Renewable Energy Guarantees of Origin may not be recognised by EU Member States post-Brexit

Written on 31 Jul 2020

As the 31 December 2020 deadline for the expiry of the transition period draws closer, the European Commission has (23 July 2020), published a notice to stakeholders clarifying the position on guarantees of origin of electricity from renewable energy sources.

Under article 15(2) of Directive 2009/28/EC, all EU Member States must have a Guarantees of Origins (GoOs) scheme. The purpose of these schemes is to ensure that energy generated from renewable sources can be tracked through the supply chain, from the generator to the end user. Guarantees of origin issued to producers of electricity from renewable energy sources are commonly transferred to suppliers in their capacity as offtakers under power purchase arrangements, together with the electricity to which the guarantees attach, offering transparency to consumers about the proportion of electricity that their suppliers are sourcing from renewable generation.

The UK scheme is the Renewable Energy Guarantees of Origin (REGO) scheme, under which Ofgem issues generators of renewable electricity in the UK with one REGO certificate per megawatt hour (MWh) of eligible renewable output. In the UK, these REGOs then pass from the generator increasingly for value, meaning guarantees of origin now represent a portion of the revenues available to a generator under its power offtake arrangements.

However, upon the expiry of the transition period, EU laws relating to the promotion of the use of energy from renewable sources and energy efficiency generally will no longer be applicable in the UK.

The notice published by the Commission confirms that, unless a trade agreement is reached, guarantees of origin which are published by designated bodies in the UK will no longer be recognised by the EU Member States after the end of the transition period. Comparatively, Ofgem has confirmed that they will continue to issue REGOs and accept GoOs from EU member states following the UK's exit from the EU.

We have seen an increased emphasis in recent years on the additionality that REGOs provide as suppliers and consumers continually look to provide and purchase green electricity in view of the broader decarbonisation agenda. We anticipate continued interest around this notice as the discussions progress regarding a trade agreement.

The notice published by the Commission also confirms that certification schemes or qualification schemes available for installers of small-scale biomass boilers and stoves, solar photovoltaic and solar thermal systems, shallow geothermal systems, and heat pumps awarded by the UK will no longer be recognised by the EU Member States after the transition period.

Read more on the energy-specific legal implications of Brexit for your business here.