Guarantees of Origin
30. Guarantees of Origin (GoOs) are a system
whereby each MW of renewable energy generated is certified so
as to guarantee its renewable credentials. A system of GoOs was
introduced in previous renewables legislation (Directive 2001/77/EC).
This Directive set out the minimum requirements for GoOs but their
use was voluntary. Some Member States used them as a means for
energy suppliers to prove their eligibility for financial support.
Other Member States made little use of them. The Commission argued
that this had led to different specifications for GoOs developing
between Member States.
31. The proposed renewables Directive contains
provisions for a new GoO scheme. The Directive would standardise
the eligibility requirements for GoOs so that they can be used
to measure Member States' renewable energy output more reliably.
The Commission also sees GoOs being used as a tradable good so
that an internal market in renewable energy can be created. This
would allow Member States to meet their energy targets by generating
renewables domestically as well as by buying GoOs accrued elsewhere
in the Community.
32. The Commission told us that GoOs were necessary
as the renewable targets for individual Member States were related
to GDP, not generating potential. Therefore, GoOs were needed
to allow some Member States to meet their targets in the most
cost effective way. They gave the example of Luxembourg as "a
small country with a relatively limited potential but a high target
because they are lucky enough to be rich". It may need to
meet its target by investing in renewables in poorer countries
with higher generating potential. Bulgaria and Romania were cited
as examples where the opposite could be true (Q 414).
33. Malcolm Wicks argued that although he expected
most of the UK's target to be met through domestic generation,
it was "important to develop the notion of trading"
to achieve the target cost-effectively (Q 295). The Department
for Business, Enterprise and Regulatory Reform's impact assessment
of the Directive stated that intra-EU trading would reduce the
UK's compliance costs by 30%. Other witnesses suggested that without
GoOs it would be unlikely that the UK could meet its target (EDF p
34. Some witnesses argued that the GoO proposals,
as currently drafted, would not be flexible enough to allow the
UK to make the necessary use of GoOs. Article 9 of the proposed
renewables Directive states that Member States meeting or exceeding
their indicative trajectories towards their targets can request
their national competent body (the organisation assigned to deal
with the issuing and recording of GoOsin the UK this would
be Ofgem) to trade surplus GoOs with other Member States. It also
allows transfers between energy companies, subject to prior authorisation
being given by the exporting Member State Government. npower argued
that GoO trading needed to be more flexible and should be open
directly to companies, without prior Government approval (pp 113-114).
EDF agreed, arguing that the system currently proposed would "obstruct
trading and force the UK to rely almost entirely on domestic measures
to deliver its target obstruct trading and force the UK to rely
almost entirely on domestic measures to deliver its target"
35. Other witnesses were cautious about using
a certificate trading scheme to meet the target. For example,
Centrica warned that excessive reliance on GoOs would weaken investor
confidence in the UK's renewables market, making it harder to
increase domestic generation (p 117). Greenpeace argued that
while Member States might work together to reach their targets,
a trading scheme between energy companies would undermine national
support schemes. They warned that energy companies would invest
only in those countries with the most generous schemes. This would
make achieving their target difficult for some Member States and
overload the support schemes of others (QQ 336-339). Other
witnesses also agreed that GoOs had the potential to disturb national
support schemes (British Wind Energy Association p 96 and
Scottish Power p 246).
36. Simon Roberts of the Centre for Sustainable
Energy argued that, given its generating resources, if the UK
needed to rely on GoO trading then that would be "a sign
that the UK has not got its support mechanisms right rather than
because the resources were that much better somewhere else"
37. Although it continues to support GoO trading,
the UK Renewable Energy Strategy consultation recognises the potential
dangers. It proposes limiting GoO trading to a specified portion
of the UK's target.
38. None of the evidence received was very clear
about how GoO trading would work in practice. Indeed, the details
of an intra-EU scheme have yet to be decided, and various proposals
are being debated by the Commission, European Parliament and Member
States. Most submissions accordingly concentrated on whether the
principal of GoO trading was appropriate. GoO trading will
very likely have to be relied on to fulfil some part of the UK's
commitments. We believe, however, that a significant proportion
of the 15% target should be met domestically to ensure that GoO
trading does not undermine efforts to increase the UK's renewable
39. We recommend that the Government specify
soon the maximum proportion of the UK's target to be met using
GoO trading so that the extent of their reliance on them to meet
the target is known. This should help
to create the stable and predictable investment environment the
energy companies require.
40. The legal bases for the proposed renewables
Directive are Article 95 (internal market) and Article 175(1)
(environment) of the Treaty Establishing the European Community.
Both of these provisions involve the co-decision procedure between
the Council and European Parliament, and Qualified Majority Voting
41. The Government's explanatory memorandum on
the proposal argued that Article 175(2) alone would be more appropriate,
as that Article provides for the adoption of "measures significantly
affecting a Member State's choice between different energy sources
and the general structure of its energy supply". On the face
of it, Article 175(2) appears relevant to the proposed measure.
This legal base would subject the proposal to unanimity in Council
and would involve only consultation of the European Parliament.
42. According to the explanatory memorandum,
the Commission rejected the use of 175(2) because Member States
already use renewables. It argued that increasing renewable generation
would not alter the general structure of a Member State's energy
supply given that the same grid infrastructure is used as for
43. Eluned Morgan MEP stated that the European
Parliament would not "concede territory" on the legal
base as that would reduce their role from co-decision to consultation
only (Q 400).
44. The Government are clearly alive to the issues
of the proposed legal base and we expect the matter will be fully
discussed during negotiations.
12 On the promotion of the use of energy from renewable
sources, COM(2008) 19 final Back
Op. Cit. Back
UK Energy In Brief July 2008, BERR, http://www.berr.gov.uk/files/file46983.pdf Back
Europe'sclimatechangeopportunity, COM(2008)30 final Back
See Science and Technology Committee, 4th Report (2003-04):
Renewable Energy: Practicalities (HL 126) Back
This is one of the EU's climate change aims. See Limiting Global
Climate Change to 2 degrees Celsius: The way ahead for 2020 and
beyond (COM (2007) 2 final) Back
Climate Change Bill 2007-08 Back