Certificates of origin and guarantees of origin as mechanisms to support the production of electricity from renewable energy sources

According to the EU strategy „Europe 2020”, the European Union aims to achieve 20% of final energy consumption from renewable sources by 2020. The provisions of the Polish Act on Renewable Energy Sources (RES Act) which entered into force on 4 May 2015 (in case of certificates of origin – on 1 July 2016) introduce several support mechanisms for entities generating electricity from renewable energy sources. Below is a brief description of two of them – the mechanism of certificates of origin and guarantee of origin.

What is the certificate of origin?

The certificate of origin (commonly known as the „green certificate”) is a document confirming that a certain amount of electricity covered by the certificate was generated from renewable energy sources (RES). Certificates are issued by the President of the Energy Regulatory Office at the request of a producer of electricity generated from RES. Property rights arising from a certificate of origin are transferable and constitute a stock exchange commodity. This support system can be used, with a few exceptions, only by producers of RES installations in which the energy was generated for the first time before July 1, 2016. These producers will be entitled to a certificate of origin for the next 15 years, but no longer than until December 31, 2035. In relation to producers whose renewable energy installations were put into operation after 1 July 2016, the mechanism of certificates of origin was replaced by an auction system.

The possibility of returning a part of the investment for the construction and operation of the RES installation of the producer is ensured by the statutory obligation to acquire certificates of origin by large industrial consumers and energy enterprises. If these entities did not fulfill the obligation to purchase certificates of origin and then did not submit them to the President of ERO for redemption, then they would have to pay a substitute fee, the amount of which would be, of course, higher than the purchase price of the appropriate number of certificates of origin.

According to the data of the TGE S.A. (Polish Power Stock Exchange), the average price of certificates of origin in June 2019 amounted to PLN 129.47 for 1 MWh.

Register of Certificates of Origin

The entity organizing trade in property rights resulting from certificates of origin in Poland is Towarowa Giełda Energii S.A. (TGE). In order to participate in the trade in property rights resulting from certificates of origin, an entity (a producer of energy from RES, an entity obliged to purchase and redeem certificates of origin or intermediary) must obtain membership in the Register of Certificates of Origin.

The copy of valid license for electricity trading must be attached to the application for entry in the Register, if the entity is obliged to hold it on the basis of applicable regulations.

What is the guarantee of origin?

The guarantee of origin is a document confirming the final recipient that the amount of electricity specified therein introduced into the distribution or transmission grid has been generated from RES. There are no property rights arise from the guarantees of origin, unlike certificates of origin, but it is possible to transfer them to another holder, even from another EU country. However, double counting and showing the guarantee of origin is prohibited. Guarantees of origin are issued by the President of the ERO in electronic form for electricity produced with an accuracy of 1 MWh upon a written request of the producer. The guarantee is valid within 12 months of the date of producing energy.

The regulations do not provide for any obligation to acquire a guarantee of origin by any entities. Most companies use the opportunity to acquire guarantees of origin to improve their image and show that they support the production of energy from RES. At the same time, having a guarantee of origin does not mean that the energy used by the company comes from RES, because the guarantee of origin only confirms the fact of introducing energy from RES to the grid by the producer. According to TGE S.A. the average price of the guarantee of origin in July 2019 amounted to only 0.79 PLN / MWh. Therefore, this is only an additional mechanism of suport for producers from RES. Manufacturers should not count on high revenues from the sale of guarantees of origin of RES electricity generated by them.

Register of Guarantees of Origin

Guarantees of origin issued by the President of the ERO in electronic form are transferred directly to the Register of Guarantees of Origin, and the sale and purchase of guarantees of origin is possible only if the membership in the Register is obtained. As in the case of the Register of Certificates of Origin, the application for entry of an entity in the Register should be accompanied by a copy of a valid license for trading in electricity, if the entity is obliged to have it on the basis of applicable provisions.