No more EU GOs in the UK, what does RECS think?

On March 29th 2022, BEIS published an open consultation after having proposed changes to the green imported electricity exemption (CfD & FIT) and the removal of EU GOs recognition in the UK (read our analysis of the consultation here). Despite the ending date of the consultation already being passed, the final decision from the UK Government yet hasn’t been published, even though we have some ideas on what is going to happen. We take this flat period to analyse the answer RECS association wrote as part of this consultation.

Where are we with the consultation?

As a quick reminder, the consultation was held between March 29th and May 10th 2022. The consultation drew some potential changes to both the CfD and FIT schemes, as well as the general recognition of EU GOs in the UK, following the Brexit. OFGEM, the energy regulator in the UK, published its conclusions right after the end of this consultation. These conclusions aren’t to be taken for the outcome, but given the feedback we had from market players and regulators, it is unlikely that the UK government decides to take a completely different path.

RECS International, the “Energy Certificate Association” promoting the development and use of Energy Attribute Certificates, therefore a major player in this market, has contributed to this consultation by submitting evidence. Although this response is a month dated, it is always interesting to read what a major player like RECS has to say on an issue that has been occupying all minds for the past few weeks.

RECS views on several points

In its document, RECS REGO market stakeholder group comments on BEIS proposals and brings forward some key elements that we will discuss after.

1. Removal of cost exemptions for green imported electricity (CfD & FIT)

RECS finds that the proposal from BEIS to end the Green Import Exemptions (GIE) is “broadly acceptable, since they are unlikely to have a significant impact on the UK’s renewable energy market”. At Greenfact, we consider that there will be an impact, even if moderate of course. On the implementation timeline, RECS recommends these changes to occur “at the later date of 01.04.2023”, in line with the OFGEM proposal and the second proposal from BEIS (the first was October 1st 2022).

         2. Recognition of EU GOs

RECS “does not support the UK government’s proposal to cease recognition of EU GoOs”.

RECS identifies three direct impacts of this measure:

-       First, a “shortfall in the renewable energy available to UK consumers”, based on the fact that more and more EU GOs were imported over the last years in the UK, as the AIB figures confirmed with the difference between the renewable energy produced and supplied in the UK;

-       Second, “higher prices for the renewable energy available to UK consumers”: as REGO prices are trading at higher prices (this will continue and increase in intensity), the supply shock mentioned above would lead to higher prices both for REGOs and renewable energy in the UK, thus desensitizing private consumers to continue to buy renewable energy for good environmental-friendly concerns;

-       Third, as no more EU GOs will be available in the UK market, UK consumers will “only receive ‘grey’ power”, leading to a lot of UK companies with a Net-Zero target in a mess: they currently source their renewable electricity and heat (Scope 2) from the EU, and won’t be able to do so after the end of EU GOs recognition in the UK.

Despite RECS not supporting this measure, they propose some adaptations to it, should the UK government want to move forward in these directions.

RECS proposals

As for the EU GOs end of recognition, RECS proposes three adjustments:

        1. Accelerate efforts to secure mutual recognition of EU GoOs and REGOs: RECS proposes that the UK joins the AIB after being an observer for a long time and by implementing the EECS standard, EU-UK mutual recognition of each party’s GOs would be facilitated.

        2. Extend, to the greatest extent possible, the UK’s unilateral recognition of EU GOs: in line with their view on the end of EU GOs recognition in the UK, RECS experts propose that the recognition of EU GOs in the UK should be extended, until “the UK Government should propose specific criteria for when EU GO imports can be ended”. Therefore, it would be part of a broader energy transition set-up and would coincide with the current dependency status of the UK on renewable energy imports from the EU.

        3. Consider overseas OFGEM issuance: to avoid importing EU GOs directly to the UK, RECS recommends that the possibility for OFGEM to “become an EAC issuing body in EU member States” should be investigated by the UK Government. Thus, REGOs could be issued outside of the UK, limiting the need to import EU GOs in the UK.

Despite these very interesting and detailed proposals from RECS, it is quite uncertain that they will be implemented by the UK Government, as per the OFGEM answer to the consultation. We will have, according to our sources, the outcome of this long process in the weeks to come.

Greenfact has decided to host a Webinar on this specific issue, to help our customers that show an interest in the UK GO market to better understand the new rules to be set. This Webinar will be held by mid-end of July, with the special presence of a member of BEIS and/or someone from OFGEM that will enlighten all attendees on the new rules and answer questions.

The exact time and date of this Webinar will be released soon, stay up to date on our Website and LinkedIn.

For any questions on the UK market and/or the Webinar, do not hesitate to contact me at leo@greenfact.com

Source: RECS International