Green Certificates: An Innovative Path to Developing Renewable Energy in Ukraine

In today's world, as we face global challenges like climate change and environmental issues, Ukraine is showing an increasing interest in renewable energy sources.

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This led to the adoption of Law No. 3220-IX on June 30, 2023, "On Amendments to Certain Laws of Ukraine Regarding the Restoration and Green Transformation of the Energy System of Ukraine" (hereinafter referred to as the Law).

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The main goal of the Law is to create favorable conditions for renewable energy producers to attract more investment into the sector and increase green energy production. This will support the development of sustainable and eco-friendly energy in Ukraine, reduce reliance on coal and other non-renewable sources, and help protect the environment by lowering harmful emissions.
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The Law introduces a new term: a guarantee of origin for electricity produced from renewable sources (hereinafter referred to as a guarantee of origin or green certificate).

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A guarantee of origin is an electronic document confirming that a specific amount of electricity was produced from renewable energy sources (RES). It also validates the environmental value of the electricity and certifies the rights associated with the positive impact of RES-based power generation.

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Green certificates are issued to RES producers and can be sold or transferred to other parties. By purchasing a guarantee of origin, the buyer can claim the benefits associated with electricity produced from renewable sources.

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The sale and purchase of guarantees of origin are conducted on market terms at free prices, with a few exceptions. Specifically, these exceptions apply to guarantees of origin for electricity sold to the Guaranteed Buyer under a "feed-in" tariff or provided under a market premium mechanism. Another exception applies to guarantees of origin for electricity produced by private household installations with a capacity of no more than 50 kW and sold to a universal service provider (USP) under a "feed-in" tariff, where these installations are transferred to the ownership of the Guaranteed Buyer/USP simultaneously with the sale of the electricity or service. The cost of such guarantees of origin is included in the price of the electricity or service purchased by the Guaranteed Buyer or USP.

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The Guaranteed Buyer and the USP have the right to sell guarantees of origin separately from the electricity or service purchased under the "feed-in" tariff, with the proceeds directed toward settlements with green energy producers.

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Renewable energy producers have the right to receive guarantees of origin for electricity produced from renewable sources, and to sell or transfer these guarantees to other parties through civil law contracts. The Law also allows for the trading of guarantees of origin on electronic auction platforms. Corresponding amendments were made to the Law of Ukraine "On Commodity Exchanges," which allows for the trading of not only fuel and energy resources but also their associated attributes.

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Owners of a guarantee of origin for electricity produced from renewable sources have the right to transfer it and/or use it to confirm that the corresponding volume of electricity they consumed for their own needs was produced from renewable sources. A guarantee of origin for electricity produced from renewable sources certifies the owner's rights to its environmental value.

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The NEURC has been designated by the legislature as the authority responsible for the issuance, circulation, and cancellation of guarantees of origin. This body is also responsible for managing the registry of guarantees of origin, where guarantees are automatically generated based on commercial metering data.

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The export and import of guarantees of origin for electricity produced from renewable energy sources are carried out under foreign trade agreements (contracts).

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The NEURC also establishes and maintains a registry of power generation facilities and consumer electrical installations, including those of active consumers who use alternative energy sources to generate electricity. This registry is an integral part of the registry of guarantees of origin. The operating procedures for this registry are approved by the Regulator.

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It is important to note that the final procedure for the issuance, circulation, and redemption of guarantees has not yet been adopted. This procedure must be approved by the Cabinet of Ministers of Ukraine based on proposals submitted by the National Energy and Utilities Regulatory Commission. We will keep you informed of any future developments regarding this matter in our upcoming publications.

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Conclusion

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In our view, the primary benefits of implementing guarantees of origin include additional funding for renewable energy support programs, extra revenue for producers, branding opportunities for suppliers, "green" differentiation for industry, and the ability for end consumers to choose their preferred electricity source. Implementing and effectively utilizing European-style guarantees of origin for electricity in Ukraine will be a significant step toward supporting the development of renewable energy. Furthermore, it will facilitate the country's post-war recovery by attracting international investment into the energy sector and creating conditions for increased exports of electricity and energy-intensive goods to the European Union.

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The legal consulting firm FEDOTOV & PARTNERS specializes in providing services to participants in the electricity and natural gas markets. Our experience in supporting energy companies allows us to say that we not only know what is written in energy laws, but we also understand how the energy business works in practice. If you have any legal questions, we are always ready to help and offer you the most optimal solutions.

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