Unbundled Energy Attribute Certificates – Only a limited way to prove sustainability

Unbundled Energy Attribute Certificates (EACs) occur if the owner of a renewable asset or an utility / energy trader is selling the EAC separately from the underlying renewable energy output to a third party

This EAC type is easy to purchase for corporates but its pricing is intransparent since there is only a limited number of standardized markets providing prices being publically available.

Unbundled EACs are only a limited way for offtakers (e.g. corporates or public institutions) to fulfil their climate targets since these instruments are lagging the direct connection to a particular power plant and therefore, cannot reliably prove sustainability.

 

 

Unbundled Energy Attribute Certificates (EACs) at a glance

Unbundled Energy Attribute Certificates occur in case a renewable energy plant owned by a developer / independent power producer (IPP) sells its Energy Attribute Certificates (EACs) to a secondary market. For example in France, the European Energy Exchange (EEX) provides a platform (called powernext) where renewable energy producers offer their European EACs, called Guarantees of Origin (GOs), within an auction.

Basic structure of Unbundled Energy Attribute Certificates    Source: Think RE GmbH, © Think RE GmbH

The potential bidders have to fulfill certain registration criteria according to the Terms and Conditions of the EEX. Therefore, only companies having signed a clearing contract with EEX such as Utilities and Energy Traders are allowed to bid for GOs which are then bundled Green Tariffs / Utility PPAs. Therefore, corporate offtakers are not allowed to participate directly in those standardized markets.

Due to this limited direct access to EAC markets as well as due to the fact that bilateral transferred EACs are normally not publically available under Non-Disclosure Agreements, EAC markets are “over the counter” and less transparent for electricity consumers.

There are some providers like Standard & Poor’s Global Platts which started tracking the prices of so-called European Guarantees of Origin, the European EACs, since September 2019.

 

 

 

Meaning of Unbundled EACs for offtakers and developer

For developers / independent power producers of renewable energy plants, unbundled EACs could be an additional revenue source which may coexist to the revenue of physically sold green electricity.

For offtakers, these certificates are an easy way to reduce their reported market-based Scope 2emissions based on the international Greenhouse Gas (GHG) Accounting standard. Therefore, they are still a major channel used by offtakers to reduce their reported Scope 2 emissions according to the International Renewable Energy Agency (IRENA).

However, offtakers are still unable to directly show the reduction of their global footprint. Thus, unbundled EACs are sometimes related to “green washing” due to the missing relationship between electricity consumption and its impact on the energy transition. Due to this fact, unbundled EACs are only a limited alternative for offtakers to fulfill their climate targets and become a Renewable Champion.

 

Global Overview of Unbundled EACs

Global Overview of Unbundled EACs   Disclaimer: The countries shown in the table do not imply any acceptance, advise, or endorsement by Think RE GmbH.    Source: Think RE GmbH, © Think RE GmbH

 

 

According to the International Renewable Energy Agency (IRENA), the estimated global EAC volume contracted annually over secondary markets accounts for more than 130 TWh equalling approx. 2% of the global renewable energy generation. Therefore, unbundled EACs are one of the major channels used for fulfilling offtakers’ sustainability and climate strategy.