Decarbonising the grid: The role of Granular Certificates in the clean energy transition

What are Granular Certificates (GCs) for Carbon Free Electricity (CFE)?

Granular Certificates (GCs) are renewable energy certificates that are stamped with the time and location of energy generation. Unlike traditional certificates that allow annual matching of renewable energy procurement, GCs enable hourly matching of energy demand and renewable generation.

Stamping certificates with this information allows for the creation of hourly renewable energy markets in specific locations. GC markets are being developed in multiple jurisdictions with differing names.

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Hourly energy markets will be covered in more detail in a future article about power market innovation. Sign-up here to receive it directly in your inbox.

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Why more granular energy matching is important

The transition from annual matching of renewable energy to hourly matching is critical for deeper decarbonisation.

While many corporates already claim 100% renewable energy use through Power Purchase Agreements (PPAs) and Renewable Energy Certificates (RECs) purchases, such as LGCs, these contracts do not guarantee that their energy demand is met by renewables at every point in the day.

For example, in some time periods there may be more solar power generated leading to potentially excess energy supply.  In other times of the day, such as the evening or nighttime, there might be a renewable energy deficit leading to a continued reliance on coal..

Granular Certificates can be used to match these deficits of green power and offer a more accurate method of matching renewable energy supply and demand – helping to unlock the potential for true 24/7 CFE. See the image below.

This method of granular tracking is a precursor to certifying green commodities, such as green hydrogen and green aluminium.

The EU has released a mandate stating that green hydrogen used within their region must include a certificate that ensures it was produced when and where renewable energy was available. As for the latter, the Australian government just recently announced the Green Aluminium Production Credit initiative, which is a program to incentivise clean aluminium production. Granular Certificates are a potential tool to help manufacturers support their green claims.

This benefit will eventually help drive greater diversification in our global energy portfolio, particularly firming and storage solutions such as batteries and hydrogen.

While annual matching of renewable generation certificates is a simple and low-cost approach that has helped support the uptake of renewable energy seen to date, the next stage of grid decarbonisation relies more on where, when and what types of green power is deployed.

Role of GCs and GC markets in supporting climate priorities

Academic research out of Europe and the US indicates that the introduction of GCs is likely to create more efficient investment signals and reduce barriers associated with matching renewable generation with demand in real time.

The expected benefits include:

• Consumers paying less to match demand with generation in real time
  
  If and when trading GCs becomes the norm, consumers will be able to match their energy demand with generation with much more efficiency. Research by Xu et. al. on the Californian system indicate that GCs could prevent over-contracting and reduce the cost premium of 24/7 CFE by as much as 24%.
  
  GCs may also allow smaller entities - that otherwise would have difficulties entering into power purchase agreements due to a lack of resources or expertise - to match consumption with generation on a 24/7 basis (24/7 CFE).

• Reductions in system-level emissions
  
  Multiple studies have concluded that if enough entities use GCs to match their demand with generation on a 24/7 basis, the total emissions of the whole system is likely to be lowered.
  
  By incentivising the development of assets that can provide CFE in the hours that would otherwise have higher emissions intensity, the overall emissions in the system are lowered more rapidly than if development of these assets was not incentivised by GCs.

• Clearer price signals for project development and a more efficient market
  
  ‍By providing clearer price signals for projects that generate clean energy in typically high-emissions intensive periods (typically periods of low wind and solar output), GCs can incentivise investment and operational decisions that reduce emissions.
  
  Projects that generate clean energy when supply is lowest could receive as much as US$106 for one granular certificate. Specifically, GCs enable greater market demand for sources of clean dispatchable generation (such as hydrogen and gas with carbon capture and storage) and long duration storage.
  
  This, in turn, means the overall build of clean energy generation and storage could be reduced, lowering the total cost to consumers.

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How the GC market is currently evolving

GC framework and markets are being explored by governments around the world.

To ensure mass adoption of the GC concept, market regulators and operators must overcome some key challenges.

Below, we explore these concerns and the potential solutions:

• Complex data management: Timestamping and tracking energy generation and consumption in real-time significantly increase the complexity of accounting, monitoring and reporting processes and systems.
  Evolving existing renewable energy certificate schemes to include time and generation stamping may help mitigate this challenge.‍
• Lack of standardisation: The lack of universal, government-backed, standards for GCs hampers their scalability. While initiatives like the United Nations Energy Compact and EnergyTag have developed principles for GCs, broader adoption requires alignment across jurisdictions.‍
• Greater market integration and adoption needed: Existing renewable energy certification schemes need to evolve to accommodate granular data. Complementary government policies and incentives are also crucial to drive demand for granular energy procurement.‍

The CORE Markets platform enables market participants to trade bespoke hourly wholesale energy contracts enabling 24/7 matching of green generation with consumption. Learn more here.

Status of GC market adoption

The EU, Californian and Australian governments are examples of jurisdictions with ambitions that will either benefit from GCs or create a market for GCs.

• United States: A recent public hearing by the State of California’s Energy Commission unanimously approved the amendments to the Power Source Disclosure regulations, marking a milestone towards increasing electricity reporting transparency. Starting in 2028, retail electricity suppliers must track and report their power sources and associated emissions on an hourly basis.
• European Union: The EU’s Renewable Energy Directive (RED) III requires hourly Guarantees of Origin for renewable hydrogen production by 2030, paving the way for broader GC adoption.
• Australia: The REGO scheme, set to launch in late 2025, aims to integrate granular data into its renewable energy certificate framework. The details of the scheme are still being finalised.

Meanwhile, some corporates have announced 24/7 CFE targets, are trading GCs and helping to develop GC trading platforms.

Voluntary activity highlights include:

• EnergyTag has reported the use of GCs in 19 countries across 5 continents. To date over 5 TWh of CFE with has been matched with demand using GCs. Most of the demand appears to be driven by large corporates and energy retailers, who are giving their customers the option of procuring 24/7 CFE.
• Microsoft, Google, LevelTen Energy and several other large institutions have formed the Granular Certificate Trading Alliance, aimed at gaining more momentum in the adoption of 24/7 CFE.

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CASE STUDY

Google embraces carbon-free energy and inspires others

• Google has been operating on 100% renewables since 2016. However, due to the differences in regional development, some grids in its countries of operation may not be powered by renewables, thereby risking Google’s 100% renewables claim.
• This is why, in 2020, Google announced a target to achieve 100% 24/7 carbon-free energy by 2030. 
• The company mentioned that it paid a significant premium for this differentiated methodology to a traditional PPA model. But the additional investment was key to it reaching 64% CFE by 2022. The latest update from Google showed that it has maintained its CFE claim in 2023 even after expanding data centre operations. 
• Beyond its operations, Google also makes targeted investments in renewable energy projects across North America, Europe and Asia Pacific to accelerate CFE adoption.
• Google’s initiative has inspired others, including the US government, to adopt a 24/7 CFE target.

Learn more here

The path forward for Granular Certificates

The introduction of Granular Certificates represents an opportunity to accelerate decarbonisation of electricity grids and achieve 24/7 carbon-free energy.

By enabling real-time alignment of renewable energy generation and demand, GCs help address critical gaps in current energy procurement models, drive down emissions, and promote market efficiency.

To understand more about the evolving renewable energy market and what it means for your business, reach out to our team, we’d love to help.