Introduction of guarantees of origin of electricity from renewable energy sources in Ukraine

Contents

  1. How does the Register of the guarantees of origin function?
  2. How can a RES producer register a generating installation in the Register of the guarantees of origin?
  3. What is the procedure for issuing the guarantee of origin?
  4. How will the guarantee of origin be circulated?
  5. How and for what purpose will the guarantee of origin be redeemed?
  6. Conclusions

Certainly the war in Ukraine has had a negative impact on all sectors of the economy, including the renewable energy sector (“RES”). At the same time, it became a new milestone in rethinking and a fresh impetus to accelerate the integration of the Ukrainian electricity market into the EU single market and the implementation of European legislation, the introduction of new RES support instruments to stimulate clean energy production, increase competitiveness in the electricity market, etc.

The introduction of guarantees of origin of electricity is an important step for the development of green energy in Ukraine. According to the Law of Ukraine No. 3220-IX dated 30 June 2023 “On amendments to certain laws of Ukraine on the restoration and green transformation of the energy system of Ukraine”, a guarantee of origin of electricity produced from RES is an electronic generated document based on information from the register of guarantees of origin of electricity produced from RES, which confirms that a certain amount of electricity is produced from RES, confirms its environmental value and certifies the rights related to the positive effect of electricity production.

On 5 March 2024, the Resolution of the Cabinet of Ministers of Ukraine No. 227 “On the introduction of guarantees of origin of electricity generated from renewable energy sources” came into force, approving the “Procedure for issuing, circulating and redeeming guarantees of origin of electricity generated from renewable energy sources” (“Procedure 1”) and the “Procedure for determining the environmental value of electricity generated from renewable energy sources” (“Procedure 2”).

In accordance with Procedure 1, the National Commission for State Regulation of Energy and Utilities (“NEURC”) is the authorized body for the issuance, circulation and redemption of the guarantees of origin on the territory of Ukraine, is the holder and administrator of the register of the guarantees of origin (“Registry”). In addition, Order 1 regulates the functioning of the Register, registration of a generating installation, issuance, circulation and redemption of the guarantees of origin, and the procedure for verifying a generating installation.

Procedure 2 regulates the mechanism for determining the environmental value of electricity generated from RES. The environmental value is measured in kilograms of CO2 equivalent per 1 MWh of electricity and determines the average amount of greenhouse gases that would be emitted by electricity producers that produce electricity from fossil fuels if electricity generated from RES were substituted. The environmental value is indicated in the guarantee of origin.

How does the Register of the guarantees of origin function?

The issuance, circulation and redemption of the guarantees of origin are carried out by users of the Register by submitting electronic requests.

Business entities that sell electricity to the guaranteed buyer at a green tariff or provide a service to the guaranteed buyer using a market premium mechanism, universal service providers and the guaranteed buyer are required to register in the Register.

Other business entities and consumers are registered in the Register voluntarily.

Thus, each producer chooses whether or not to issue the guarantees of origin, except for those producers who have received support and are already in the balancing group of the guaranteed buyer.

As for now, the Register is not yet operational. To launch it, the NEURC is working on the implementation of specific software offered by Grexe. The scheduled date for the start of the Register’s full operation is the end of August 2024.

However, the register of electricity facilities and electrical installations of consumers (including active consumers) using RES for electricity generation is already available, which is operated in accordance with the NEURC Resolution No. 2624 dated 27 December 2023 and registration in which it is mandatory for those who wish to participate in the circulation of the guarantees of origin in the future. According to the resolution, electricity producers and consumers (including active consumers) using RES and wishing to obtain the guarantee of origin have to take several steps. 

Until 1 February 2024, producers had to provide information about their identification data, the name and location of the electricity facility and its installed capacity. After that, by 31 May 2024, they have to provide information on the type of technology used in the production of electricity from RES, the characteristics of RES and the ability to operate autonomously.

How can a RES producer register a generating installation in the Register of the guarantees of origin?

The RES producer creates an account based on an application submitted electronically to NEURC as the administrator of the Register. NEURC provides open and free access to the Register to applicants and its users. The application form for creating an account is published on the official website of NEURC.

In the created account, the user registers generating installations. Only generating installations that are located in the domain ofUkraine are registered in the Register. The Register users have the right to register a generating installation owned by them aroused by them for other legal reasons. If the Registry user owns more than one generating unit, each generating unit is added to the account.

When registering a generating installation in the Register, general information about such installation is provided: the date of commissioning, location, network connection, the type of technology, installed capacity, investment support mechanism, etc.

What is the procedure for issuing the guarantee of origin?

The guarantee of origin is generated in the Register automatically on the basis of certified commercial accounting data, which is entered by NPC Ukrenergo, as the administrator of commercial accounting into the Register on a monthly basis and is issued for a standard volume of electrical energy supplied to the network, which is 1 MW/h.

That is, when consuming or supplying a volume of electrical energy to the network in the amount of 2.5 MWh/h, the user can be issued two guarantees of origin of electrical energy, and the balance in the amount of 0.5 MWh/h is accumulated in the user account of the Register of the Guarantees of Origin and taken into account in next months.

The guarantee of origin contains information about the type of RES, the start and end date of supply of electrical energy to the network, location, installed capacity and characteristics of the generating installation, information about the type of support (green tariff, market premium mechanism, provision of services to ensure stability of the price of electrical energy ), the date of commissioning of the generating plant, the date and the country of issue of the guarantee of origin, environmental value and unique identification number.

The guarantee of origin is not issued for electrical energy released from an energy storage installation, except if such an installation is used at facilities producing electricity from RES without obtaining an energy storage license.

How will the guarantee of origin be circulated?

The circulation of the guarantee of origin is the transfer of ownership of the guarantee of origin in any way determined by law (purchase and sale, gift, exchange, etc.). 

The owner of the guarantee of origin may transfer it to another user of the Register by creating a request for transfer in the Register, in response to which the recipient of the guarantee of origin must agree. The guarantees of origin are in free circulation for 12 months, during which such guarantees of origin are available for trading at free prices.

An important issue is the recognition in Europe and international trade of the guarantees of origin issued in Ukraine, as this will only be possible after the NEURC becomes a member of the Association of Issuing Bodies (AIB). NEURC assumes that the path to entry may last for about one year. 

The introduction of the circulation of guarantees of origin is a positive step both for renewable energy producers and for business in general. RES producers, during low electricity prices, will be able to profit from the sale of guarantees of origin, in turn, businesses (the buyers of the guarantees of origin) will be able to confirm compliance with ESG standards. And, of course, it is an opportunity for participants in the market of guarantees of origin to “compensate” for the amount of CO2 emissions during taxation.

How and for what purpose will the guarantee of origin be redeemed?

Redemption of the guarantee of origin means that the owner of the guarantee of origin enters information in his account about the termination of further circulation of the guarantee of origin. The guarantee shall be redeemed within 18 months from the date of electricity generation. If the guarantee is not redeemed within 18 months, the guarantee is cancelled.

The owner of the guarantee of origin has the right to redeem it, in particular for the purpose of: 

  • confirmation that goods, works or services were sold in whole or in part using electricity generated from RES;
  • confirmation that the electrical energy produced by the generating installation and consumed for its own needs originates from RES;
  • disclosure of information to the consumer of electrical energy about energy sources in accordance with the Procedure for disclosing information to consumers of electrical energy about energy sources in the general structure of the balance of electrical energy purchased by the electric supplier and/or produced at its own electrical installations, approved by the Resolution of NEURC dated December 27, 2023 No. 2626.

To redeem the guarantee of origin, the owner submits to NEURC through his account an electronic request indicating, in particular, the information about the number of the guarantees of origin that is planned to be redeemed, the final purpose of their redeemed and the name of the beneficiary in whose favor the guarantee of origin is repaid and his location. 

Conclusions

Taking into account the experience of European countries, we can conclude that the introduction of the guarantee of origin is not only about accounting for electricity and confirming its production from RES. This is the way to attract investment, increase transparency and efficiency of the energy sector and the country’s economy as a whole. Ukrainian business will have the opportunity to ensure the competitiveness of Ukrainian products in the EU markets, relieve the burden of the “carbon barrier” CBAM, etc. Accordingly, this is a powerful tool for the overall economic development of the country. So, we hope for the rapid implementation of the guarantees of origin in practice and their further development.

If you need legal advice, please fill out the form below to request it.  

Oleksandr Melnyk

Oleksandr Melnyk

Partner, Head of Corporate Law and M&A practice, Attorney at law

Khrystyna Zimenko

Khrystyna Zimenko

Associate

246

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