Guarantees of Origin and Competition in the Spot Electricity Market

Mario Blázquez (), Isabel Hovdahl, Malin Arve, Endre Bjørndal () and Mette Bjørndal ()
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Mario Blázquez: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway, https://www.nhh.no/en/employees/faculty/mario-blazquez-de-paz/
Endre Bjørndal: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Mette Bjørndal: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway, https://www.nhh.no/en/employees/faculty/mette-helene-bjorndal/

No 2023/24, Discussion Papers from Norwegian School of Economics, Department of Business and Management Science

Abstract: We study the effect of introducing a market for green energy attributes on the market for the energy itself. In Europe, renewable energy producers receive Guarantees of Origin (GOs) that they can sell to consumers who wish to declare their electricity consumption as “green”. In a model of price competition, we show how the introduction of such a GO market can increase competition in the spot electricity market, leading to reduced electricity prices. In the current market design, the trade of GOs is not restricted by the physical transmission capacity in the spot electricity market. However, since the production capacity of GOs is still limited by the total dispatch of electricity, suppliers have incentives to compete more fiercely in the spot market. This pro-competitive effect disappears if the physical transmission capacity is also imposed on the GO market.

Keywords: Electricity market; competition; pricing; guarantees of origin (search for similar items in EconPapers)
JEL-codes: D43 L13 L94 Q41 Q48 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2023-12-15
New Economics Papers: this item is included in nep-com, nep-ene, nep-eur and nep-ind
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