More acronyms. A Renewable Guarantee of Origin (REGO) is an instrument designed to ensure that electricity produced from renewable sources can be guaranteed as such. EU Member States were obliged to establish a system for the issue of REGOs in response to a request from renewable generators in order that they may demonstrate that their electricity was produced using renewable sources. It is like a certificate of authenticity for renewables.
It is generally understood that REGOs are not tradable instruments. Although there is not an explicit prohibition to trading “it is important to distinguish guarantees of origin clearly from exchangeable green certificates” say the EU rules. Furthermore in GB the guide produced with the legislation that implemented the EU rules (The Electricity (Guarantee of Electricity Produced from Renewable Energy Sources) Regulations 2003) stated: “...the DTI has no plans to introduce any system for trading REGOs separately from the electricity, and is not currently aware of any plans to set up a formal trading system for REGOs. It is arguable that, were REGOs to be traded separately, then this would make it more difficult for suppliers to use them to demonstrate what percentage of renewable electricity they had supplied...” .
Power suppliers are required to disclose the contribution of each energy source to the total amount of electricity they supply. The 2003 Electricity Directive requires that Member States must ensure that the information provided by suppliers is reliable. In order to ensure reliability, the evidence must be held to support the disclosed fuel mix. In relation to renewable energy, the primary evidence for this is REGOs.
The January 2008 draft Renewables Directive proposes some substantial amendments to the current provisions relating to REGOs. The proposals greatly enhance the procedures for their issue, registration, transfer and cancellation. However, the biggest change is arguably the inclusion of a provision to explicitly allow for the trading of REGOs separately from the energy to which it relates. It provides at Article 9(3) that: “…[A] transfer may accompany the transfer of the energy to which the guarantee of origin relates, or may be separate from any such transfer.”
However, there is a surprising lack of explanation regarding this in the Explanatory Memorandum and Recitals and it is rather unclear exactly how the trading might work in practice.
The proposal would have implications on the current system for fuel mix disclosure given that it would introduce the possibility for generators to sell the REGO separately from the energy being sold to suppliers. Thus, if the REGO is not also transferred to the supplier purchasing the energy, then a problem may arise in relation to fuel disclosure as the supplier is no longer being supplied with the requisite evidence required in relation to their fuel mix disclosure.
It may become very important for suppliers to ensure that any new purchase agreement being entered into with generators has an express provision inserted to ensure that REGOs are included with the energy purchase in order that the energy may be counted in their fuel mix disclosure (under the fuel mix provisions, any energy supplied that is not supported by evidence must be expressed as being an equal proportion of all fuel types). This will be particularly important for those suppliers offering a green tariff or who want to brand themselves as “green” in general.
According to the timetable on the European Parliament’s website, the European Council are meeting on 4 and 8 of December for a debate and decision respectively. Thereafter the draft Renewables Directive will go to the European Parliament under the co-decision procedure for a sitting on 16 December followed by a vote on 17 December. Watch this space!