“An energy certificate is an electronic document which provides proof of the source of 1,000 kWh of electrical energy (an average European household would need between 3 and 5 certificates each year to prove where its electricity comes from).
Electricity comes from many generators and is transported to consumers across an electricity grid. This mixes energy from various sources, so it is not possible for consumer to know where their energy comes from. However, it is possible to contract with a plant to generate into the grid, and suppliers do this on behalf of their customers, using certificates as evidence that the energy has been generated. Nobody knows where the electricity flows, but certificates let us see where the money has gone.
Energy certificates can be used to support the claims of generators, suppliers and consumers as evidence of energy production or consumption, whether as proof of “green supply”; as a condition of receiving public support; or as proof of “environmental credentials”.
Certificates can be bought by entering into contract of sale, either with another market party or with an Exchange. This contract may specify what they can be used for, particularly in the case of certificates that are associated with public support schemes. Note that energy suppliers represent their customer base, buying certificates on behalf of consumers.
Energy certificates are created by an independent “issuing body”, which guarantees their quality and credibility by means of various checks and controls. They can then be transferred between accounts held on a central registration database (otherwise known as a “registry”) by market participants. When the associated energy is sold to a final consumer, or perhaps used as evidence by a public body, then the certificate is made non-tradable and moved to a separate account from tradable certificates.
Energy certificates which are used as evidence of the use of renewable energy are also called:
- Guarantees of Origin (GO)
- Renewable Energy Certificates (RECs)
- Tradable Renewable Energy Certificates (TRECs)
- Tradable Renewable Certificates (TRCs)
- Green certificates.”