One of the topics discussed during the RECS OMC Meeting on the 28th and 29th of November 2019 has been the future implementation of full disclosure in the electricity market. Commerg fully supports this development and therefore we would like to outline what this means in practical terms for businesses and the general electricity market.
Full disclosure for electricity
The term “full disclosure” means that electricity suppliers must provide certificates stating where their electricity comes from. All of it. Every MWh on the wholesale electricity network must be counted and documented by the use of certificates. The Registry/Regulator counts therefore all the electricity that is uploaded on the grid and downloaded from the grid for consumption. Because it is impossible to track one electron on its journey from producer to the consumer. You can’t tell whether the electricity powering your laptop, tablet or computer on which you are reading this article is from a renewable energy source (wind, solar, hydro, biomass) or from fossil sources (coal, gas). This is the first issue that full disclosure tackles.
Moreover, currently mainly renewable energy sources are labelled with a certificate of origin: Guarantees of Origin (GOs). A supplier or business wishing to source their electricity from renewable energy must buy Guarantees of Origin to match its electricity usage. GOs act as an accounting system for the electricity grid: An X amount of renewable electricity comes in (producer) and therefore that same amount can be consumed (supplier, business or any other type of end-user). Buying GOs is however a voluntary action which removes the incentive to move towards a greener future, despite the commitment made by many companies and suppliers. Since the introduction of GOs in 2009 there have been several claims that GOs lead to greenwashing, but it is not what an accounting system such as the GOs network should be associated with. Removing the facultative aspect of GOs and the appearance of greenwashing are the second and third issues that full disclosure can solve.
Full disclosure of electricity means that an electricity supplier must provide documentation for ALL the electricity, grey and green, that they supply to their businesses and households.
This will allow the following:
The electricity supplier can provide a detailed table of where their electricity comes from.
The consumer can easily compare and choose between electricity suppliers, based on the data and documentation.
Producers of electricity have a bigger incentive to certify their production.
Example of Fuel mix from supplier X: Source: https://en.wikipedia.org/wiki/Fuel_mix_disclosure
Already now there are 2 countries that have implemented full disclosure, Austria and Switzerland, with a third starting from 2020 (Netherlands). In Austria and Switzerland suppliers must provide sourcing certificates for each MWh that they have supplied over the period of one year. This includes certificates for Gas, Nuclear, Coal as well as renewables. The obligatory aspect of providing these certificates strengthens the legitimacy of the market and provides an incentive for suppliers to move towards a greener fuel mix, or in line with what their customers want. Full disclosure of the fuel mix also makes it clear for all consumers which supplier fits their needs best.
We think that more countries adopting a full disclosure for electricity will lead to:
An ideal tool for governments to steer the origin of their country’s energy consumption;
An increased push towards renewable energy;
A better incentive for the wanted source of energy;
More price efficiency and transparency in the market for these certificates;
More choices for consumers to pick the electricity supplier that they think is the best fit.
Hearing the recent developments at the RECS meeting regarding full disclosure showed that good steps have been made in an even better direction and we encourage other countries within the Association of Issuing Bodies to do the same.