The Guarantee of Origin Scheme (GO Scheme) is an emerging, internationally aligned strategy that compliments the Commonwealth's legislated goal of achieving net zero carbon emissions by 2050.
Through the GO Scheme, producers of renewable energy can make credible low emissions claims about their products, unlocking opportunities for trade, decarbonisation and investment while fostering a robust renewable energy market both domestically and internationally.
The GO Scheme will primarily function through the creation of certificates, which allow for the recording and tracing of information regarding renewable energy products. These certificates can then be traded for financial benefit, surrendered to claim renewable energy benefits or traded to ensure transparency and informed decision making in the market.
The implementation of the GO Scheme not only ensures alignment and consistency with international energy certification schemes but also underscores Australia's commitment to sustainable energy practices, attracting significant investments and propelling the country towards a greener future.
Background
The Commonwealth has previously implemented several schemes to achieve net zero emissions by 2050. An example is the Renewable Energy Target Scheme (RET Scheme), which was first achieved in 2019 and continues to trace renewable energy production.
With the RET Scheme projected to due to end in 2030, the Commonwealth is now introducing a new internationally aligned GO Scheme, which is expected to be legislated in 2024 and administered by the Clean Energy Regulator (CER).
The GO Scheme will complement the RET Scheme and enable the industry to track and certify emissions from Australian renewable energy products and advance towards achieving net zero carbon emissions.
The RET Scheme: A refresher
The Commonwealth's RET Scheme was designed to increase the use of renewable energy, reduce greenhouse gas emissions and promote the market growth of renewable energy products. To achieve this, the RET required that at least 33,000 gigawatt-hours (GWh) (reduced from 41,000 GWh) of Australia's electricity be produced from renewable sources by 2020. The RET Scheme operates through two main schemes – the Large-scale Renewable Energy Target (LRET) and the Small-scale Renewable Energy Scheme (SRES).
The RET expands the market through the creation and trading of renewable energy certificates. This allows generators of renewable energy to sell their products valued above market prices and at market prices through Commonwealth subsidies. To further stimulate market growth and reduce emissions, the LRET mandates liable entities to purchase and surrender Large-scale Generation Certificates (LGCs).
Limitations of the RET Scheme
With the RET projected to shortly meet its target, it is no longer a significant driver of renewables investment.
The Commonwealth has not legislated for its extension past 2030 due to several reasons, including:
- policy uncertainty surrounding the RET, its inability to provide a clear and ongoing certificate framework and investor certainty
- the reduced value of LGCs as a result of oversupply in the market, making assistance through the Commonwealth subsidies unnecessary and increasing costs for households and businesses
- its exclusion of the creation of certificates for exported electricity or offshore renewable generation, and for 'below-baseline' generation, that is, generation from capacity before 1997.
What is the GO Scheme?
In June 2021, the CER conducted successful trials of the GO Scheme focusing on hydrogen and hydrogen-carrying energy. The scheme is now being designed to expand and incorporate new products.
The GO Scheme will measure, track, verify and certify the carbon emissions and other attributes of Australian renewable energy products, including solar, wind, ammonia, synthetic fuels and metals. It also aims to develop both the domestic and international market for clean energy and enhance Australia's global position in renewable energy trading.
To achieve these aims, the GO Scheme will:
- provide a framework for tracking renewable electricity claims and quantifying the embedded emissions
- stimulate market creation by allowing clean energy products to be fairly valued for their emissions attribute
- incentivise clean energy product innovation across the supply chain
- accelerate the uptake of clean energy products
- play a key role in helping new projects secure finance and improve the effectiveness of other Commonwealth efforts to scale up renewables and the hydrogen industry.
How does it work?
Similar to the RET Scheme, the GO Scheme will allow producers of clean energy to make credible low emissions claims about their products, unlocking opportunities for trade, decarbonisation and investment. However, participation in the GO Scheme will be voluntary (unlike the RET). Producers will be eligible to participate if their production pathway is covered under an emissions accounting methodology under the scheme.
Further, the GO Scheme will also utilise certificates like the RET Scheme to ensure the tracking of emissions and to support claims made by businesses and organisations regarding their renewable energy usage. GO Certificates will be issued for each megawatt-hour (MWh) of renewable energy produced and can be traded for a financial benefit or surrendered to claim the renewable energy benefit. These certificates will represent the net generation of renewable energy, incorporate marginal loss factors and auxiliary losses from onsite use of generation.
The GO Scheme will include two types of GO Certificates – the Renewable Energy GO Certificates (REGOs) and the Product GO Certificates (Product GOs).
REGOs
REGOs are associated with tracking renewable electricity generation and can be traded separately to the renewable electricity they were produced alongside. The certificate mechanism would build on the LGC framework under the RET Scheme and will provide certainty for renewable electricity investment and procurement beyond 2030 when the RET Scheme ends.
By providing information on the origin and type of renewable energy, the GO Scheme supports the development of renewable energy and provides assurance to companies purchasing GOs that the certificates are of high quality. Further, it is proposed that REGOs would be created for all renewable generation, including electricity exported and generated overseas or offshore, electricity generated by small-scale solar PV and renewable electricity from storage facilities.
Product GOs
Product GOs verify the carbon intensity of products across their lifecycle and aims to capture emissions associated with the supply of raw materials, production, transport and storage to the point of consumption or international departure. Product GOs may adopt a provenance approach where certificates could be traded alongside the product itself while having the flexibility to recognise that molecules may be interchangeable in certain situations.
Possible implications of the GO Scheme
During the cross over of the RET and GO schemes, the CER will ensure no duplication of certificates. LGCs and REGOs will remain valid in the GO Scheme for 12 months and will be stamped with the date and time of generation. There will also be no requirement for LGCs or REGOs to match the time of production, however, a mechanism providing producers with the option to demonstrate time matching on RECs will be developed over time. Furthermore, it is important to note that the implementation of the GO Scheme will not change the eligibility criteria for LGC creation.
Overall, as the global community continues to invest in renewable energy and clean energy manufacturing, the implementation of the GO Scheme will further strengthen Australia's international and domestic position by facilitating market growth and investment opportunities.
Helpful resources
- Renewable Electricity Guarantee of Origin Approach paper September 2023
- Renewable Electricity Certification Policy position paper for renewable electricity certification under the Guarantee of Origin scheme and for economy-wide use December 2022
- What's next after the RET?
If you have any questions about either schemes or how the GO Scheme could impact your business, please get in touch with our team below.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.