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

Abstract

Guarantees of Origin (GO) were introduced in order to enhance transparency about the origin
of production of green electricity in Europe. The separation of electricity and GO trade has
resulted in a prosperous GO market that is, however, characterized by non-transparency and
opportunistic behavior. Historic price development occurs seemingly erratically and can
therefore not be used to forecast future GO prices. This paper firstly provides an overview of
the European GO market and an analysis of the historic price development; secondly, it
proposes a model for determining future price developments of European GOs for different
renewable energy technologies in different countries up to 2040. For non-household consumers,
the model introduces a novel approach to determine the willingness-to-pay for green electricity.
Four different scenarios are considered (Status Quo, Sustainable Development, Full
Harmonization, Ideal Development). It is found that GO prices can be expected to 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, GOs could become a useful additional policy instrument
for the promotion of green electricity in the EU.

Keywords: renewable energy, green electricity, policy, willingness to pay, power purchase agreement, Europe, guarantees of origin

JEL Classification: O33, O52, Q42, Q48