The European Market for Guarantees of Origin for Green Electricity: A Scenario-Based Evaluation of Trading under Uncertainty

Abstract

Because electricity is a homogeneous commodity, the origin of a specific MWh of delivered green electricity cannot be determined. Thus, Guarantees of Origin (GoO) were introduced in order to enhance transparency on the origin of production of green electricity in Europe. The separation of electricity and GoO trade has resulted in a prosperous GoO market that is, however, characterized by non-transparency and speculative behavior. Historic price development occurs seemingly arbitrarily and can therefore not be used to forecast future GoO prices. Bearing this in mind, this paper firstly provides an overview of the European GoO market and an analysis of the historic price development; secondly, it proposes a model for determining future price developments of European GoOs for different renewable energy technologies in different countries up to 2040. Four different scenarios are considered. It was found that prices for GoOs will increase on average in the next years, with prices ranging from 1.77 to 3.36 €/MWh in 2040. Coupled with rising demand for green electricity and further standardization of issuance procedures as well as the projected price developments, GoOs might well become a useful tool for the promotion of green electricity production in the EU.