How the system works
The New Zealand Energy Certificate System (NZECS) enables consumers to buy certificates from specific generation facilities. The system does not change the electrons that are supplied to you via the national grid.
Key aspects of operation
1. All electricity (renewable or otherwise) is fed into the national grid. Via the thousands of kilometres of transmission and distribution lines, this electricity is supplied to the nation's electricity consumers.
2. Once electricity enters the national grid, it becomes impossible to track. This means that no consumer can know for certain where the electricity they use has come from.
3. The NZECS enables generators of electricity to issue a 'certificate' for every unit of power they produce. This certificate shows how and when the energy was generated, and from where. This information is referred to as a 'generation attribute'.
4. NZECS certificates can be traded and transferred from electricity generators to electricity retailers, who can ultimately sell these certificates to energy consumers. Through the purchase of a certificate, a consumer 'reserves' that unit of generation as their own.
5. By purchasing generation certificates from renewable energy facilities, and matching them to their consumption via a process called 'redemption', a consumer can make clear statements about the type of electricity that they support..
6. By tracking all of these statements, we can make sure that each unit of energy is only counted once, and that no one is making false claims.
7. Finally, by tracking the flow of certificates, we can accurately calculate the characteristics of the remaining supply to ensure that everyone gets a clear picture of the nature of the energy that they are purchasing. As more and more consumers purchase certified energy, the 'residual supply' becomes less and less renewable, encouraging further behavioural change.
The New Zealand Energy Certificate System (NZECS) is built to be compatible with international greenhouse gas reporting standards. How the NZECS relates to each of these principles is explained below.
1. Certificates convey generation attributes.
The GHG emissions associated with the generation of certified electricity are clearly shown for each unit certified. These emissions rates are determined as part of the generation facility audit process, in conjunction with the generator.
The NZECS certification process also captures other attributes including location, technology type, age of facility, etc. These attributes can not be separated out and claimed separately.
2. Uniqueness of claims.
Certification is essential to reduce double-counting - when one unit (or attribute) of generation is counted twice by two consumers of electricity. A generator issuing certificates within the NZECS has sole authority over generation attributes from registered facilities, and must declare at the outset any alternative accreditation for which the facility is registered.
This allows assurance that all claims being made through use of the NZECS are not also being made in other systems.
3. Retirement of certificates.
The NZECS redeems all certificates once purchased by a consumer, removing them from circulation. This process is performed within the NZECS registry, managed by the relevant supplier of certificates and reviewed by the NZECS.
All certification is time-bound to a particular production year (1 April to 31 March). At the end of the year, all issued certificates must either be redeemed or cancelled and removed from circulation. They cannot be carried over into the next year. This means that all certified generation will have occurred within the same production year as consumption to which it is matched. Development in this area will be carefully addressed in consultation with key user groups.
5. Market boundaries
All certificates recognised by the NZECS originate from electricity generation facilities operating in New Zealand.
6. Residual supply mix
Once all certificates have been issued, an adjusted 'residual supply' mix is calculated to determine the characteristics of uncertified electricity. This supply mix is created by gathering data on national total generated electricity, and removing volumes explicitly certified.
The NZECS performs this process yearly and will make this residual supply mix available for all users of the electricity system.
The NZECS Production Year
The NZECS Production Year matches the New Zealand company and personal financial year, with a number of key processes performed immediately after year-end.
Key phases are explained in the diagram and text below.
Description of phases
Production year X (1 April - 31 March)
Certificates are issued against generation which occurs within a Production Year, and can be traded and redeemed against consumption that occurs within the same production year.
If certificates have been issued but not redeemed at the end of the Production Year, they will be cancelled.
Throughout the Production Year, set-up activities such as user registration, production device audits etc, can be performed.
End of year final actions (1 April - 30 April, Production Year X+1)
At the end of the production year X, registrants and participants have one month to complete final transactions for that year.
This grace period is to account for lag in the provision of generation or consumption data, and ensures that all transactions are completed before system reconciliation begins.
Individual user calculations (1 May - 31 May, Production year X+1)
Once all transactions relating to Production Year X have been performed, the process of individual reconciliation and verification can begin.
In this process, explicit certification (purchase and redemption of certificates) is calculated for each individual energy user and a final statement provided detailing the nature and volume of certificates procured.
Calculation of residual supply mix (1 June - 30 June, Production Year X+1)
The final step in the system reconciliation process for Production Year X is the calculation of the residual supply mix, performed by netting off all explicitly certified generation volumes from the total volume of generated electricity.
The adjusted residual supply mix is then made publicly available for all system users.
Addressing residual supply
Certification gives us a system-wide view of all electricity claims that are being made. This involves using certificates to transfer attributes, and using the residual supply calculation to avoid any double-counting.
Any time an energy user actively seeks to purchase a volume of certificates, this certification is termed 'explicit'. The remaining generation attributes are allocated to the remaining energy users who did not take action - this is 'implicit certification'.
Explicit certification generally reflects premium characteristics such as renewable or carbon-free. As explicit certification volumes increase, the characteristics of the residual supply mix become more carbon-intensive over time. This can, in time, further promote premium generation types.
Below is a simplified diagram depicting the process of reaching the residual supply mix.
By default, network losses are allocated the residual supply mix factor.
A live residual supply mix feed is being developed and will be published soon. To stay informed as it is launched, register your interest below.