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Glossary · Energy industry & energy transition

Certificate Cancellation

Certificate cancellation Guarantee of origin certificate Green power electricity procurement Carbon footprint

Certificate Cancellation, in German "Entwertung", is the final removal of an electronic electricity certificate from a registry. After that, only one specific party can claim the attribute of a specific quantity of electricity, for example "generated from wind energy". In the case of a guarantee of origin, the certificate leaves the tradable stock. It is allocated to an electricity delivery, an electricity product or to reporting. EU law explicitly provides that guarantees of origin are issued, transferred and cancelled electronically. A guarantee of origin by default covers 1 MWh, and no more than one guarantee may be issued for each unit of energy produced.

Cancellation is not a technical operation in grid operation but a booking transaction. It does not determine which electricity physically flows to a consumer. It determines who may use the renewable attribute of a quantity of generated electricity, for example in electricity labelling, in customer communication or in a greenhouse gas balance. It can be compared with a cancelled admission ticket: the ticket still exists as a record, but it cannot be used a second time or resold.

Unit and Meaning

The unit of quantity is the energy generated, in the European system by default one megawatt hour. A guarantee of origin represents neither installed capacity nor secured delivery capability. It proves that, within the permitted scope of validity, one megawatt hour of electricity with certain characteristics was generated, such as energy source, installation and generation period. It does not automatically prove that a specific consumption was covered simultaneously by this installation or originates physically from it.

Issuance, Transfer, Cancellation, Expiry

A certificate typically passes through four stages. First it is issued, after a registered installation has generated electricity and the quantity has been recorded in the registry. It can then be transferred between accounts, for example from the plant operator to a trader or an electricity supplier. Cancellation ends tradability. Without cancellation, it expires after the deadline has passed. Under the EU Renewable Energy Directive, guarantees of origin are valid for transactions for twelve months from generation. Guarantees that have not been cancelled lose their validity no later than 18 months after generation. For labelling purposes, energy companies must cancel guarantees no later than six months after the end of their validity.

Internationally, the same function exists under other names, such as "retirement", "redemption" or "cancellation", also for other forms of Energy Attribute Certificates. The designations differ depending on the registry. The core remains the same: a registry rule prevents the same attribute from being used more than once.

Legal Situation in Germany

In Germany, the Federal Environment Agency (Umweltbundesamt) maintains the guarantee of origin registry. The legal basis is the Herkunfts- und Regionalnachweis-Durchführungsverordnung (HkRNDV, Ordinance on the Implementation of Guarantees of Origin and Regional Certificates), last amended in August 2025. Only plant operators, traders and electricity suppliers can open an account. Under § 30 HkRNDV, guarantees of origin may be used for electricity labelling only by an electricity supplier. The supplier must apply for cancellation, and the registry administration must approve the application. The supplier may submit the application only for its own electricity supply and electricity labelling. In doing so, it can specify a particular electricity product or the name of a customer.

A German peculiarity follows from this: companies or municipalities that are not themselves electricity suppliers cannot independently cancel guarantees of origin in the German registry. According to the Federal Environment Agency, it is legally not possible there to improve one's own climate balance on paper merely by independently cancelling cheaply purchased certificates. Companies therefore obtain the attribute via a supplier that cancels on their behalf or for their product. In other countries, the registry rules may differ. If a supplier wants to show electricity from renewable energies that is not subsidised under the EEG in electricity labelling, it must cancel guarantees of origin in the registry for this purpose.

Why Cancellation Is Needed

In the grid, electricity cannot be physically sorted by its origin. Guarantees of origin solve this allocation problem administratively. They separate the origin attribute from the physical quantity of electricity and make it transferable separately. Precisely because the attribute is freely tradable, the system needs a clear end point. Otherwise, plant operators, suppliers and end customers could each declare the same megawatt hour as renewable. Cancellation is this end point, at which a tradable certificate becomes a used-up claim.

Cancelled guarantees are also removed from the general mix. The residual mix describes the electricity mix that remains after the quantities allocated via cancelled guarantees of origin have been deducted. If these levels are not cleanly separated, the same attribute is counted twice: once in the green electricity product and once more in the general supplier mix or residual mix.

Significance for the Greenhouse Gas Balance

For market-based Scope 2 accounting under the GHG Protocol Scope 2 Guidance, cancellation is a quality criterion. Contractual instruments must be tracked and cancelled by or on behalf of the reporting organisation. They must be the only instruments that carry the emissions attribute of this generation. In addition, they should be issued and redeemed as close in time as possible to the consumption period. A purchase contract alone is therefore not sufficient. The certificates become a claim only once they have been cancelled for the appropriate period, in the appropriate market area and in favour of the right party.

The earlier wording that certificates must be cancelled "for the appropriate balancing group" is misleading. A balancing group is an instrument of energy-industry volume balancing and not a reference point for the cancellation of guarantees of origin. What matters are the delivery or consumption, the period, the scope of validity and the beneficiary party.

For auditors, traceability is decisive: Which guarantees were cancelled for which period, for which quantity of electricity, in favour of which organisation and in which country? In Germany, a cancellation certificate and a database extract show who cancelled for whom. These documents are not themselves guarantees of origin.

Typical Misinterpretations

  • Cancellation is not physical green electricity consumption. It secures the exclusive claim to an attribute, but says nothing about whether renewable electricity was available in the same hour. This question is addressed by the concept of Temporal Matching.

  • Cancellation does not prove additionality. A guarantee can come from a decades-old hydropower plant. Whether a purchase incentivises new plants depends on price, contract form and plant age. In the case of a long-term Power Purchase Agreement, the link to financing is often closer than with standard guarantees bought on a short-term basis.

  • A lower market-based emissions value does not mean that the actual power plant dispatch in the grid area decreases to the same extent. For the system effect, the time of consumption, load profile, residual load, grid bottlenecks and the question of which power plants are displaced are what count.

Distinction from Supply and Flexibility

An electricity supply contract governs prices, quantities and terms. The origin attribute must additionally be secured through cancelled guarantees. Flexibility, by contrast, describes the ability to shift consumption, generation or storage in time. A company can cover its entire annual electricity consumption with cancelled guarantees and still draw a lot of electricity in hours with high fossil residual load. Conversely, a flexible consumer can relieve the grid without holding an origin claim. With heat pumps, electric cars and data centres, this time dimension is becoming more important. Annual cancellations do not reflect it.

In summary, Certificate Cancellation is a necessary control mechanism against double counting. It answers the question of who may use an attribute. It does not answer whether the purchase led to the creation of additional plants, which power plants were running in a particular hour, or whether the consumption was beneficial to the grid.

Sources

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Edited by eCMS on 11.11.2026 17:10

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