Energy Markets

What are Unbundled Energy Attribute Certificates?

December 9, 2021

Unbundled Energy Attribute Certificates (EACs) are certificates where the renewable energy seller sells the EAC separately from the underlying energy output to a third party. This seller is an owner of a renewable asset, a utility or energy trader.

This EAC type is easy to purchase for corporate buyers, but its pricing is intransparent. There is only a limited number of standardized markets providing prices which are publically available. Moreover, unbundled EACs are only a limited way for energy buyers (like corporates or public institutions) to fulfill their climate targets. These instruments are lagging the direct connection to a particular power plant and cannot reliably prove sustainability.

OVERVIEW

  • How unbundled Energy Attribute Certificates work?
  • What are unbundled EACs for corporate buyers and independent power producers?
  • Global Overview of Unbundled Energy Attribute Certificates

Unbundled Energy Attribute Certificates are certificates where the renewable energy seller sells the EAC separately from the underlying energy output to a third party. However, the buyer cannot relate its electricity consumption to the particular renewable energy source nor can they influence the energy transition.

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Basic structure of Unbundled Energy Attribute Certificates

How unbundled Energy Attribute Certificates work?

Unbundled EACs occur when a developer of a renewable energy plant or an independent power producer (IPP) sells its Energy Attribute Certificates to a secondary market. E.g. in France, the European Energy Exchange (EEX) provides a platform (called Powernext) where sellers offer their European EACs within an auction. These European EACs are also called (GOs).

The potential bidders have to fulfill specific 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. These Guarantees of Origin are then bundled Green Tariffs or merchant Power Purchase Agreements (merchant PPA, also known as a utility PPA).

Therefore, corporate buyers are not allowed to participate directly in those standardized markets.

Bilateral transferred EACs usually are not publically available under Non-Disclosure Agreements. Due to this and the limited access to EAC Markets, these markets are “over the counter” and less transparent for electricity consumers.

Some providers like Standard & Poor’s Global Platts started tracking the prices of Guarantees of Origin, the European EACs, in September 2019.

What are unbundled EACs for corporate buyers and independent power producers?

For developers and independent power producers of renewable energy plants, unbundled EACs can be an additional revenue source. This may coexist with the revenue of physically sold green electricity.

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

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

Global Overview of Unbundled Energy Attribute Certificates

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

Rotating Certificate Globe
Global Overview of Unbundled EACs
Disclaimer: The countries shown in the table do not imply any acceptance, advise, or endorsement by Think RE

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