An Oslo-based consultancy believes Europe’s growing market for honesty in proving electricity’s absence of fossil fuels could be worth as much as 57 Billion Euros by 2030, enough to fund half the investment needed to meet the EU27’s clean electricity goals.
Fears of “greenwashing” & fraud in misrepresenting the supposed authenticity of ‘low-carbon’ power sourced through third parties and brokers have dogged corporate and wholesale electricity markets in the UK and beyond for over a decade.
Solutions proposed in the UK have included settlement hub Elexon’s and ES Catapult’s proposal that carbon might be tracked electron by electron through distribution grids, all the way from generation to consumption.
In May 2022, the EU launched its REPowerEU Plan to accelerate the rollout of renewable energy and sustain Europe’s energy independence
For the plan’s ambitions to be met, the Commission predicts close to 2 380 TWh of renewable electricity per year by 2030 will need to be produced.
Looking now over their border into the EU27, Norwegian consultants Ecohz conservatively estimate that GO prices will average 5.5 EUR until 2030. That would mean the GO market reaching an annual value of 10 billion EUR by the end of the decade. This means GOs could raise 57 billion EUR over the next eight years.
The Guarantees of Origin system is the EU’s mechanism to track renewable electricity consumption. It is a central pillar of the EU’s Fit-for-55 policy package, which establishes a goal of 55% emissions reduction by 2030, and includes a demand that that renewables meet 70% share of electricity.
That implies adding clean generation capacity capable of around 870 TWh of annual clean power production.
In January 2022, GOs were as low as 1.7 EUR/MWh. Twelve months on, the price stood at 9 EUR/MWh, driven jointly by market impact of Putin’s attack on Ukraine, Europe’s dry summer, and stricter ESG criteria affecting EU generators, offtakers and corporations.
The consultancy’s analysis conservatively estimates that the price of GOs will average 5.5 EUR/MWh towards 2030, driven by a growing consumer base.
“Consumers’ willingness to pay for documented renewable energy, despite rising costs, is expected to hold GO certificate prices well above historic levels, creating a revenue stream that can accelerate Europe’s decarbonisation efforts substantially,” in the word’s of Ecohz’s principal Tom Lindberg.
“We see unprecedented balance between supply and demand, notwithstanding volatility and the energy crunch. This shows trust in market-based instruments and represents a significant investment opportunity for the renewable energy sector.
“The development of the GO market during 2022 tells the story of a revenue source for clean energy producers that is too big to disregard,” says Lindberg
His firm’s analysis shows that, between 2023 and 2030, GOs could raise 57 billion EUR for renewable electricity producers. A gearing of 75% would hike the total possible investment over the next eight years to 228 billion EUR.
Today, says Ecohz, the cost of installing 1 MW of new renewable capacity –– either wind or solar –– is approximately 1 million EUR, and falling. Hence, based on an average of 2 000 operational hours yearly for wind and solar technology, new renewable electricity generation partially financed by GO income could amount to 458 TWh per year, close to half of the additional renewable energy production the EU needs to reach its 2030 targets.
Fact box: Transforming revenue from GOs into new renewable energy
The importance of market-based instruments for investments is growing, says the consultancy.
Government support, formerly crucial for building new renewable power plants, is becoming obsolete as investment costs decline and GO income replaces subsidies. Swedish power producer Vattenfall, for example, won a non-subsidised tender to install a 700-MW offshore wind farm in the Dutch North Sea partly due to the economic opportunity that GOs represent. This was the first time the company embarked on a large wind farm offshore without any subsidies. More stories like this are likely to surface.
Growth in GO supply since 2010. The number projected for 2022 relies on data by the Association of Issuing Bodies (AIB), market analyst Greenfact, and in-house analysts.