Navigating the Guarantees of Origin Market: insights from 2024 and expectations for 2025
Guarantees of Origin (GO), part of the Energy Attribute Certificates (EACs) category, play a pivotal role in Europe’s energy transition. By certifying the source of electricity injected into the grid (technology and geographical origin), they enhance sector traceability and transparency.
In 2024, this inherently volatile market experienced significant price drops and regulatory changes. In this article, we provide an overview of the past year and offer projections for 2025.
The Guarantees of Origin market: Price fluctuations
2022: A record year for Guarantees of Origin market
Over recent years, the GO market has exhibited notable volatility, but 2022 stands out as exceptional, with prices reaching record levels, exceeding €10 per MWh. This unprecedented peak was driven by:
- Increased demand from end consumers eager to reduce their carbon footprint.
- Regulatory changes promoting renewable energy consumption.
- A perceived supply-demand gap, particularly due to the historic drought that impacted hydropower production.
2024: Declining prices despite sustained interest
In 2023, GO prices stabilized between €7 and €8 per MWh. However, the beginning of 2024 witnessed a dramatic price drop to €3.25 per MWh in January, marking a 67% decline compared to the 2022 peak.
Prices continued to decline throughout the year, reaching levels not seen since 2021. This downward trend does not reflect reduced interest, as the Association of Issuing Bodies (AIB) reported a faster increase in the number of transfers compared to the number of issuances.
This price collapse can be attributed to two key factors:
- Increased supply: A return to normal hydropower conditions and significant growth in wind and solar capacities.
- Favorable market regulations: Policies supporting renewable energy production boosted GO availability.
Additionally, the number of expirations is not expected to grow in proportion to the issuance rate, implying that nearly all new GOs are being utilized and often exchanged multiple times.
Dynamics of Guarantees of Origin supply and demand
Demand for GOs remains strong
One undeniable trend is the continuous growth in demand for Guarantees of Origin. According to AIB data, GO cancellations reached 723.2 TWh in 2023, up from 707 TWh in 2022.
This upward trend highlights the growing interest of businesses and individuals in sourcing green electricity.
Strong growth in GO supply
On the supply side, Guarantees of Origin also experienced significant growth, rising from 730.7 TWh in 2022 to 867 TWh in 2023 (+136 TWh). This surge can be attributed to:
- The recovery of hydropower following the 2022 drought.
- Massive investments in wind and solar energy capacities.
However, not all issued GOs enter the market. A substantial share is included in Power Purchase Agreements (PPA), which allow buyers to claim the use of renewable energy while also hedging financial risks.
The influence of regulations on the Guarantees of Origin market
An ambitious European Directive
On March 30, 2023, the European Union adopted a provisional agreement under the Renewable Energy Directive, aiming to achieve 42.5% renewable energy by 2030. This ambition is materializing through:
- Enhanced GO traceability: A planned transition to hourly tracking of GO certificates.
- Stronger incentives to consume green electricity.
The role of the Corporate Sustainability Reporting Directive (CSRD)
The use of GOs is becoming less optional than before. The CSRD will require 50,000 companies operating in the EU to disclose the origin of their consumed energy by 2029.
Some companies begin reporting as early as 2024, with others following soon after. While the CSRD does not mandate the use of green energy, it is worth noting that, under European taxonomy, the source of consumed energy could influence the interest rates applied to corporate financing.
Extension of GOs to non-renewable energy sources
On November 16, 2023, a European decree expanded the GO system to include all electricity sources, including nuclear and fossil fuels (gas and coal). Key highlights of this reform include:
- Creation of new “non-green” GOs.
- Application of the same rules as for renewable GOs.
- A diversified certification portfolio for consumers and suppliers to verify the origin of their electricity.
This reform could significantly influence demand and pricing for renewable GOs by introducing greater competition in the market.
2025 Guarantees of Origin market forecast
Looking ahead, the GO market in 2025 is expected to remain dynamic, with the following key trends anticipated:
- Growing Demand: Ambitious EU climate targets will continue to drive demand for renewable GOs.
- Increasing Supply: New wind and solar capacities, alongside stable hydropower production, will sustain high supply levels.
- Stricter Regulations: Hourly GO tracking and the inclusion of non-renewable sources will reshape market dynamics.
Volatility and price stabilization
In 2024, GOs produced for 2025 were priced roughly twice as high as GOs produced in 2024, signaling market anticipation of future price increases. This trend is likely to intensify in the second half of 2025, as new regulatory requirements come into effect.
Stakeholders will need to closely monitor regulatory developments and production trends to anticipate market movements and seize emerging opportunities.
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