Guarantees of Origin: the prices, disruptors and impact of RFNBOs on an evolving market

We look at the short-to mid-term drivers of this rapidly growing market and report on why it is crucial to the decarbonisation agenda

4 minute read

The Guarantees of Origin (GoO) market, introduced under the EU's first Renewable Energy Directive (RED I) in 2001, is a pillar of innovation when it comes to sustainable energy and decarbonising our power systems.

GoOs – a type of Green Gertificate – allow energy consumers to demonstrate that the electricity they use is generated from renewable (and other low-carbon) sources, and is an EU-wide market, with trade conducted through various channels including state subsidy offset auctions, over-the-counter transactions and exchanges. 

In recent years, the market has witnessed remarkable growth, marked by expansions in both demand and supply, but despite this progress it still only covers around one third of total power demand, although this indicates substantial room for growth.

Indeed, projections imply an upward shift as new electrification vectors emerge requiring validation of low-carbon consumption. This market is key to the energy transition in ensuring the transparency and accountability of renewable energy consumption. 

Our new report examines the current dynamics of volume and price within the GoO market with specific focus on supply, demand, and trading activities within the EU's four largest power markets – Germany, France, Italy, and Spain – and assesses key price drivers in the short to mid-term, particularly the impact of Renewable Fuels of Non-Biological Origin (RFNBO) regulations. 

Read on for a summary of our report or download the extract by completing the form at the top of this page.  

The GoO market continues to provide a supplementary income stream for eligible generators, although recent months have seen a softening in prices. As the market transitions under RED III, the focus on the timing of production could significantly impact future GoO values. 

Market development 

The foundation of Guarantees of Origin (GoOs) is to certify the authenticity of electricity generated from renewable sources. Introduced under RED I, the GoO market, characterised by its relative opacity, predominantly operates through over-the-counter trades or  bundling with Power Purchase Agreements (PPAs).

Currently, GoOs can be transferred up to one year after issuance, which means they are often traded months after the energy is generated. This time-lag tends to diminish the distinction between resource availability and demand within the GoO markets of today. However, with the introduction of RED III, the market is set to evolve towards an hourly or even sub-hourly timestamp system, potentially adding significant value to the timing of energy production relative to demand. 

In our deep-dive into current market dynamics, we show how hydroelectric remains a cornerstone of supply, despite the surge in power supplied by wind and solar photovoltaic installations.  

Norway stands out as a powerhouse and the leading supplier in the GoO market with its hydroelectric fleet contributing nearly half of the total volumes. Germany, the Netherlands, and Italy account for nearly 50% of GoO demand, with a significant portion of Norway’s supply going towards meeting demand in these neighbouring markets.

In 2023, GoO demand represented close to one-third of total power demand in markets covered by the Association of Issuing Bodies (AIB), even with an overall decline in electricity consumption since 2021. 

Subsidy offset auctions, such as the French EEX centralized auction, provide clear price signals, and market liquidity on exchanges like EPEX SPOT are on the increase.

These factors have led to strong price convergence across different technologies. However, it's important to note that GoO prices have significantly softened in recent months, dropping to 1-2 EUR/MWh from the highs of 7-8 EUR/MWh seen in early 2023. 

Key market influencers 

France and Sweden have become significant key players in the GoO market, a position that could potentially be strengthened by the recent inclusion of nuclear energy in the market. Additionally, the rise of new electrification vectors and corporate sustainability goals are expected to drive an incerase in demand for green certificates. Likewise, EU sustainability standards, including mandatory climate mitigation reporting requirements, may further influence future GoO demand.  

In addition, a question mark exists over whether GoO supply from Norwegian hydro will continue to be available to buyers in our countries, notably thos ein Germany – any change here would represent a major market disruptor. 

Whilst we recognise that Renewable Fuels of Non-Biological Origin (RFNBOs) are contributing positively to demand, their impact is moderated by strategies that prioritize PPAs and regulatory exemptions. For example, electrolysers targeting low-price hours can leverage temporal exclusions to produce green hydrogen without relying on PPAs or GoOs in certain markets. Monitoring regulations on temporal and geographical granularity will be crucial, as these could decouple prices and increase volatility. 

Future forecasts 

As the Guarantees of Origin market continues to evolve, we will monitor and analyse developments to provide deeper insights and accurate predictions, and quantify market size in the mid-to long term as well as here, in our short-to mid-term report.  

Learn more 

If you would like to download the extract from the report for further information, please complete the form at the top of this page.   

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