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Guarantees of Origin: defining the price of net-zero

April 13th, 2023

Over the years, prices for Guarantees of Origin have fluctuated due to a variety of factors, including changes in government policies, market competition, and the cost of producing renewable energy. In this post, Laura Malinen, Market Manager at Montel Marketplace, takes a closer look at the development of GO prices.

As Montel Marketplace allows market actors to see prices for Guarantees of Origin, find new counterparties and trade renewable certificates, we discuss and publish the prices of GOs with traders, producers and consumers every day.  

These discussions are crucially important to all market actors. Because GOs have traditionally been traded either privately between two parties or through brokers, little information on the GO prices (and how these prices are determined) is publicly available.  

The prices of Guarantees of Origin are, naturally, subject to supply and demand. They fluctuate daily and strongly depend on the product.  

Even though there is a joint GO system in Europe, factors like AIB HUB connection, green labels or specific production technology in a given geographical location affect the price significantly.  

These regional differences are caused by different government policies. Local regulations can significantly impact the price of GOs.

For example, the introduction of a carbon tax can increase demand for GOs, thereby driving up prices. On the other hand, changes in subsidies or other incentives for renewable energy can reduce demand, leading to lower prices. 

As we all remember from the dry summer of 2022, weather can also have a significant impact on prices.  

The vast majority of renewable Guarantees of Origin in Europe are issued for Nordic hydro power. So, when trying to predict market movements, considerations around Nordic reservoir levels and (long-term) weather forecasts are key.  

Transparency and standardisation also play a part in price formation. The more transparent the market is, the easier it is for the market participants to agree on prices. This helps to build liquidity, leading to increased price stability and predictability in turn. 

Despite their growing popularity, GO prices have been notoriously volatile. This is mainly due to the GO being relatively small and illiquid, thanks to a limited number of buyers and sellers. 

Another factor contributing to volatility is the fact that GOs are not standardised across Europe. Each country has its own system for issuing GOs, and the rules and regulations can vary widely, even though some harmonization is achieved through EECS.

Montel Marketplace is built to bring transparency to these opaque GO markets. We believe that making prices available to everyone will benefit all market actors. Today over 150 member companies are already using our end-of-day prices, published for wind, hydro and anytech GOs.  

Our end-of-day prices are based on our best price assumptions of the market. We take actual trading prices, as well as bids and offers from both on and off the screen into consideration when making our calculations. When assumptions need to be made, we ensure accurate feedback from a wide range of expert sources to ensure their accuracy.  

This means that all Montel Marketplace participants have a reliable benchmark every morning when they log in, giving them an edge when planning their daily market operations.

Make sure you're in the know when it comes to GO prices