Industry — 6 September 2023

Nord Pool, AFRY, and Granular Energy whitepaper

New expert paper examines ways to bring transparency to the power market

Nord Pool, AFRY, and Granular Energy

A new paper released today by power-market operator Nord Pool, the sector-focused advisory firm AFRY Management Consulting and clean energy management start-up Granular Energy examines how upcoming changes to Guarantees of Origin could transform power markets and accelerate decarbonization, through a new price signal for flexibility.

One of the most significant actions that any individual or organization can take to reduce their carbon-emissions and support the energy transition is to choose to use carbon-free electricity.

Time-stamped energy certificates in electricity market design

Energy Attribute Certificates (EACs) have existed for over 20 years as the mechanism for consumers to reliably attribute electricity from a particular source without the risk of double counting or other fraud. These certificates have been incorporated into European legislation as ‘Guarantees of Origin’ since 2006.

Like nearly all EACs today, Guarantees of Origin (GOs) are still based on ‘annual matching’ of supply and demand, meaning that solar energy produced during daylight hours in summer can be claimed at any point throughout a 12-month window. There is now widespread support to transition this system to a sub-hourly matching period using timestamped energy certificates to enable more credible green energy products and establish an important new price signal for energy storage and flexibility.

This new joint paper explores the application of time-stamped energy certificates (also called granular certificates or GCs) in electricity market design and the potential for this to accelerate the deployment of technologies that deliver clean energy when it is most needed.

Wind farm

Key findings are:

  • Once available, granular energy certificates based on electricity metering data are likely to become an essential instrument for the electricity sector. Previously separate and unconnected wholesale power markets and energy certificate markets will become increasingly aligned.
  • As tradeable instruments, time and location-based pricing for carbon-free energy certificates will create new incentives for actions and technology investments that are essential for grid balancing and decarbonization, such as energy storage, clean dispatchable generation and demand flexibility.
  • The effectiveness of these price signals can be enhanced by incorporating these instruments into electricity market design. Several example use-cases for granular certificates in market design are explored including: (i) Providing a locational value, (ii) Green and grey power markets, and (iii) Demand-side response incentives.

This paper is intended for energy policy makers, regulators, and other relevant industry stakeholders.

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