Guarantees of Origin (GOs) have long been subject to criticism. Sceptics say they are ineffective, that the system is flawed. And although there are many things that could be improved about GOs, criticism is often based on misunderstandings of what they are and what they try to achieve.
In this article, we tackle some of the critiques often levelled against energy attribute markets to show which arguments are valid, where the doubters go wrong, and why having a functional market-based tool to spur the energy transition is now more relevant than ever.
True, it does not. The day after you purchase GOs, the exact same energy mix will come out of the socket on your wall. However, GOs and other Energy Attribute Certificates have never claimed to change the physical energy mix that is delivered through the grid. Rather, they create a separation between the physics and the environmental attributes of actual clean energy produced, assigning ownership of those attributes to organisations that pay for them.
Why? Because with ownership comes willingness to pay. By giving voluntary buyers the exclusive right to claim the benefits of a volume of power, they gain an incentive to financially support their preferred type of energy, unlocking an additional source of revenue for clean energy producers and making it more competitive against less desired sources of energy.
That extra income is increasingly important as profitability is squeezed in several markets. “When planning new development, we need to know that we can include GOs in our spreadsheets. Several of our projects have been made profitable, at least partially, by Guarantees of Origin,” Jon Sverre Monsen, Head of Environmental Markets at clean energy producer Å Energi, said.
So, no, the connection between buying GOs and influencing the physical energy mix is not direct. However, the economic connection created by the market system is clear — and could be the difference between building new power plants or not.
The challenge of the energy transition is enormous, well beyond any individual’s or organisation’s ability to fix. However, there is real power in collective action.
Think of it as voting. Individuals don’t win elections on their own. It is the belief that people will rally together and support the same ideal, the same vision, that will ultimately sway politics one way or another. That principle applies to climate action, too.
Furthermore, once you start adding up the impact of seemingly isolated individuals, things look a lot more promising. In 2023, Ecohz estimated that the GO market could generate close to €50 billion for renewable energy producers, which could support the EU’s climate goals. The market has changed since then, but the principle remains: impact multiplies when people come together.
As Ivar Munch Clausen, our Chief Business Development Officer, likes to say: no one can do everything, but everyone can do something. That something counts.
GOs are sometimes perceived as too simple to be effective. “What do you mean all I have to do to substantiate a renewable energy claim is buy a certificate?” In some people’s eyes, that is far too easy.
Market-based systems are, indeed, simple — but that is intentional. GOs aim to provide a relatively straightforward tool that allows as many organisations as possible to engage with the enormous task that is the energy transition. Simplicity, in this case, equals action at scale.
Moreover, that simplicity is only part of the story. Faced with the impossibility of tracking power in the grid from production to consumption, the Greenhouse Gas Protocol (GHG-P) developed two complementary methods for measuring the emissions of purchased electricity. GOs fall under the market-based method, which relies on contractual instruments. The location-based method, in turn, reflects the carbon intensity of the grid.
Together, the two methods paint a clearer picture of an entity’s electricity usage, allocating responsibility both to governments — for the national energy mix — and to companies, which can choose their energy source through GOs and other types of contracts.
The complementarity of the two approaches is an acknowledgement of the complexity of a challenge that must be tackled from multiple fronts. The role of GOs is to incentivise new investments. Keeping it “simple” can encourage all kinds of companies, large and small, to support that common cause.
In countries where almost all electricity production comes from renewable sources, there is a widespread belief that being located there must mean one is automatically using renewable power. That assumption is, unfortunately, incomplete.
Look at Norway, for example. Although 98% of total electricity production in the country is renewable, there are power cables connecting it to Sweden, Finland, the UK and mainland Europe, through which electricity is constantly exported and imported. That means consumers could, at any point, be using a combination of Norwegian renewables and other types of energy coming from abroad.
As mentioned before, we rely on dual reporting — market-based and location-based — because it is impossible to track electricity physically. Even in a region with high renewable production, there are too many elements at play for any grid-connected consumer to say with certainty what kind of power they are using. Dual reporting helps nuance the picture.
In their bid to support more renewable generation, market-based systems also acknowledge that countries are not isolated. Even in Norway, where renewables already prevail, building more clean power plants means low-carbon electricity can be exported to countries with lower renewable penetration, contributing to the decarbonisation of the entire European grid.
Perhaps most importantly for voluntary clean energy buyers, depending exclusively on national averages means being powerless. Without an instrument that allows them to actively choose renewables, how are they supposed to influence the energy mix of their grid or affect which energy sources are prioritised?
GOs function under the principles of collective participation and voluntary choice. While it is true that they are perfectible, they are also one of the pillars of corporate climate action in Europe. The organisations they engage and the revenue they generate have a real, impact. As we work to reform and improve the system, we would do well to keep that in mind.
*Hedda Øisjøfoss is a Senior Advisor at energy supplier Ishavskraft