RED III: The Impact on PPAs and GOs
Have you ever wondered what to expect from the REDIII? The revisions to the Renewable Energy Directive II (RED II) aim to double the share of renewables by 2030. Power Purchase Agreements (PPAs) and Guarantees of Origin (GOs) will also undergo significant changes that will aid in the development of these markets.
What can we expect from the RED III?
The adoption of the Climate Law has set Europe a binding objective of net-zero by 2050. The first major milestone on the road to net-zero will be the 2030 emission targets. Europe has set a target of net GHG emissions reductions of 55 percent by 2030, compared to 1990 levels. To achieve this goal, a number of updates to energy legislation are currently in progress. At the core of these updates is the amendment to the Renewable Energy Directive II (RED II).
In a recent article, we discussed the commission’s proposals for the updated directive (or RED III). Current proposals aim to double the share of renewables from 20 to 40 percent in 2030. The RED III will also include a number of other measures. These include supporting electrification, sustainability, certification of gases such as hydrogen, and cross-border cooperation. Power Purchase Agreements (PPAs) and Guarantees of Origin (GOs) will also see some important changes that will promote the development of these markets.
Summary of the Renewable Energy Directive III For PPAs & GOs
During the last edition of RE-Source, Amsterdam’s flagship event which gathers renewable energy buyers and suppliers, RED III was discussed. During one of the main stage conferences of the closing day, speakers from the public and private sector examined how the new directive will shape the European energy policy framework.
The European Commission has recognised the successes of the PPA and GOs markets in the past decade. These mechanisms are now seen as critical tools to accelerate renewable energy deployment in Europe. They enable Member States (MS) to achieve the bigger renewable targets more cost-effectively and make savings in support schemes. However, PPAs and GOs are not without their flaws. To help improve these markets, the Commission has proposed several changes for the RED III. These changes primarily relate to Article 15 and Article 19.
Article 15 (PPAs)
Taking a closer look into Article 15, the new PPA provisions propose to:
- Strengthen reporting requirements on PPAs for member states. Member states will be required to assess the regulatory and administrative barriers of PPAs. They will also be tasked with removing unjustified barriers.
- Ensure that the associated GOs can be transferred to the buyers of the renewable PPAs.
- Reduce financial risks of PPAs. The use of credit guarantees has been proposed to help SMEs access the market.
- Introduce requirements to indicate the expected volume of national renewable power generation that will be supported by Corporate PPAs (CPPAs).
Keep reading the article in FlexiDAO’s blog.