2021-03-17
Does GO system add value to energy transition?
Guarantees of Origin (GO) has existed in Europe for 20 years. First as a voluntary certification scheme and afterwards as EU directive mandated instrument. The Renewable Energy Directives (I and II) define that Guarantees of Origin are for the purpose of disclosing energy origin to end-users. Also, they acknowledge that GOs has a support value for renewable production. Let’s assess the impact of GO system according to these two aspects: consumer choice and support for renewable production.
Guarantee of Origin system is a one which empowers consumers to vote with their wallet on what kind of energy they want to consume. The references for GO Supply and Demand is best explored through the AIB market statistics. The below graph shows the development of Issuing and Cancellation volumes since 2013 to present day. In simplified terms, cancellations represent the amount of renewables bought and claimed by end-users and issuance represents the volume of renewable production that has received GOs.
For the market value of GOs, there is no public general price reference. However, there are several private indices and information from national GO auctions of supported renewable production. For statistics from the auctions please see links under the Market data page. In general, for the bulk GOs (Nordic hydro), the prices have been in the last few years between 0.1 euros and 2.5 euros. The bigger trends affecting the market are rainfall attributing to hydro reservoir balances, political and technological advances increasing the renewable production and increased awareness to climate change causing increase in consumption of renewable electricity.
Currently prices are on the low side. From the graph below we see Renewable Issuance was around 700 TWh (millions of GOs) for year 2020. If considering a GO to be valued at 0.2 euros then annual monetary value flowing to renewable producers can be estimated at 140 million euros. With GO price as 0.1 euros that would be 70 millions and with 2.0 euros it would be well over one billion euros. Naturally, there are system related and other costs for producers but there are also higher prices for more specialized GOs,
Antti Kuronen
Antti Kuronen helps Grexel customers navigate energy attribute certificates.He is passionate about sustainability and believes energy certification is important step in transition to renewable energy based economy.
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Hundred(s) million euros of additional support to renewable production. That doesn’t sound too shabby. According to latest IRENA study, the electricity prices of newly commissioned solar and wind production were in 2019 averaging around 40-100 euros per MWh. For 100€/MWh installation the 0.1€/GO(MWh) extra income is a small stream, but for a 40€/MWh installation the 2.5€/GO(MWh) is over 5 percentages and that already makes a difference.
Let’s go back to the original question: what is the GO system value to energy transition? With the low prices for the most part, the extra income from GOs may have not been the primary driving the renewable investments per-se. Still, all extra funding is making renewable investments profitable faster. Hundreds of millions of euros have been channelled and are being channelled to renewable producers through GOs. As the old saying suggests great rivers are made by many small streams.
In the coming weeks, here in the Grexel blog, I will explore GO system from different commercial perspectives. Follow Grexel on Linkedin, and make sure you don’t miss it.
