The purpose of this Letter of Intent is to lay down a common understanding shared between the national biomethane registries regarding their cooperation towards a cross-border trade of biomethane. 1. The signatories to this Letter of Intent (the Partners ) share the view that a functional system of comprehensive information transfer between the national biomethane registries is essential for facilitating future cross-border biomethane trade within the European gas grid. We believe that biomethane is a unique source of renewable energy, as it is the only renewable resource capable of flexible production, and which can be used in the heating, power and vehicle fuels sector. 2. The foundation of cross-border trade will be the proof of injection of biomethane, or Guarantee of Origin, with a standard unit size. The term Guarantees of Origin is used to refer to electronic documents which serve as a proof of origin and other qualities for bio-methane but do not have an own, intrinsic (market) value, and cannot be traded independently from the physical product they are connected to. The Guarantees of Origin are distinct from Certificates which can be traded independently from the physical product. This applies even if a pure certificate system is operating in particular European States. 3. Biomethane in the following text will include upgraded biogas and Syngas. Power-to-Gas will be included only if the applied power is generated from renewable sources and the hydrogen is biologically converted to methane. 4. The Partners encourage the establishment of national biomethane registries in every European country. The LoI is open for other registries to join. Partners will actively try to assist the establishment of registries. 5. The Partners agree on the following major areas of collaboration: to create the best possible conditions for transfer of information related to biomethane transactions, to ensure highest possible compatibility between their registration systems, to set the conditions for mutual acceptance of Guarantees of Origin for biomethane. 1 2
6. The partners share the intention to work together via regular meetings/working groups to solve open issues. 7. This Letter of Intent is not a legally binding document. 8. The partners acknowledge the contribution of the EU-Regist project of Biogasrat+ and of the IEE GreenGasGrids project to the preparation of this cooperation. 9. Signatures Biomethan Register Austria (AT) VSG (Federation of Swiss Gas Industry CH) Biogasregister (DE) Energinet.DK (DK) Gaz Réseau Distribution France (FR) Green Gas Certification Scheme (UK) 2 2
WHAT IS THE PURPOSE OF THE LETTER OF INTENT? This proposed Letter of Intent is not a legally binding document. The Letter of Intent serves as a kind of a foundation stone for the future building of a structured, widely recognised cooperation among all national biomethane registries in Europe. The purpose of this Letter of Intent is to confirm the principal readiness of the signatories (national biomethane registries) for cooperation, to lay down the basic understanding among the signatories regarding the cooperation, to serve as an invitation for the other national biomethane registries which have not yet joined the cooperation, to encourage the competent bodies in all other European countries to establish the national biomethane registry with the prospective of joining this European initiative. WHY ARE COMMON RULES NEEDED? Upgrading biogas to biomethane opens totally new dimensions to the biogas industry. Biomethane enables geographical separation between production and use, makes cross-border transaction possible. Nevertheless, the production of biomethane and its cross-border trade makes sense only if the special renewable feature of biomethane (its intrinsic value) can be realised on the market. The value of biomethane is the sum of its physical value and its intrinsic (green, renewable, sustainable) value. The main challenge of biomethane trade (especially of cross-border trade) is that the physical and intrinsic values do not move together. It is the task of biomethane registries to provide trustworthy documentation which certifies the special (renewable) features of the product. The national biomethane registries are the competent bodies to provide for such documentary confirmation within the boundaries of their national borders. This documentation is issued in accordance with the domestic legal, regulatory and market requirements. Key requirement of biomethane import is that the green property of biomethane should be recognised by the importing country, and that the gas should be counted towards national quotas or targets. The relevant qualification cannot be provided by the importing country, it must come from the country of production. The relevant documentation issued by the national biomethane registry in the producing country has a real value only if it contains (certifies) all those attributes which are necessary in the importing country. This requires the definition of a standardised set of data to be exchanged with involvement of the national registries whenever biomethane is transferred across borders. Stated simply, this requires that Guarantees of Origin, as documented in national biomethane registries, should be recognised by counterpart registries in other countries. A functioning European biomethane market is highly dependent on a transparent, reliable and effective system of comprehensive information transfer among the national biomethane registries across national borders. Cooperation between the national registries is needed to create the necessary framework conditions for such a transfer of information. For this purpose the national registries cooperating in the creation of the European biomethane trading scheme should agree on a coordinated set of 1 4
criteria/attributes all of them applying in the same way and should harmonise their procedures. Alternatively the registries could agree on a classification of criteria/attributes establishing classes with different level of requirements. The main aim of their cooperation is to create the compatibility between the registries and to set the conditions for mutual acceptance of Guarantees of Origin for biomethane. The term Guarantees of Origin (GoO) is used to refer to electronic documents which serve as a proof of origin and other qualities for biomethane but do not have an own market value. The GoO cannot be traded independently from the physical product thus excluding double-counting. Nevertheless, the European Biomethane Guarantee of Origin will contain all information needed for qualifying imported biomethane as green. The establishment of national biomethane registries in every European country and the broad cooperation and coordination among them will be the first important steps towards creating the conditions for a free cross-border biomethane trade in Europe. WHAT ARE THE KEY AREAS OF COLLABORATION? to create the best possible, most efficient conditions for transfer of information related to biomethane transactions among the national biomethane registries, to establish a harmonised methodology by which the complete information pertaining to biomethane Guarantees of Origin is transferred between each registry, to ensure highest possible compatibility between the national registration systems, to set the conditions for mutual acceptance of Guarantees of Origin for biomethane (at the start on bilateral, later also on multilateral basis). WHICH ARE THE MAJOR PARAMETERS TO BE HARMONISED? The Partners are expected to endeavour issuing their Biomethane Guarantees of Origin in compliance with the regulations prevailing both in their home countries and in the other European countries (having joined the cooperation), in such form and with such content which qualifies the imported biomethane for equal treatment with domestic production. The criteria/attributes represented and documented by a Biomethane Guarantee of Origin should correspond to the criteria/attributes which must be fulfilled by imported biomethane in order to be qualified for support in individual member states of the European Union and European Economic Area. 2 4
The Partners will agree on minimum criteria to be included in the GoOs. These could include: a) Unified numbering scheme for the Guarantee of Origin (a standard unique identifier for issuing Guarantees of Origin in addition to existing national systems) b) Country Code (Germany DE, e.g.) c) Name and address of producing installation d) Documentation (audit) on biomethane production e) Injecting period f) Quantity injected (with measuring instrument number) g) Documentation (audit) on injection h) Type of substrate(s) processed in the biogas plant i) Documentation (audit) on withdrawal from grid j) Sustainability certification (as required, for example in case of transportation fuel use) k) Validity period of the GoO Exclusion of double counting: Each registry must ensure that its users will exclusively utilise the particular registry for international sales. The owners of the GoOs will be liable for excluding the possibility of double counting. Mass-balance is an important factor in registering quantities of biomethane. In a mass balance system feed-in and withdrawal are recorded in the relevant registries and audited. Under Directive 2009/28/EC Article 18 (1) ( Mass-balance ), a mass-balance system is defined as an electronic registry which is used to trace the chain of custody (injection trade offtake) of biomethane injected into the natural gas grid. Individual molecules are not tracked; assignment of the right of withdrawal ( trade ) suffices to document transfer. In a mass-balance system Guarantees of Origin cannot be traded in isolation from a physical quantity. 3 4
A crucial pre-condition for eliminating the hurdles on the way of free biomethane trade is to recognise the European natural gas network as one single balance-cycle (Bilanzkreis), i.e. to accept that the mass-balancing requirement is fulfilled as soon as the respective volume of biomethane has been taken out of the European natural gas network (and this transaction has been properly certified). WHICH ARE THE POSSIBLE NEXT STEPS? The participating national registries should establish working groups to address the following issues: Drafting harmonised recommendations for issuing, registering, transferring and cancelling the Biomethane Guarantees of Origin to be applied in cross-border biomethane transactions, Drafting contract templates, Drafting auditing procedures, Assessing the need, technical solutions and costs for establishing a joint computer server dedicated to the transfer of information among the national biomethane registries, their contractual partners/clients and the competent authorities, Elaborating a proposal on recognising the European natural gas grid as a single massbalance system for international biomethane trade. The deliverables of the working groups should be discussed at workshops organised with the participation of European stakeholders involved in biomethane production, transportation and use. 4 4