The European Market for Guarantees of Origin for Green Electricity: A Scenario-Based Evaluation of Trading under Uncertainty

Alexander Wimmers and Reinhard Madlener ()
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Alexander Wimmers: Workgroup for Infrastructure Policy (WIP), TU Berlin, Straße des 17. Juni, 10623 Berlin, Germany
Reinhard Madlener: Institute for Future Energy Consumer Needs and Behavior (FCN), School of Business and Economics/E.ON Energy Research Center, RWTH Aachen University, Mathieustaße 10, 52074 Aachen, Germany

Energies, 2023, vol. 17, issue 1, 1-35

Abstract: Guarantees of Origin (GOs) were introduced in order to enhance transparency about the origin of green electricity produced in Europe, and to deliberately empower end-consumers to participate in the sustainable energy transition. The separation of electricity and the GO trade has resulted in a prosperous GO market that, however, has been characterized by non-transparency and opportunistic behavior. Historic price development has been opaque and can therefore not be used to forecast future GO prices. This paper, firstly, provides a thorough overview of the European GO market and an analysis of the historic price development; secondly, it proposes a model, the first of its kind, for determining future price developments of European GOs for different renewable energy technologies in different countries up to 2040. For household consumers, GO price determination is based on willingness-to-pay estimates from the literature, whereas for non-household consumers, the model introduces a novel approach to determine the willingness to pay for green electricity. Four different scenarios are considered (Status Quo, Sustainable Development , Full Harmonization , and Ideal Development ) and annual GO data are used. The findings indicate that GO prices can be expected to increase on average in the next years, with prices ranging from 1.77 to 3.36 EUR/MWh in 2040. Sensitivity analysis shows that ‘WTP percentages’ have the highest influence on GO prices. It can be concluded that future GO prices will remain challenging to predict, even with the support of sophisticated models, due to the expected supply and demand-driven market growth affecting the market equilibrium prices for different GOs in different countries.

Keywords: renewable energy; green electricity; policy; willingness to pay; power purchase agreement; Europe; guarantees of origin (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2023
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