Scaling the energy market: blockers and solutions
22 May 2023
Martijn, Business Development Manager
In the dynamic landscape of energy production and consumption, Guarantees of Origin (GOs) have emerged as a mechanism to promote renewable energy sources and reduce carbon emissions.
These certificates offer a way to track the origin and environmental attributes of energy, enabling businesses to make informed choices on what type of energy they consume. However, despite their potential, GOs face several challenges that hinder their effectiveness.
This article reflects on the status quo, and what we envision for the future of GOs at ZTLment.
Additionality: A Critical Challenge
One of the primary concerns with GOs is the issue of additionality. The concept of additionality refers to the ability of GOs to incentivise the development of new renewable energy projects that would not have been otherwise viable without the demand for certificates.
Without the assurance of additionality, GOs may just serve as a way for existing renewable energy generators to monetize their green attributes, without significantly driving the growth of new renewable energy capacity.
To address this challenge, it becomes crucial to establish robust mechanisms for ensuring that GOs are tied to genuinely additional renewable energy generation. Implementing rigorous criteria and verification processes can enhance the credibility of GOs. Furthermore, creating a framework for transparent financial collaboration can empower end-users in tracing back additionality when they purchase certificates.
Outdated Infrastructure: A Blocker to Progress
Another significant challenge related to Guarantees of Origin lies in the outdated infrastructure that supports their issuance and tracking. As the energy landscape evolves rapidly, the existing infrastructure might struggle to keep pace with emerging technologies and evolving market dynamics.
Outdated systems may result in delays, inaccuracies, and inefficiencies in the issuance and transfer of GOs, undermining the transparency and trust that underpin their foundation.
To overcome this hurdle, investing in modern and standardised infrastructure is essential. The integration of blockchain technology, for example, could streamline the issuance, tracking, and trading of GOs, ensuring transparency, immutability, and efficiency.
By leveraging the benefits of blockchain, the energy industry can enhance the reliability and scalability of the GO system, empowering stakeholders to participate in the transition towards a sustainable energy future.
Efficient Accounting: The Key to Sustainable Energy Markets
Efficient accounting and tracking mechanisms are fundamental to the successful implementation of Guarantees of Origin. Accurate measurement, reporting, and verification of energy production and consumption are vital for maintaining the integrity and credibility of GOs.
However, without standardized accounting practices and robust auditing processes, the potential for errors, double counting, or fraudulent activities can undermine the reliability of the GO system.
To ensure efficient accounting, industry-wide standards and best practices need to be established and adopted. Moving funds and digital certificates on one ledger can contribute to this. Such measures will enhance the accuracy and transparency of energy accounting, bolstering the integrity of GOs and fostering trust among stakeholders.
Regulated Tokenization and Money Movement
At ZTLment, we are working with stakeholders across the value chain of both the energy and carbon markets to solve for the aforementioned challenges.
As Europe’s first regulated payments institution built on blockchain, we help our customers in these markets harness the benefits of this cutting-edge technology without the worries of dealing with cryptocurrencies, shady wallet infrastructure, and compliance complications.
Our solution is designed with these three main problems in mind, by tokenizing GOs and being able to trace them throughout the value chain.
This way, additionality can no longer be overlooked, and delays in issuing and retiring certificates are no longer a problem, as data flows in real-time in relation to the flow of funds and accounting is done efficiently and transparently.
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