The Flawed System of Green Electricity Certificates and Guarantees of Origin

Out the latest figures Statistics Netherlands shows that approximately 15 percent of all energy in the Netherlands is now generated sustainably. For electricity, that share is higher at more than 40 percent. This is mainly due to the rapid growth in the number of wind farms and solar panels.

But it is still much less than you would expect, since about 80 percent of customers buy green electricity.

Green = gray

There are actually two forms of green electricity. The first is exactly what you imagine: electricity generated from windmills, solar panels, hydropower and – somewhat more controversially – biomass.

These categories added together therefore account for more than 40 percent of all electricity generated in the Netherlands. The other green electricity is, all things considered, as gray as anything.

“Actually, that electricity is not green,” says Martien Visser, professor of energy transition at Hanze University of Applied Sciences. “It is generated by gas and coal plants.”

Guarantees of Origin

Nevertheless, it can be sold as green electricity. This is due to European trade in so-called Guarantees of Origin (GoOs). These are certificates that energy farmers can buy from (usually foreign) producers of green energy. 1 GO is equal to 1000 kilowatt hours of sustainably generated electricity.

If a supplier buys GOs, it can therefore sell its own gray electricity as green electricity. In fact, they buy the right from another party to call power green.

Just one label

The strange thing is that this green electricity is not transported to the Netherlands at all. Only the green label. Nor is it the case that more green electricity is being produced elsewhere in Europe as a result.

“A lot of green electricity on the Dutch market has a cheap foreign GoO – especially from Scandinavian hydroelectric power stations,” says a spokesperson for Milieu Centraal. “These plants have existed for a long time, so choosing this power does not lead to new investments in sustainable energy sources.”

In countries with many hydropower plants, such as Norway, Sweden and Austria, they perish in the green electricity and therefore also in the GOs. They are therefore dirt cheap.

Green power turns grey

“They just sell them for a small amount,” Visser continues. “Actually, you should say: that’s why the electricity in Scandinavia has become gray.” But that’s just on paper and nobody cares. It is a ‘very special system’, says Visser.

Even more special is the case of Iceland. That country is not even connected to the European electricity grid and almost all electricity is generated sustainably by means of hydropower and geothermal energy. Nevertheless, Dutch companies can buy GOs in Iceland.

On paper, this could make Dutch suppliers greener and Icelandic suppliers grayer, but no more kilowatt-hours of green electricity are generated.

The annoying thing is that consumers with, for example, an electric car that they charge with ‘green energy’ have the feeling that they are CO2 neutral, while that is simply not true.

Not intended to encourage

“The so-called GOs are not intended to stimulate investments in green production,” says a spokesperson for Energie-Nederland, the interest group of energy suppliers. “It is a label. At the source (production), the green value (in the form of a GoO) is separated from electricity. Electricity is traded on the market separately from the GoOs.”

Nevertheless, according to Energie-Nederland, the system could ultimately provide more green electricity. “Suppose there is a scarcity of GoOs, then the price will rise. That could mean extra income for new production of sustainable energy. So if there are more consumers who want sustainable energy, then that can indeed be an incentive for the generation of more renewable energy.”

But as said: the market is full of Guarantees of Origin, so there is no question of scarcity. And since more and more energy is actually being generated sustainably, this scarcity will not arise either.

Dissolves itself

But that’s also the good news. Because, Visser thinks, the problem will eventually solve itself. If the enormous growth of wind and solar energy continues in the coming years, almost all electricity in our country will eventually be green and foreign GOs will no longer be necessary.

Milieu Centraal advises consumers to choose a power product from Dutch soil. In that case, the money actually ends up with a producer of Dutch green electricity, which means that more money is indeed released for extra green electricity.