Soaring GO prices to drive renewable energy development


Soaring GO prices to drive renewable energy development


Debate over the best way to buy renewable energy has been heating up recently as strong demand has pushed European Guarantee of Origin (GO) certificates to all-time high prices.

A Guarantee of Origin (GO) is an energy certificate issued when 1 MWh of renewable energy is produced to ensure the electricity purchased comes from renewable sources.

The tradeable certificates have seen prices increase more than tenfold through 2022.

On November 30, Platts, a division of S&P Global Commodity Insights, assessed Nordic hydro 2022, the most actively traded GO, at €9.82/MWh ($10/MWh). Prices have been surging since early September, compared to levels of less than €1/MWh at the end of 2021.

The price increase is due to the shortage of hydropower following the summer drought in Europe, as well as demand from corporate buyers seeking to meet emissions targets by buying renewable energy certificates.

While lower certificate prices lead to skepticism about their impact on renewable energy development — particularly as many come from old plants — the surge in value has increased revenues for renewables producers and demonstrated strong demand for renewable energy.

But whether that will encourage the development of new capacity is still open to debate.

The extent to which buying certificates was 'additional' — a term used to describe whether an environmental commodity supports new projects that would not otherwise be built — could indeed depend on price, according to Matthew Brander, senior lecturer in carbon accounting at University of Edinburgh Business School.

"Current higher prices make it more likely that GOs achieve additionality but it cannot be assumed that they do," said Brander.

"Investors will only factor GO prices into their investment decisions if they think those prices are certain and relatively long-term," he added.

Analysts at S&P Global Commodity Insights forecast average solar and wind GO prices in the range €5-8/MWh from 2023 to 2030.

"At this price range, our models suggest that, all things being equal, some 4-5 GW of newbuild per year could be encouraged across Europe," said Bruno Brunetti, head of low-carbon electricity analytics at S&P Global Commodity Insights.

In addition to higher prices, a tightening of rules on location and a move to match supply and demand on an hourly rather than annual basis could help improve the impact of certificates.

RE100, a corporate initiative committed to 100% renewable, said in October that members should only acquire renewable energy from projects less than 15 years to increase demand for new capacity.

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