A better integration of renewable sources in electricity markets translates into a dynamic market for certificates of origin GO - RECs

The percentage of electricity being generated and consumed out of the total energy mix is increasing. Europe is betting on this electrification trend to achieve its independence from third-country producers. A plausible scenario and a technology solution assessment.

Electricity markets current reality

Europe is decoupling the pricing of the electricity from fossil fuels prices while seeking a higher percentage produced by renewable sources. Spain has moved within 5 years from 40% renewable capacity installed in 2018 to 60% in 2023. The following chart shows the generation close to achieving up to 50% and close to an overtake to non renewable.

Electricity market and origin of certification have been to some extent separated or not as connected and automated as they could be. Renewable energy is produced and a renewable certificate is created the following month, 1 MWh metered= 1 GO. Environmentally concerned consumers and companies, some may also comply by law to use renewable energy, acquire these certificates of origin the months after, most likely via their suppliers. Desire for renewable energy is increasing, therefore its value. New players are entering production, such as prosumers, producers and consumers, thanks to their panels on a rooftop. An adaptation to make these markets accessible to everyone should be sought by all participants.

Possible future scenario

For example: a solar panel on a rooftop injects energy into the grid, measured by the smart smart meters, time-stamped certificates GOs at the time frame the electricity is being negotiated (.e.g. 15 minutes). Your electricity supplier either receives directly, or acquires this certificate, and cancels it for your home as electricity is consumed and measured by smart meters. Large portfolio imbalances can still be met at traditional exchanges, certificates with longer time ranges.

To achieve this idealistic scenario, or any of the possible ones in between, and develop a fairer market, the Association of Issuing Bodies, AIB, has expressed their main concerns and needs for improvement across their Member States:

• Timestamp on GOs encouraged.
• GO Size Defined: Default is set at 1 MWh, with provision for fractions where appropriate.
• Small Production Devices: mandatory simplified registration procedures for GOs.

With special focus to integrate the small producers and give them access to these untapped profits, efficient technologies should be assessed.

Cost effective technology that should be assessed

Blockchain stands out as a cost-effective, scalable, and transparent system with numerous applications. It facilitates timestamping and granularity, allowing for the precise fractionalization of certificates. Its versatility extends to issuing certificates, recording transactions, tracking balances, managing end delivery and consumption, and acting as a reliable settlement and clearing infrastructure for payments. Beyond these core functions, blockchain offers an “open platform” for companies seeking to innovate and create their own value-added products and services based on the data available in the register. This adaptability benefits all stakeholders across the spectrum, from large-scale energy farms to individual prosumers.

On top of this, the distributed ( a step after decentralization) shape of blockchain networks adapt to the tendency towards a decentralised shaped energy grid, at the same time providing higher reliability for fully functional transactions 24/7.

Summary

The technology presented is just one option, that to my knowledge and experience could handle the challenge, while being easy to deploy and scalable to any amount of data in the near future, other present or future technology tools could fulfil these requirements better.

Millions in potential value for producers are being lost, ranging from 5% to 10% of the energy's worth. A loss due to the lack of national markets and adequate transaction systems for liquidity purposes, which brings the right price discoverability. All participants from government agencies in charge of oversight and registers, energy suppliers, producers of all sizes should be prepared for a more dynamic market with higher volumes and higher values for renewable energy certificates. Is your company prepared for this transition?

Reads: AIB analysis and recommendations, Blockchain in GO certificates value chain