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A booming Guarantees of Origin market could drive record investments in renewable energy production in Europe

Published:  01 March, 2023

Soaring demand for Guarantees of Origin (GO) could raise 57 billion EUR for investments in clean power, enough to secure close to half of the additional production the EU needs to reach its 2030 climate goals, a new analysis by Ecohz, a global provider of sustainability solutions, reveals.

At the end of last year, the price of GOs, the certificates used to document renewable energy consumption in the EU, reached its peak above 9 EUR/MWh. At the beginning of 2023, the price stood at 7 EUR/MWh. Ecohz’ analysis conservatively estimates that the price of GOs will average 5.5 EUR/MWh towards 2030, driven by a growing consumer base.

In January 2022, GOs sold at 1.7 EUR/MWh. Since then, robust and growing demand, coupled with the cumulative effects of war in Ukraine, a dry summer, and stricter corporate ESG criteria, has impacted GO prices. Consumers’ willingness to pay for documented renewable energy, despite rising costs, is expected to hold certificate prices well above historic levels, creating a revenue stream that can accelerate Europe’s decarbonisation efforts substantially.

“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 Tom Lindberg, CEO of Ecohz.

Reaching 228 billion EUR invested in renewable energy production

The EU’s Fit-for-55 policy package establishes a goal of 55% emissions reduction by 2030. Close to a 70% share of renewable electricity is required to meet that target, which implies adding around 870 TWh of annual clean power production.

Ecohz’ 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, the cost of installing 1 MW of new renewable capacity –– either wind or solar –– is approximately 1 million EUR, or less. 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.

The importance of market-based instruments for investments is growing. 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.

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