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Green power traders fear for their future -- European draft directive forgets the voluntary green power market

The existing market for trade of green electricity in Europe could collapse under the European Commission's proposals for new renewables legislation. This was the stark warning that emerged from the renewable energy trading community at a conference in Amsterdam last month organised by RECS International, a Dutch company that sells renewable energy certificates.

Europe's green power traders are concerned about the Commission's proposals to make Guarantees of Origin (GO) the primary tool by which countries demonstrate their compliance with EU targets for renewables. They point out that this new use of GO will pull the rug out from under green credit trade. GO today are used to verify the "greenness" of electricity generated from renewables and are traded across borders to meet consumer demand for a green power supply.

Collectively, EU countries must get 20% of their energy from renewables by 2020 under the EU's draft renewable energy directive, requiring that about 35% of electricity comes from green sources. As the draft directive currently stands, GO will only be allowed to be traded with other member states when the exporting country is on track to meet its renewable energy targets and has green power to spare. Even then, some countries will be able to "opt out" and prevent trade across their borders altogether.

This will prevent the existing use of GO as a certificate for trade in green electricity, said Paul van Son from Deutsche Essent, a trader in renewable energy and the largest wind farm operator in Germany. GO should have three functions, he said: for target counting in each member state, as a certificate used for trading and for "disclosure" about fuel mixes. The directive as it stands only supports target counting. "This will lead to the collapse of the green electricity market based on GO," he says.

Christof Timpe of the Association of Issuing Bodies for green certificates in Germany suggested a model using "multiple GO," with each unit of energy awarded two GO -- one for disclosure and meeting demand in the voluntary market and the other for target counting. But this solution has its drawbacks.

One delegate pointed out that by buying imported GO, a customer in one country will be helping another country to meet its target. "Many people will not want to do that," he said. Michiel Karskens of the Bureau Europeen des Unions des Consommateurs in the Netherlands echoed this argument, saying payment for credits should be for additional generation of green power, not the same output. Customers buy green power because they want to make a difference, he said.

"Any product which is not creating additionality is questionable," Timpe agreed. Under the directive, every kilowatt hour of renewable energy will contribute directly to a country's target, he pointed out. "We will be lobbying for the ability to retire certificates to create additionality so that they do not count towards any country's target."

Disclosure is an essential function of GO because it protects the customer, said Peter Niermeijer of RECS International. The Commission is forgetting the role of customers in the voluntary market. "From the market place point of view, we are strongly in favour of the principle that the GO is for disclosure." Although with some adjustments it could be made suitable for target counting, he said. "But keep it simple." In America certificates are sold into either the compliance or the voluntary markets (page 80), with the compliance market setting the price level.

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