Guarantees of Origin: market trends for 2023

Renewables providing light in the darkness

Written by: 

Laura Malinen
Market Manager, Montel Marketplace

March 31st, 2023

As UN reports suggest that we are running out of time to limit global warming to 1.5°C, how does the energy sector go further, faster in order to reach net-zero?
Laura Malinen, Market Manager at Montel Marketplace provides insights into how Guarantees of Origin are key to facilitating the energy transition and what changes we expect to see to help strengthen their role in decarbonising the energy sector.

Perhaps more than ever before, the Guarantee of Origin (GO) market really developed and gained momentum in 2022.

We saw record high GO prices and an increase in the overall market size for EECS GOs.

We have tracked all these developments at Montel Marketplace and made it easy for market participants to follow along too.

More than 150 trading parties are already on the platform. This means they are able to see the prices for completed trades, find new counterparties and trade GOs easily.

Overall, there are now more than 700 users following the reliable, transparent market data provided by the platform.

We are very proud to help new actors get started in the GO market at such an exciting time. Let’s look ahead and see what developments 2023 could bring.

GO Market Trends 2023

Europe is investing into renewable energy production. This green transition is now going faster thanks to the EU's ambitious RE-POWER goals.

And even though the supply of GOs is likely to increase with more renewable energy sources, this will not lead to plummeting prices.

The GO will remain the sole European tool for disclosure of energy origin and the demand will increase with the supply.

Market players are expecting prices to stabilise in 2023.

Prices will depend largely on the weather conditions we see this summer. This is a factor because energy producers typically sell their GO supply one or more year in advance.

Should conditions be favourable to renewables, we can expect prices to reach some form of stability.

However, if conditions cause low production levels, more GOs will need to be sourced from the traded market. Prices will therefore rise due to increased demand.

The increasing need for GOs is also evidenced by HUPX and EPEX starting their own auctions for renewable energy Guarantees of Origin in the past year.

These seem to have gained traction within the industry and will increase levels of market transparency.

While the role that the state and auctions play in the markets is likely to continue increasing in 2023, the vast majority of trades are still made on Over The Counter (OTC) basis.

This means that trades are conducted between two parties, reducing market transparency as trade prices are not available.

GO pricing has definitely been affected by the inclusion of nuclear power within the EU's green taxonomy.

An additional level of price complexity has also been added by the European Union’s taxonomy, that now defines nuclear energy  as a transitional activity that can be considered renewable under strict conditions.

As nuclear GOs have a significantly lower price than those issued for energy sources traditionally considered to be renewables, there is an increasing interest towards them.

Combining nuclear GOs will still allow the consumer to make carbon neutrality claims, but at a lower cost.

As EU member states implement the Renewable Energy Directive, we will also see an increasing interest towards Guarantees of Origin for new energy carriers, such as biogas, hydrogen, heating and cooling

Although the industry is patiently waiting for the CEN-EN 16325 to define the shared groundwork for the new products, individual member countries are already designing the national schemes.

For instance, EU countries have taken different stands on requiring grid connections between the point of issue and cancellation of the heating and cooling GO. This naturally raises a lot of questions on how easy it will be to trade these certificates on a European level.

So, we can expect an interesting 2023. Which of these trends will touch your daily activities?

To learn more about Montel Marketplace, take a look at our dedicated webpage and sign up for your free account.