don’t know if the soil is contaminated, or if it has been sprayed with pesticides – it doesn’t have any label helping you to make an educated decision. It is the same with energy. Knowing it is a green product is great, but when you buy a mix of energy, then knowing what else you are getting apart from green energy is useful. With full disclosure, you know exactly what you are getting. And I want to know the bad stuff as well as the good stuff. It is important!
Sweden, Switzerland and Austria all support full disclosure, as it is good for carbon footprinting. It is also a good way for supply companies to organize their products. In the UK, for example, there is less resistance to nuclear power, so full disclosure will also benefit those who want to buy nuclear.
Will the Commission implement full disclosure? There have been some negative vibes with arguments of high costs, but our view, based on the experience of members, is that these are not justified. Our impression is that the Commission is sympathetic towards full disclosure, providing these concerns can be overcome.
“Frankly, it should be the same rules for renewable products as for non-renewables” Jared Braslawsky, RECS International
JB: It is too early for full disclosure; in many countries, better regulation is needed for specified electricity products and the Residual Mix. With these improved regulations, the portion of electricity that falls into the Residual Mix will come down dramatically. This option is more realistic than forcing each member state to comply with full disclosure regulations. The first logical step is that the GO will be made available for fossil and nuclear in all countries
The consumer should be able to choose: 100% green or, in lieu of a choice, 100% residual mix. It is the mechanism that is important; give consumer an individual product according to the consumer’s choice. And frankly it should be the same rules for renewable products as for non-renewables.
GF: Article 19, paragraph 11 states that “Member States shall not recognize guarantees of origins issued by a third party”. Which countries are considered third party?
PM: RED II and the Commission’s purpose is to govern the EU. All countries within the European Union, the European Economic Area and the Energy Community are covered by these regulations. Third parties are therefore countries such as Switzerland, Russia, Turkey and perhaps the UK following Brexit, which are close to the EU and have power lines connected to the Union.
GF: In the same article, it is written that “guarantees of origin shall be valid with respect to the calendar year in which the energy unit is produced…Member States shall ensure that guarantees of origin are cancelled by 30 June of the year following the calendar year”. How will this affect the pricing of the GO?
JB: We have a positive attitude to this proposal. It makes the definition of all electricity products much stronger. The RM is based on the production data of the previous year and the specified products are based on cancellation of GO’s. Working with calendar years excludes the possibility of double counting and makes the definition of the RM precise: RM is than the average of all production in a year minus all electricity produced certified with a GO. A condition is that all member states work with the same closing date and that all member states introduce the rule at the same time. Making the measure part of the REDII makes the improvements feasible, realistic and possible. The quality level of Information to consumers about the origin of the electricity consumed/purchased becomes more accurate.
PM: The Commission is proposing that GOs are valid for use in association with a calendar year when they represent energy produced during that calendar year, meaning that if the energy is produced in December, the shelf life of the GO is only 6 months, and it may attract a lower price. Common sense suggests that a GO with a shelf life of 18 months is more valuable than one lasting only 6 months. But keep in mind that this is only a draft directive, and like the last Directive (2009/28/EC) it may change a lot before it is approved.