The benefits of renewable energy production are well-known and widely discussed – from mitigating climate change to achieving energy independence and export potential for Latvia. However, there is another advantage that is not widely recognized. Specifically, the use of "green energy" can provide manufacturers with an opportunity to sell and export more, or sell at a better price. Importantly, this doesn't require having your own solar or wind farm. Furthermore, companies that can demonstrate adherence to sustainability principles in their operations are increasingly receiving various advantages, such as banks offering better financing conditions for business development.
Green energy certificates allow any company or institution to prove that all the electricity they use daily is sustainably produced from renewable energy sources. Moreover, the use of sustainably produced energy in business operations can be an important marketing and communication aspect, not only in Latvia but also in export markets, where consumers pay increasing attention to sustainability issues.
Since 2021, Latvia has had a market for Guarantees of Origin, which verify the source of electricity generation, including the resources and technology used. AS Augstsprieguma tīkls issues Guarantees of Origin to renewable energy producers for the energy they generated. These certificates are issued for specific volumes of energy produced and can be traded freely – much like stocks or bonds. This market in Latvia is already well-developed. For example, in 2024, Guarantees of Origin were issued for 5.02 million MWh, while the previous year, it was even more – 5.36 million MWh. The volume of Guarantees, as well as the production of "green energy," is influenced by weather conditions and will change annually. However, as the renewable energy sector grows, so too will the volume of certificates.
In addition, several Guarantee of Origin traders are active in the market, and several Baltic companies buy them to certify that the energy they use is "green." For example, companies like Rimi, Ikea, Ignitis ON, Cēsu alus, Alūksnes putnu ferma, and others use these certificates in the Baltics. Alūksnes putnu ferma takes a comprehensive approach, producing solar energy itself and certifying the electricity used in its poultry farm operations with Guarantees of Origin. As consumer demand for sustainably produced goods and services grows, so will the demand for Guarantees of Origin.
Guarantees of Origin Can Be Locally Specific and Exportable
Guarantees of Origin can be very specific. For example, they are often tied to a particular solar or wind energy park. This is significant because, if you are a producer or institution in a specific municipality and you want to use energy produced by the renewable energy park in that municipality, this is possible with a Guarantee of Origin. You can purchase the certificate directly from your local energy producer and be sure that you are supporting your municipality’s economy. By successfully using this fact in your communication, you can strengthen your company’s reputation. The electricity you receive, of course, will be no different from that produced, for example, by the Daugava hydropower plant or the Riga thermal power station, but the Guarantee of Origin will systematically prove that you are using renewable energy from your own municipality.
New export opportunities for Latvia's economy are also created by guarantees of origin. These Guarantees are international, meaning they can be imported and exported in any EU country and other countries that recognize them. This also affects demand and price, as the value of Guarantees of Origin auctions in countries like France impacts their value in Latvia. Statistics show that the export opportunity is widely used in Latvia. For example, last year, around 4.5 million MWh of Latvian Guarantees of Origin were exported, accounting for about 90% of all Guarantees issued in Latvia that year. At the same time, Guarantees of Origin are also imported into Latvia, but in much smaller volumes – for example, about 450,000 MWh last year. We can see that there are traders in Latvia who actively buy up Guarantees of Origin and export them in large volumes to countries where there is a shortage or demand for better prices.
The New Corporate Sustainability Reporting Requirements Will Change the "Green Energy" Market, but the Essence of the Advantages Will Remain
In February of this year, the European Commission (EC) published a new set of proposals that aim to change sustainability reporting requirements under the so-called Corporate Sustainability Reporting Directive (CSRD). The EC’s goal is to simplify business operations in Europe, and the proposals significantly reduce the number of companies subject to CSRD reporting requirements, including in Latvia, and defer reporting obligations for those who will still have to comply. If these proposals are adopted in the EU legislative process, the sustainability reporting requirement will apply only to companies with more than 1,000 employees and revenues over 50 million euros or balance sheet totals exceeding 25 million euros. There are enough such companies in the Baltics, but these are already the "giants" of the Baltic market, and the new reporting requirements will no longer affect medium-sized companies.
What does this mean for the Guarantees of Origin sector? Guarantees of Origin for electricity have been, and still are, part of corporate sustainability policies, and the removal or deferral of reporting obligations may reduce the motivation to purchase Guarantees of Origin. Some companies may see less of a need to prove that their used energy is "green." However, the EC and EU "green course" will not change, and sustainability reporting will remain in place, albeit on a smaller scale.
It is important to emphasize that sustainable policies and the use of "green energy" are crucial not only for reporting and compliance but also because many companies voluntarily choose to implement them, as it improves their operations and helps achieve strategic sustainability goals. We see that in Latvia, Guarantees of Origin have been purchased and continue to be purchased by manufacturers for whom the EC sustainability reporting requirements do not apply – neither before nor after the change in EC policies. The use of "green energy" and sustainability is the future, regardless of the new EC proposals. Only the speed and intensity of implementation will change.