f97.beERIK SCHMIDT’S WORKSHOP
← All terms

Glossary · Energy industry & energy transition

Cancellation of Guarantees of Origin (HKN)

Cancellation of guarantees of origin Guarantee of origin Green power electricity labelling residual mix electricity procurement Carbon footprint renewable energies

HKN cancellation is the registry process by which a guarantee of origin (Herkunftsnachweis, HKN) is permanently allocated to a delivered quantity of electricity, an electricity product or a supplier's disclosure. After that, the certificate can no longer be traded. An HKN is an electronic document. It shows end customers that a specific quantity of energy was generated from a specific source, such as wind, photovoltaics, hydropower or biomass. Cancellation uses up this origin attribute. It can then neither be resold nor claimed a second time.

Under EU law, the standard size of an HKN is 1 MWh. Since the amendment of the Renewable Energy Directive, Member States may also issue fractions, provided they are a multiple of 1 Wh. At most one HKN may be issued for each unit of energy produced. In Germany, the Guarantee of Origin Register (Herkunftsnachweisregister, HKNR) of the Federal Environment Agency (Umweltbundesamt) issues one certificate for each megawatt hour that is generated and delivered to final consumers. EU law also allows Member States to issue HKN for energy from non-renewable sources and for gas, hydrogen, heating and cooling. An HKN therefore does not automatically stand for green electricity. What matters is which energy source is stated on the certificate.

An HKN is traded independently of the physical electricity. Electricity and certificate therefore do not necessarily run through the same contract, the same delivery route or the same point in time. Until cancellation, the HKN is a circulating certificate: it can be transferred, bundled, sold or held in a stock. Only cancellation completes the allocation, and the registry blocks the certificate against any further use. EU law explicitly requires that the same unit of renewable energy is taken into account only once. In addition, issuance, transfer and cancellation must be electronic, accurate and fraud-resistant, in line with the requirements of standard EN 16325. This safeguard against double counting is the foundation on which disclosure and market-based accounting work at all.

Deadlines and process in Germany

Under EU law, an HKN is valid for transactions for twelve months from production. At the latest 18 months after production, every certificate that has not been cancelled loses its validity. Member States must include expired HKN in the residual energy mix. According to the Federal Environment Agency (as of August 2025), the following applies in the German registry:

  • For twelve months from the production month, an HKN can be issued, transferred and cancelled.

  • This is followed by six months in which it can only be cancelled or moved within the holder's own account. The prerequisite is that the HKN is already in the account of the party who wants to cancel it at that point in time.

  • 18 months after the end of the generation period, the registry administration declares the HKN expired ex officio. Expired certificates must not be used, not even in sustainability reports. They flow into the German residual mix.

An example: for electricity that a plant generated in July 2024, the operator can no longer have HKN issued in August 2025. For HKN from foreign registries that issue daily, the HKNR allocates the certificate to a production month. Different foreign rules may apply to international transfer. In Germany, HKN may be used and cancelled only by electricity supply companies and only for electricity disclosure. They may also only label electricity quantities that were delivered in the calendar year in which the certificate's generation period falls. Companies that consume electricity therefore do not usually cancel themselves in the German registry. Their supplier takes care of the cancellation. Other countries may have different account models.

The ban on double marketing applies to plants receiving support under the Renewable Energy Sources Act (EEG). Anyone who receives a payment for their electricity under § 19 or § 50 EEG 2023, such as a market premium, must not pass on guarantees of origin for it. Conversely, the entitlement to support lapses if HKN are passed on. Regional certificates under § 79a EEG are excluded. HKN from German plants therefore come mainly from plants that are not, or no longer, supported.

Distinction from electricity flow, green electricity supply and PPAs

An HKN cancellation is not a physical electricity delivery. Electricity flows in the grid according to the laws of physics and not along contracts. A household with a green electricity tariff does not receive electricity that could be traced back to exactly the plant whose certificates were cancelled. Cancellation allocates a generation attribute purely in accounting terms. It does not describe a line, an electricity path or simultaneous supply.

A supply contract does not replace cancellation either. A supplier can buy electricity on the wholesale market and the HKN separately from it. It can also source both bundled from one plant or a portfolio. In both cases, the renewable allocation that counts for disclosure arises only through cancellation. The difference lies in the quality of procurement, not in the principle of the certificate. A PPA can help to finance a plant or to hedge its price risk. However, the existence of a PPA does not replace the cancellation of the associated HKN in the registry. Conversely, an HKN can be cancelled entirely without a long-term offtake contract. In that case the attribute is allocated in accounting terms, but this says nothing yet about investment impact or price risks assumed.

Significance for electricity disclosure, residual mix and climate accounting

In electricity disclosure, suppliers state from which energy sources their electricity originates in accounting terms. For green electricity shares that go beyond the share supported under the EEG, they need cancelled HKN. Cancellation is the counterpart to the residual mix: what has been allocated to specific customers or products via HKN is deducted from the general remainder. According to EU law, the residual energy mix is a country's total annual mix excluding the quantities covered by cancelled HKN.

Companies use cancelled HKN mainly in market-based Scope 2 accounting of purchased electricity. The certificates change the reported emission factor of the electricity purchased. However, actual emissions in the electricity system do not automatically fall to the same extent as a result. Whether that happens depends on which fossil power plants are displaced, whether new plants are built and how load, generation and grid bottlenecks interact.

Typical misunderstandings

  • "Physical green electricity on site": A cancellation proves the origin attribute for a specific quantity. It does not prove that generation and consumption took place in the same hour or the same region, or that the local grid was relieved.

  • "Automatically new plants": An inexpensive HKN from a long-since depreciated existing plant has a different economic meaning than a long-term, bundled supply from a new plant. Whether a purchase triggers new plants is described by the concept of additionality. Cancellation alone does not prove this.

  • "Mere mislabelling": This criticism falls short. Without HKN there would be no reliable separation between deliberately sold renewable attributes and the residual mix. It becomes problematic when one infers more from a simple cancellation than the certificate can deliver.

Market and incentives

How much an HKN costs depends, among other things, on technology, country of origin, age of the plant, demand and quality criteria. Cancellation is the last step in this chain: it ends trading and fulfils the purpose of the certificate. High demand for certain qualities can push prices up. Whether this turns into investment, however, depends on price level, contract duration, regulation and financing conditions. What matters in practice is that the electricity market and the certificate system are separate. The electricity market organises generation, trading and balancing, while the certificate system tracks attributes. Statements from one level cannot simply be transferred to the other.

Temporal allocation and system benefit

As the share of wind and solar power grows, timing becomes more important. An annual allocation can, arithmetically, match solar power from June with consumption in December. It says little about supply in individual hours. Stricter approaches allocate HKN monthly or hourly, see temporal matching. They place higher demands on data, registry processes and procurement. As a result, flexibility, storage and load shifting become more valuable, because consumption in hours with plenty of wind or solar power can avoid curtailment.

The Greenhouse Gas Protocol is currently revising its Scope 2 rules. In the public consultation from 20 October 2025 to 31 January 2026, it was proposed that certificates in the market-based method be recognised only if they match consumption hourly and come from a grid region into which the electricity can actually be delivered. After the consultation, an approach with hourly matching, deliverability and additionality continues to be discussed as one of two variants. Final rules are still pending. Even under stricter rules, HKN cancellation remains an act of allocation; only the requirements for a suitable allocation rise.

Conclusion: HKN cancellation is a precise tool for a limited task. It prevents double counting and binds origin attributes to a consumption or product. It does not replace a physical supply chain, an examination of investment impact or an analysis of temporal coverage.

Sources

Related glossary entries

Edited by eCMS on 12.11.2026 05:06

© 2026 Erik Schmidt. All rights reserved. Quotations with a link to the source are welcome.