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GO basics: a guide to Guarantees of Origin

June 13th, 2024
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If you’re looking to increase your business’ investment in green sources such as renewable energy, you may have come across the term Guarantee of Origin (GO) but what is it and how does it apply to your business? We’ll explain in this GO basics complete guide.

As more businesses venture into renewable power procurement, Guarantees of Origin are becoming a more desirable reassurance of where your energy is coming from. A Guarantee of Origin guarantees that the energy you buy is produced from a specific power plant, usually differentiating the choice between renewable or non-renewable energy. The scheme certifies the source of a procured unit of energy, showing that it was produced from a renewable source.

This is helpful for a company attempting to measure its carbon footprint as it can determine the amount of renewable energy being used by the business.

Guarantees of Origin were introduced in 2011 alongside the EU’s Renewable Energy Directive, which was the first of its kind. 

The Process: How Renewable Certification is Issued and Traded

Traditionally, it had been difficult to track the exact source of a unit of energy, but Guarantees of Origin allow energy to be traced directly back to a source power plant that generated it. This is done via certificates which use an electronic mechanism to measure the energy generated by a particular source. Guarantees of Origin are issued based on how many MWh of electricity are produced. 1 MWh of energy is equivalent to one Guarantee of Origin.

The energy generated is sold independently to the accompanying certificate, so the buyer can verify the source of the energy is renewable. This is particularly desirable for businesses that have clients who manage carbon-conscious portfolios or actively deal with suppliers who have an impact on their carbon footprint.

The Value of GOs to Renewable Energy Sources

It can be beneficial for businesses buying renewable energy to receive Guarantees of Origin with their energy purchase, but why are Guarantees of Origin beneficial to the renewable providers that generate green energy? We take a deep dive into the value of Guarantees of Origin to renewable energy sources:

Encouraging investment in renewable energy 

While Guarantees of Origin don’t impact how much energy reaches the main power grid or affect the financial value of energy, the certification guarantees that revenue goes directly to a specific power plant, encouraging the purchase of renewable energy. 

Meeting emissions targets and showing the benefit through reduced penalties 

As carbon reduction targets get bigger, companies not hitting government-mandated carbon reduction targets may receive financial penalties. Companies looking to reduce their carbon footprint and, by proxy, attempt to hit carbon reduction targets may use Guarantees of Origin as a way to prevent penalties related to carbon emissions, encouraging other businesses to do the same.

How GOs Contribute to Transparency in Energy Production

 Guarantees of Origin are a vital tool for businesses to show their commitment to green energy to potential customers and to position themselves as preferred suppliers. This is because the certificates create transparency in energy production, enabling potential business partners, clients or investors to see exactly where a company’s energy is produced, and how ethically. 

Preferred suppliers for carbon conscious investors 

Many businesses are now managing what’s known as carbon conscious portfolios. This means that they consider their investment portfolio based on how a potential investment can impact their own carbon footprint, including investment in businesses that have positive sustainability credentials. This can include businesses that have entered PPAs, directly invested in renewable energy or have acquired Guarantees of Origin. Acquiring Guarantees of Origin could make your business a more attractive investment opportunity as the potential investor can see a clear pathway to your energy procurement via the certification. 

Climate-responsible to potential clients and consumers

 Guarantees of Origin can promote your business as a carbon-conscious investment opportunity and promote your sustainability credentials to potential clients or business partners. As more companies opt to connect with businesses that align with their own environmental, societal, and governance (ESG) values, potential partners may consider your energy procurement when choosing whether to contract with your company. Consumers are also becoming more conscious of corporate sustainability, choosing to buy from businesses that are transparent about their green manufacturing processes and sustainable energy procurement. 

International Context: International Renewable Energy Certificates 

Guarantees of Origin are only available in Europe, but other international options are available for carbon-conscious energy procurers based outside of Europe. Businesses can acquire International Renewable Energy Certificates (I-RECs) or market-based certificates, which are available in Latin America, Africa, and Asia.

The Future of GOs: Market Mechanisms, Trends and Evolving Standards

There’s no doubt that interest in the investment of renewable energy has spiked in the last few years, with initiatives that go hand in hand with renewable investment following a similar trajectory. 2023 was a record year for the issuance of Guarantees or Origin, which reflected a direct impact of increased investment in renewable energy production in Europe generally. 

This year the issuance of Guarantees of Origin are expected to follow a similar trend, with issuances of Guarantees of Origin holding strong. As Guarantees of Origin are considered part of PPAs, this popularity of Guarantees of Origin is directly linked to the expected uptake in PPAs in 2024, particularly as alternative PPAs such as hybrid and floating PPAs are expected to gain in popularity. 

Corporate consciousness is also expected to have an impact on the uptake of Guarantees of Origin. The RE100, a global association of 250+ companies is one organisation driving corporate conscience - members have pledged to consuming 100% renewable energy before 2050. The success of RE100 is the prominence of its members, which include Apple, Google, Microsoft, Facebook, NIKE, Sony, IKEA and BMW.

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