Renewable certificates, green tariffs and Guarantees of Origin

A key tool for corporate energy buyers, as well as sustainability communicators and auditors, these tools can help energy buyers distinguish between credible and superficial "green" offers.

The three key certificate systems are renewable certificates, green tariffs and guarantees of origin, but they validate very different elements of sustainable energy practices. 

These certification processes, if used correctly, can protect organisations from greenwashing and can ensure integrity in low-carbon procurement. But the different policies and regulations governing these certifications can feel like a minefield, so we'll aim to clarify the complex world of renewable energy certificates and tariffs, helping energy buyers avoid reputational pitfalls and ensure genuine carbon reductions. We outline some of the best reporting best practices and standards to help you get the best out of green energy verification tools.

How certificate systems work

The lifecycle of a certificate follows a specific structure to ensure that verification is assured.

• Origin - A certificate is produced for each megawatt of energy created in a renewable energy plant. 

• Issuance - A plant applies for a certificate for this megawatt of energy to be verified as coming from a renewable source. 

• Trading - A certificate is available for purchase on the energy market.  This may help companies meet either mandatory or voluntary carbon-emissions reduction goals. 

• Retirement of certificates - The national registry must be contacted to retire a certificate to ensure there is no 'double-counting', a greenwashing technique where certificates are used more than once. 

Market- vs. location-based accounting

There are two key methods for accounting for emissions. Market-based accounting accounts for specific renewable energy investments and financial instruments, such as Guarantees of Origin (GOs) and specific agreements to account for emissions. This method allows companies to highlight their investment in renewable energy. Location-based accounting, on the other hand, uses the average emissions intensity of the entire local grid and doesn't account for factors such as GOs.

What GOs actually prove

A guarantee for investors or auditors dealing with a specific business, GOs verify that a given MWh of energy came from a renewable source. 

Energy attribute certificates (EACs) as proof of generation origin

EACs act as a guarantee of green entry by providing transparency into a specific source of energy, allowing consumers to choose to invest in businesses and energy plans (in the case of utility providers) that support sustainability goals. They also offer companies procuring energy the opportunity to clarify their energy consumption, helping them achieve both self- and government-imposed carbon-reduction goals.

Limits: no physical link to consumption, risk of double-counting

One key limitation of these verification tools is that the green attributes aren't directly linked to the physical electricity, as energy is sold separately on the energy market. Perhaps the most crucial element of GOs and other certification schemes is their role in reducing greenwashing: a verified source guarantees that energy parcels cannot be claimed twice, thereby reducing the risk of greenwashing. However, because electricity is sold physically separately from the certificate, this is still not a foolproof method.

The difference between green tariffs and PPAs

There are several contractual formats available for procuring green energy, with frameworks suited to different types of businesses and energy needs. 

Supplier-bundled vs. direct offtake

The key difference between green tariffs and PPAs is the method of verifying low-carbon energy consumption. A green tariff is a guarantee from an energy supplier to an energy consumer that the energy consumed will be matched by the same amount delivered to the grid, so that the customer is essentially paying for green energy. A PPA, on the other hand, is a direct-off-take contract, meaning it's a set amount of energy confirmed for a specific period at a particular price from a specific power plant. 

Pricing, term length, and traceability differences

One specific element of a contract that sets a PPA apart from a green tariff is its length: PPAs tend to be much longer, with contracts lasting, on average, around 10 years. A PPA also allows a buyer to purchase energy directly from a supplier, meaning the energy can be traced back to that specific power plant. The cost savings are often higher than with a green tariff, as the PPA customer is protected from energy price hikes.

Additionality and credibility in green claims

While many businesses invest in green energy, the downside is that it doesn't necessarily reduce preventable carbon emissions. Some companies will opt to invest financially in carbon-reduction schemes but not actually alter their consumption in operational areas where it could be reduced. Why does 'additionality' matter for genuine decarbonisation? This is because additionality ensures that emission reductions would not have occurred unless a specific intervention, such as carbon credit sales or a PPA, was undertaken. 

Factors such as independent third-party verification of green claims, prioritising reducing carbon emissions over offsetting, and participating in successful voluntary initiatives such as the RE100 guidance are best practices for assessing supplier claims.

How to verify and report renewable sourcing

Electronic tracking systems, such as REC registries, are used throughout the lifecycle of a certificate to verify the active status of that verification tool. Public disclosure of sustainability efforts is crucial for a business's transparency; the use of recognised frameworks to do so is key for clarity and the building of successful audit trails. Finally, avoiding misleading communications is key to brand reputation. Clarifying and checking the specifics of each verification tool before promoting is best practice. Not all green power is equal, so understanding certificates separates genuine impact from marketing gloss.