f97.beERIK SCHMIDT’S WORKSHOP
← All terms

Glossary · Energy industry & energy transition

Green electricity

Green electricity Green power Guarantee of origin electricity labelling renewable energies electricity supplier

Green electricity is electricity that is sold, accounted for or contractually allocated to a consumer as electricity from renewable energy sources. This usually means electricity volumes from wind power, photovoltaics, hydropower, biomass or geothermal energy. The term says nothing about which electricity physically arrives at a socket. In the public grid, the feed-in from many plants is mixed. A household or business always draws electricity from the local grid and not directly from a specific wind turbine. Exceptions are a dedicated direct line or a self-supply installation.

The green attribute therefore usually arises through allocation rules. In Europe, the most important tool for this is the guarantee of origin. It certifies that a specific volume of electricity was generated in a renewable plant. Under the EU Renewable Energy Directive, a guarantee of origin by default covers 1 megawatt hour, and only one guarantee may be issued for each unit produced. This means the same renewable attribute cannot be sold multiple times.

Physical delivery and accounting-based allocation

Green electricity is often understood as if the purchased electricity flowed directly from the wind turbine to the customer. In the public grid, this applies only in special cases. Grid operators maintain the voltage, frequency and stability of the grid. Suppliers procure electricity volumes and allocate them to their customer groups on paper. Physical grid operation and commercial supply are thus two separate levels.

This separation is not a trick but follows from the structure of the electricity system. Electricity must be generated, or provided from storage, at the very moment it is consumed. It is traded, however, on exchanges, through supply contracts and in balancing groups. The term "green electricity" belongs predominantly to this accounting and contractual level. It does not automatically mean that renewable generation covered the actual consumption in every quarter-hour.

An example: A tariff can be fully backed by renewable certificates on paper for a year. Nevertheless, on windless winter evenings, electricity is consumed in a grid that also receives feed-in from fossil power plants. For a company's carbon footprint, the accounting-based allocation may count, depending on the accounting rule. For questions of grid operation, security of supply or storage needs, however, an annual allocation says little.

Distinction from eco-electricity, renewable and low-carbon electricity

In everyday use, "green electricity" ("grüner Strom"), "Grünstrom" and "Ökostrom" are mostly used synonymously. None of these terms is legally defined as a product designation in Germany. What is bindingly regulated are the underlying certificates and the electricity labelling. The German Environment Agency (Umweltbundesamt) emphasises that a guarantee of origin only documents the energy source, location and period of generation. It does not assess the ecological quality of the generation or of the electricity product as a whole. That assessment is provided only by voluntary eco-electricity labels with their own criteria.

"Renewable electricity" describes more narrowly the technical origin, that is, generation from renewable sources. "Low-carbon electricity" is broader. It may also include electricity from technologies that emit few greenhouse gases in operation but are not renewable. In Germany, green electricity is not equated with nuclear energy. In electricity labelling, nuclear power is a separate category alongside the renewable categories.

For the consumer, green electricity is final energy. The benefit it brings to the energy system also depends on what it replaces. A heat pump can displace fossil heating systems, and an electric car can displace mineral oil. In such cases, electricity consumption rises while total fossil energy use may fall.

Guarantees of origin and electricity labelling in Germany

For Germany, the Umweltbundesamt maintains the guarantee of origin register. A certificate contains at least the energy source, the location of the plant and the period of generation. A certificate is issued, transferred (also across borders) and finally cancelled. If a supplier wants to declare in its electricity label renewable electricity that is not supported under the EEG (Renewable Energy Sources Act), it must have the corresponding certificates cancelled at the Umweltbundesamt.

Under EU law, guarantees of origin can be traded up to twelve months after generation. Energy companies must cancel them for labelling purposes no later than six months after the end of this period. This shows that a guarantee of origin is a volume certificate with a roughly defined time frame and not a confirmation of simultaneous delivery.

The electricity labelling under Section 42 of the Energy Industry Act (Energiewirtschaftsgesetz) is the visible interface to the end customer. Suppliers must state how their delivered electricity is composed. The categories are nuclear power, coal, natural gas and other fossil energy sources, tenant electricity supported under the EEG, and "renewable energies with guarantee of origin, not supported under the EEG". If a supplier offers different products, for example an eco-electricity tariff, the share of "renewable energies, supported under the EEG" must additionally be declared for each product.

A German particularity concerns plants that receive a payment under the Renewable Energy Sources Act (EEG), that is, a market premium or a feed-in tariff. For this electricity, the Umweltbundesamt does not issue guarantees of origin. The ban on double marketing also prohibits operators from passing on guarantees of origin for supported electricity. Conversely, for electricity whose certificate they pass on, they lose the entitlement to support. The background is that the general public finances these plants, formerly through the EEG surcharge, now through the federal budget. Their renewable attribute should therefore not additionally be sold exclusively to individual tariff customers. It appears instead as its own category "supported under the EEG" in the label. Suppliers may declare this share as regionally generated using regional certificates.

A large part of the renewable volume generated in Germany is supported. For this reason, the guarantees of origin for eco-electricity tariffs often come from other European countries, frequently from hydropower. This is legally correct. However, it does not mean that the tariff triggers any significant expansion in the German electricity system. The EU Directive as amended by RED III now also allows Member States to issue certificates for supported plants in order to take their market value into account. Germany has, according to the status examined here, basically retained the ban for EEG-supported electricity.

Additionality, time reference and effect on the system

Green electricity is often measured solely by the annual volume. An example: A company consumes 10 gigawatt hours per year, that is, 10,000 megawatt hours. If it has 10,000 guarantees of origin cancelled for this, the annual balance is matched. What remains open, however, is whether the renewable plants generated at the times when the company needed electricity. The higher the share of wind and solar power, the more important this time reference becomes.

Photovoltaics generates mainly during the day and in summer. Wind energy fluctuates with the weather and can be high or low for days. Industrial processes, heat pumps, data centres, charging stations and households follow their own consumption patterns. Consumption that is green on paper can therefore fall in hours with high residual load. Residual load is the demand that, after deducting wind and solar power, still has to be met by controllable power plants, storage, imports or shifted consumption.

This is why more sophisticated procurement models emerge. Companies conclude, for example, long-term offtake contracts, so-called power purchase agreements, with new wind or solar farms. Such plants are marketed without EEG support via other direct marketing and can therefore receive guarantees of origin. Other approaches allocate generation and consumption hourly or even more finely. This creates transparency about the temporal degree of coverage but requires more data, accounting and risk management. A continuously hourly-matched renewable supply is considerably more difficult in a weather-dependent system than an annually balanced tariff.

Additionality asks whether a green electricity product enables new renewable generation or merely redistributes existing attributes. A certificate from a long-depreciated hydropower plant provides a correct allocation. Its expansion impulse is small, however, if the plant would run anyway. A long-term offtake contract for a new wind farm, by contrast, can secure the investment. What matters are the specific contractual and market conditions, not the label.

How to check an offer for green electricity

  • Electricity labelling: What is the share with a guarantee of origin, which countries do the certificates come from, and what share is supported under the EEG?

  • Plants: Type, age and location of the plants. Do the certificates come from existing plants or from new projects?

  • Label and criteria: Is there an independent eco-electricity label with requirements on expansion or investments? The guarantee of origin alone does not assess ecological quality.

  • Time reference: Is accounting done annually, monthly or hourly? For companies, a comparison with their own load profile is added.

Significance for consumers, companies and policy

For private households, green electricity is above all a supply product. The differences between tariffs are greater than the similar advertising suggests. For companies, green electricity additionally plays a role in carbon footprints, sustainability reports and supply chain requirements. This can make sense if it secures renewable investments. But it can also overestimate one's own impact if only cheap certificates are purchased. Load profile, location, grid bottlenecks and the actual emissions of the simultaneous electricity mix then remain out of view. The statement "powered by 100 percent green electricity" is therefore incomplete without stating the accounting rule.

For energy policy, the term links private willingness to pay, market rules and expansion targets. A well-designed market for green electricity can facilitate investments and make demand for new plants visible. If it is not very transparent, it merely shifts green attributes between customers without changing anything about generation, grid integration or flexibility.

Conclusion: Green electricity is not a physical proof of delivery at the socket. It is a regulated allocation of renewable generation to consumption. How meaningful it is depends on guarantees of origin, electricity labelling, support status, additionality, time reference and procurement model. The term only becomes precise once it is clear whether it describes an annual balance, a tariff, an investment contribution or a simultaneous renewable supply.

Sources

Related glossary entries

Edited by eCMS on 12.11.2026 05:05

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