UWEA initiated a comprehensive study of the market for Guarantees of Origin of electricity from renewables (“GO”) in Ukraine. The SE “Ukrpromzovnishekspertyza” analysed the trends existing on the GO market in Europe and provided an assessment of the prospects for the development of this market in Ukraine in its Report “Guarantees of origin of electricity produced from renewable energy sources as a new tool for achieving Ukraine’s climate neutrality. Trends and prospects for the development of the GO commodity market in Ukraine, the impact on the national economy in the medium term”.
Here are the key provisions of the Report.
Despite the existing progress in building the GO market, in Ukraine there are a number of barriers to its full functioning, among which:
1. Non-compliance with EU standards: the mechanism for the circulation of guarantees of origin in Ukraine does not fully comply with EU standards, which complicates the potential export of “green” electricity to EU countries. In particular, the export of GOs from Ukraine is currently possible only under foreign trade agreements.
2. Low interest among potential GO buyers and a limited domestic market. Ukraine lacks incentives to increase buyers’ interest in purchasing GOs. The absence of benefits (for example, tax benefits) holds back the development of the GO market.
3. The absence of mechanisms to stimulate demand for GOs taking into account their environmental value. At present, GOs cannot replace eco-tax payments, and therefore there is insufficient economic justification for their existence.
4. The absence of the right of industrial enterprises to use Ukrainian GOs (generated or purchased) to confirm the origin of the electricity used in the production of goods for export (there is no toolkit for reducing the level of embedded emissions for the CBAM).
5. Insufficient awareness among consumers about GOs as a new tool for their real influence (contribution) on the process of the “green transition” of Ukraine’s economy and the protection of the environment in Ukraine.
At the same time, GOs can become an additional source of income for renewables producers, as well as for other electricity market participants that have the right to sell GOs (the Guaranteed Buyer, electricity supply companies). Growth in the volume of trading on the GO market will have a positive impact on reducing the payback periods of renewables projects, which, in turn, will contribute to the further development of the renewable energy sector. Providing incentives for the growth of demand for GOs will, among other things, make it possible to reduce the burden of the special obligations imposed to support renewables producers.
The authors of the Report see the need to introduce mechanisms to stimulate demand for GOs, in particular:
1) the introduction of stimulating state policy measures (for example, introducing emissions trading as is done in the EU, and/or providing separate tax benefits that take into account the environmental value of guarantees of origin, introducing mandatory disclosure of information about the share of consumed renewable energy in the production of goods, etc.);
2) the coordination and authorisation of the export and recognition of Ukrainian GOs on EU markets;
3) direct work with business from the point of view of corporate social and
environmental responsibility.
GOs can become an additional source of income for renewables producers, as well as for other electricity market participants that have the right to sell GOs (in particular, the Guaranteed Buyer and electricity supply companies). Growth in the volume of trading on the GO market will have a positive impact on reducing the payback periods of renewables projects, which, in turn, will contribute to the further development of the renewable energy sector.
In the absence of incentives, demand for GOs will remain low and will not exceed 20–30 million GO units per year. Solving the problems of the GO market will contribute to the development of renewables capacity in Ukraine. Accordingly, the structure of electricity production will change, and CO2 emissions will automatically decrease. That is, the carbon footprint in Ukrainian products will decrease in the long term.
According to the authors of the report, the growth of investment and the construction of new renewables capacity thanks to the full functioning of the GO market in Ukraine will have a positive impact on the main macroeconomic indicators:
- Growth of GDP and gross output: According to the authors’ model calculations, Ukraine’s GDP will grow by 0.26% (UAH 20.9 billion in 2024 prices), and gross output by 0.3% (UAH 51.6 billion). The largest increase will be observed in the sectors of electrical equipment manufacturing and construction.
- Job creation: The creation of 17,600 new jobs is expected, in particular 5,800 in industry. First and foremost, the new jobs will be provided to the workers of the thermal power plants that are currently destroyed.
- Tax revenues: The growth of economic activity will provide an additional UAH 5.5 billion in tax revenues, in particular through VAT (+UAH 1.9 billion) and personal income tax (+UAH 1.5 billion). The export of surplus “green” energy will add a further UAH 32 billion to the budget, which in total will amount to UAH 37.5 billion.
- Localisation of production: The GO market will contribute to the localisation of the production of renewables equipment in Ukraine, attracting European investors.
The development of the GO market in Ukraine is critically important for the restoration of the energy system destroyed by the war and for ensuring a “green” transition in line with global climate goals. An effectively functioning GO market will make it possible to stimulate demand for “green” energy, attract significant investment and achieve the growth and decarbonisation of the national economy.
