Guarantees of Origin
A new Spanish regulation regarding guarantees of origin for renewable gases will allow gases such as biogas and hydrogen to be identified and certified under a system similar to the one applied to renewable electricity.
This week’s post from SynerHy aims to take a closer look at renewable hydrogen guarantees of origin, guided by two experts in the field like Rafael Ortiz and Andrea Costa. Guarantees of origin of energy are a tool that allows us to know the attributes of a specific amount of energy (usually 1 MWh). These attributes can include aspects such as the quantity of energy used to produce this amount of energy, the type of energy (renewable or non-renewable, for example) or the emissions associated with this amount of energy.
This tool can identify whether a given quota or amount of energy has been produced from renewable sources and it can be used as a reference for standards or regulations, to set limits or thresholds for what is considered clean or emission-free energy (or energy carrier). These limits or thresholds also have economic implications, as they can, for example, allow identifying which types of energy receive public funding. This is the case of the EU taxonomy, which specifies the maximum amount of emissions associated with hydrogen production (3 kg CO2/kg H2) in order to be included in the EU’s sustainable financing framework.
Guarantees of origin also aim to encourage responsible consumption by providing end-consumers detailed information on the origin of their energy consumed. Moreover, they allow electricity distribution companies to supply products based on their attributes (e.g. renewable energy), which increases the offer to the final customer and gives them some influence on the implementation of new renewable energy production facilities, in case the demand for that product (renewable energy) rises to levels that exceed the current production.
Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 requires Member States or designated competent bodies to ensure that the requirements they impose on guarantees of origin comply with the EN 16325 standard. The standard EN 16325, which was originally drafted for application to guarantees of origin for electrical energy, establishes the methodology for calculating guarantees of origin, as well as the rules for their use, including aspects such as issuance, conversion and cancellation. This regulation is in process of review, including energy guarantees of origin for gases (including hydrogen, and ammonia) as well as for heat and cooling, with no approval foreseen in a short term.
The current version of the draft GOs standard EN 16325 allows the exchange of GOs between different energy carriers considering that these are electricity, gas (methane, hydrogen, ammonia…), heat and cold. For example, a quantity of electricity GOs (renewable) can be converted into hydrogen GOs (renewable) using an electrolyser, taking into account the energy losses of the process. Likewise, hydrogen GOs can be converted into electricity GOs through the use of a fuel cell (considering the losses of the process).
Guarantees of origin are not physically associated with the amount of energy produced. Therefore, a consumer can declare, for example, that he/she consumes renewable energy, even though the energy that it is actually consumed does not have a renewable origin.
A system setup in this configuration allows a renewable hydrogen producer to deliver its production into the natural gas grid (so-called blending) and to enable the sale of hydrogen GOs to consumers connected to the natural gas grid, even when the consumer cannot physically separate the hydrogen from the gas, or there is no hydrogen at the point of supply at all.
To avoid this, the European Commission is proposing that the grid should define the type of GOs that can be supplied. Therefore, only GOs associated with natural gas can be extracted from a natural gas grid, meaning that a consumer connected to this grid will not be able to obtain GOs associated with hydrogen.
It should be highlighted that the EN 16325 standard, as currently defined, only considers energy production when defining GOs, and does not include the energy demand and emissions associated with the transport of energy from the production source to the end consumer. This is partially justified because the original standard focused on electricity, which is distributed through the grid, so the losses and emissions associated with transport are considered the same for any unit of energy being transported (although this does not reflect reality). In fact, the draft standard is highly targeted at energy distribution through grids, which does not represent the current situation for hydrogen, for which there is no transport network (pipelines) nowadays, as there is for electricity or natural gas.
Regulations concerning Guarantees of Origin in Spain
The Royal Decree partially implements the Directive 2018/2001 of the European Parliament and the Council on the promotion of the use of energy from renewable sources, regarding the requirements of sustainability and reduction of greenhouse gas emissions from bioenergy and the guarantees of origin for gas from renewable sources. It also creates the system of guarantees of origin and names the Technical System Manager as the entity responsible for this system, on a provisional status «while the Ministry for Ecological Transition and the Demographic Challenge does not have the human and material resources to carry out its functions».
Thanks to the new guarantees of origin – similar to those already established for electricity produced from renewables – each MWh of 100% renewable gas will generate the emission of a guarantee of origin with information on where, when and how the gas was produced. Consequently, the guarantees will provide an added value when the gas is marketed that will encourage its consumption, with the consequent environmental benefit.
The Royal Decree creates a Register of Gas Production Facilities from renewable sources and a Producers’ Committee. Producers and distributors will be able to exchange guarantees of origin within the system in a transparent and secure transaction, which will record the production, transfer and cancellation of the guarantees of origin. The guarantees of origin will certify the volume of gas and its quality, as it will distinguish between hydrogen produced with renewable energy, and will cover any renewable gas produced and consumed, whether on-site, self-consumed, and whether or not supplied to the pipeline network.
Last 1st November 2022, Order TED/1026/2022, of 28th October, entered into force, approving the procedure for the management of the system of guarantees of origin for gas from renewable sources (“Order 1026/2022”). This regulation develops the system of guarantees of origin of renewable gases created by Royal Decree 376/2022 and its implementation in the step 1.8 of the “Plan Nacional Integrado de Energía y Clima” (PNIEC) 2021-2030 and in art. 12 of Law 7/2021, of 20th May, on climate change and energy transition.
The Order approves the management procedure that defines the basic rules on which the IT platform that will manage this new system of guarantees of origin is being developed.
This Order TED/1026/2022 takes as a reference the latest available draft of the standard EN 16325, including a review process of this order once the standard is approved. According to this order, the guarantees of origin defined in Directive (EU) 2018/2001 of the European Parliament and of the Council of 11th December 2018 are an endorsement of the renewable origin of energy whose exclusive purpose is to certify to the end consumer that a certain quota or amount of energy has been supplied from renewable sources. The condition for issuing guarantees of origin of renewable gases required in this order is aligned with the Directive (EU) 2018/2001 and with the EU delegated act that complements it.
This delegated act sets out several conditions for defining hydrogen of renewable origin. For example, hydrogen is considered to have a renewable origin if it is produced by an electrolyser connected to a grid
- with more than 90% of energy from renewable sources
- with emissions under 18 gCO2eq/MJ
- if the electricity is consumed during a period of grid imbalance allowing to reduce the need for production curtailment by renewable sources.
Furthermore, hydrogen can be considered renewable if the electrolyser is powered by renewable energy from one or more sources that fulfil the requirements of additionality, temporality and geographical relationship described in that delegated act.
THE GO SYSTEM IN SPAIN
In Spain, the “ad tempore” entity responsible for the development, administration and supervision of the GO System is Enagás GTS. There are currently three types of guarantees of origin: grid-compatible gas (applied to biomethane production and hydrogen blending), renewable hydrogen and biogas.
Figure 1 – Life cycle of a GO. Source Enagás
The life cycle of a GO will have a total period of 18 months from the production of that energy, with the last 6 months being only valid for redemption, which guarantees that gases of renewable origin consumed have been recently produced and fulfil the quality standards established by the regulations. The redemption of a guarantee of origin is understood as the allocation of these guarantees to an electricity or gas consumer, identified through their CUPS (Universal Supply Code).
Renewable Hydrogen Sources Certifications Exchange Marketplace
Based on the assumption that 70% of (grey) hydrogen is consumed in refineries and that renewable hydrogen production is expected to account for 25% of Spain’s total by 2030, a market for the exchange of certification of renewable origin is expected. Over the next few months, we will see the launch of this market.
For an initial estimated price for the cost of 1 GO, it may depend on several factors:
- Of the balances/imbalances of green versus grey hydrogen production.
- Strong demand from certain types of consumers versus others.
- An average TTF price for methane gas that is subject to strong fluctuations.
- The willingness of major polluters to pursue a decarbonisation policy.
Up to 2030, the hydrogen transport challenge will dictate the consistent demand for hydrogen (mainly focused on refineries). Between 2030-2040, the transport sector will gain much more weight, with the GO market peaking from 2040 onwards. Oil companies, large steel companies, the chemical industry, large shipping companies and public administrations are expected to be the main buyers of GOs.
Guarantees of Origin Management System
The following figures describe the performance of the GO management system as foreseen by the standard:
Figure 2 – Performance of the Spanish GOs system. Source: “Resolución de dudas GdO. (ENAGÁS 2022)
Figure 3 – Organisation of the system and interactions between the different actors (Source: Andrea Costa)
It is important to highlight here that:
- The three flows: GO Life Cycle – Commercial Flow – Physical Flow, (see Figure 2) are independent of each other, although they share a common point: the production of renewable gas is associated with a GO dispatch, a commercial entry into the Gas System and a physical ﬂuidance of gas.
- Once dispatched, the GO can be fully unlinked from the energy that triggered it.
- On the other hand, redemption associates a GO with a given gas consumption (physical and commercial) thereby making that consumption renewable.
Moreover, as a consequence of point 2:
- A producer can transfer GOs to the distributor to which it sells the production or NOT.
- In case of gases fed into the gas system, the entering point contract or allocation has no consequences on GOs: the value fed in derives in dispatch rights for the producer.
- A consumer can purchase GOs and redeem his own consumption regardless of his supplier.
- A consumer could purchase gas from one distributor and GOs from a different distributor.
The process by which a GO is transferred from the account of an issuing holder to the account of a second holder or receiver. This is initially done via the Web Platform. Only those Guarantees of Origin whose status is “Valid for Transfer, Redemption and Export” will be transferred, so the transfer will only be viable during the production of the energy that triggered the Guarantee of Origin.
Figure 4 – Schematic diagram of a GO transfer (source Enagás)
LAUNCH OF THE PLATFORM FOR THE SYSTEM OF GUARANTEES OF ORIGIN AND ISSUANCE OF GO
On 24th January 2023, Enagás GTS launched the platform for registering holders and facilities of the system of guarantees of origin for renewable gases, applicable to renewable hydrogen. The Technical System Manager has achieved the first milestone of this project, in accordance with the provisions of the Government’s +SE Plan (“Plan Más Seguridad Energética”), unveiled in October 2022. Via the website (www.gdogas.es) any interested company can apply for registration in the system and can register renewable gas production facilities.
In addition, detailed information on the location, type, capacity and commissioning date of gas production facilities from renewable sources can be consulted, in accordance with the requirements of the Royal Decree 376/2022 of 17th May. This regulation temporarily designates Enagás GTS as the entity responsible for the development and management of this new Guarantee System.
Since March 2023, following the objective set for this project in the +SE Plan, Enagás GTS enables the issuance of guarantees of origin for facilities registered in the system. The platform already has dozens of authorised entities with very diverse profiles: renewable gas producers, suppliers, consumers, traders, service providers and market platforms.
Figure 5 – Transfer process. Source: Enagás
International Hydrogen Certification Initiatives
As mentioned above, GOs are a tool that allows traceability of a certain amount of energy produced. This tool is the starting point for many international initiatives that define thresholds or limits on emissions, or simply production conditions for the certification of hydrogen, whether it is renewable, low-carbon or whatever identification is desired. The protocols developed by these initiatives usually identify the emissions associated with the hydrogen supplied, including a methodology for calculating these emissions.
The limits of the system being considered may vary, focusing exclusively on production, or including aspects such as hydrogen preparation (pressure and/or purity) or transport.
The International Energy Agency (IEA) recently published an analysis of the different certification schemes that can be currently found. These are listed in the following table:
Figure 6 – Analysis of the different hydrogen certification schemes (IEA)
Guarantees of origin (GO) are a tool that allows us to know whether a certain amount of energy has been produced from renewable energies or what percentage of its production has been produced from renewable energies.
Thanks to GOs, producers will be able to benefit from the incentives expected from the EU hydrogen bank and other funding mechanisms for hydrogen projects, which will allow hydrogen to be produced at a competitive price compared to current fossil fuels.
The integration of transport-related emissions into these GOs is an aspect worth considering, especially for hydrogen. Nowadays there is no specific way in which hydrogen will be transported, nor in what form. It can be compressed, liquified or in a carrier (e.g. ammonia). It can also be transported by truck, train, ship or pipeline. This variety of transport methods means that the carbon footprint associated with the hydrogen received by the end consumer can be very different, even when the hydrogen has been produced under the same conditions.
Moreover, in the case of hydrogen, as with gases in general, the export/import opportunities are greater than for electricity, as there is no need for a physically connected transport network between production and consumption. For example, electricity cannot be imported/exported between Europe and Australia, but hydrogen can be transported between both regions.
This is why including information on transport emissions in the GO is of great importance, due to both the many hydrogen transport alternatives that are available, and the different locations where hydrogen can be produced and exported.
As mentioned above, the draft EN16325 standard is targeted at grid transport. However, it would be significant that the final methodology of this standard does not represent a challenge for those renewable hydrogen producers who do not supply their hydrogen through the grid and that such standard makes it easier to associate GOs to their product in the same way as for grid-connected hydrogen producers.