Policies around certificate trading have emerged to encourage renewable energy projects. There are certificates for the use of gases, thermal energy, fuels, and electricity. This Theme Report focuses mainly on the market for Guarantees of Origin (GOs) for electricity.
GOs for electricity are certificates that guarantee that a quantity of electricity has been generated from certain energy sources. GOs are tradable within the European Economic Area (EEA) and are managed in the Netherlands by VertiCer. However, the market for GOs is complex due to varying national regulations and the lack of harmonised policies within the EU. At the same time, new EU policies have been adopted that impose reporting requirements on the environmental impact of companies. This may ensure that the market for GOs will receive new demand impulses, as companies can use GOs as part of their sustainability reporting
On an annual basis, the Netherlands consumes relatively more GOs than it produces. In the short term, the supply of GOs is mainly influenced by weather conditions. In the longer term, the growth of renewable electricity generation capacity is an important supply factor. On the other hand, electricity consumption, macroeconomic conditions, policy measures and social pressure are important demand factors.
Zooming out to the market dynamics in Europe, we see that besides the Netherlands, Germany also has a large demand surplus. This is partly caused by the policy in Germany which ensures that subsidized renewable electricity generation is not eligible to apply for GOs. The demand surpluses that occur in certain countries are roughly offset by supply surpluses in countries such as Norway, Sweden, and France. These are countries where relatively large amounts of hydropower GOs come from.
The price movements of GOs have been highly volatile in recent years. Prices of European GOs peaked at around 10 euros per megawatt hour in the months of October and November of 2022. A major cause of this was the drought in Norway in that particular year, which put considerable pressure on the supply of GOs from hydropower. In 2023, high prices between three and eight euros per megawatt hour also prevailed for a long time. Meanwhile, prices have somewhat normalised to below three euros per megawatt hour. Major reasons for the drop in prices since the peak are the normalisation of hydropower levels, the rapid growth of electricity from renewable sources in 2023, and the UK’s decision to stop accepting European GOs. Demand for GOs is expected to increase in 2025, partly due to policy changes that make their use more interesting for companies.
In the future, GOs for hydrogen will play an increasingly important role. These GOs were introduced in 2022. Besides these GOs, in this Theme Report we also look at the main trends and developments in the GO markets of green gas, thermal energy, and fuels, respectively.