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

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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.

Suggested Citation

  • Wimmers, Alexander & Madlener, Reinhard, 2020. "The European Market for Guarantees of Origin for Green Electricity: A Scenario-Based Evaluation of Trading under Uncertainty," FCN Working Papers 17/2020, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN), revised 01 Jun 2023.
    • Handle: RePEc:ris:fcnwpa:2020_017
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    Cited by:

    1. Fatras, Nicolas & Ma, Zheng & Duan, Hongbo & Jørgensen, Bo Nørregaard, 2022. "A systematic review of electricity market liberalisation and its alignment with industrial consumer participation: A comparison between the Nordics and China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 167(C).
    2. Madlener, Reinhard & Sheykhha, Siamak & Briglauer, Wolfgang, 2022. "The electricity- and CO2-saving potentials offered by regulation of European video-streaming services," Energy Policy, Elsevier, vol. 161(C).
    3. Schmitz, Hendrik & Madlener, Reinhard, 2021. "Preferences for Energy Retrofit Investments Among Low-income Renters," FCN Working Papers 8/2021, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    4. Fabianek, Paul & Glensk, Barbara & Madlener, Reinhard, 2021. "A Sequential Real Options Analysis for Renewable Power-to-Hydrogen Plants in Germany and California," FCN Working Papers 1/2021, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    5. Liu, Xueying & Madlener, Reinhard, 2021. "Economic Benefits of Direct Current Technology for Private Households and Peer-to-Peer Trading in Germany," FCN Working Papers 7/2021, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    6. Walter, Antonia & Held, Maximilian & Pareschi, Giacomo & Pengg, Hermann & Madlener, Reinhard, 2020. "Decarbonizing the European Automobile Fleet: Impacts of 1.5 °C-compliant Climate Policies in Germany and Norway," FCN Working Papers 18/2020, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).

    More about this item

    Keywords

    renewable energy; green electricity; policy; willingness to pay; power purchase agreement; Europe; guarantees of origin;
    All these keywords.

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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