Revenue from Guarantees of Origin is supporting investments in renewable energy

Guarantees of Origin (GOs) as a market incentive

The economic idea behind Guarantees of Origin, the market-based energy tracking system that operates in Europe, is relatively simple. By purchasing GOs, consumers pay for the environmental qualities of clean energy, giving producers of their preferred type of power an extra source of revenue. Buyers get ownership of the attributes of a unit of energy — namely lower emissions — while sellers receive a premium on their product, incentivising them to generate more of it.

That market incentive works much in the same way as tax credits and state subsidies, except the extra cash comes from voluntary buyers who want to see renewables outcompete fossil fuels.

Unfortunately, tracing the real-world effects of that money is not easy. By and large, there is no way of knowing exactly how much GO-generated income turns into new investments, meaning that the additionality — the correlation between buying GOs and new renewable energy installations — has long been portrayed as weak.

There’s also the issue of price. In 2022, GO prices skyrocketed and pierced the 10-Euro per megawatt hour mark. By the end of 2025, the price had fallen back to under 1 Euro per megawatt hour, encouraging critics who argue that GOs are so cheap they are inconsequential.

Those critics, however, might be looking in the wrong place. According to consultancy Afry, in Norway alone, GOs could raise EUR 1.6 billion for the state from 2025 to 2029, both in the form of taxes and as revenue for state-owned utilities and power producers. That number does not include revenue for private energy producers.

Whether the estimates are realised depends on demand growing to counteract the current GO oversupply. But even as low prices mean less income for renewable producers, GOs are already underpinning the profitability of renewable energy.

How GOs are increasingly supporting RE investments

Renewable energy production is a game of small margins. Building new installations does not come cheap, while a myriad of external factors, from policy changes to market fluctuations, can jeopardise the profits of energy generators. And their books are already squeezed.

According to the Norwegian Water Resources and Energy Directorate (NVE), the levelized cost of energy (LCOE) for onshore wind and utility-scale solar increased by 31% and 43%, respectively, between 2022 and 2024. For fixed-bottom offshore wind, the jump was 65%.

At the same time, average electricity prices are declining across Europe, while the cannibalisation resulting from more intermittent renewables further puts pressure spot prices. In Norway, NVE estimates the cost of electricity could fall around 30% towards 2030. “These factors are challenging the profitability of new clean energy installations,” says Jon Sverre Monsen, Head of Environmental Markets at clean energy producer Å Energi. “Many potential investments are now marginal, at best.”

Against that backdrop, GO income is not only a welcome addition to the bottom line — it could be the difference between building or not building new clean power plants. “When planning new development, we need to know that we can include GOs in our spreadsheets. Several of our projects have been made profitable, at least partially, by Guarantees of Origin,” Monsen says.

GOs are also crucial to realising long-term Power Purchase Agreements (PPAs), which are often regarded as the gold standard of renewable energy procurement because of their perceived additionality. That additionality would not be possible without GOs.

“Producers need long-term contracts to secure cash flows and reduce risk, while consumers strongly value getting the green attributes of PPAs, which requires GOs” Monsen continues. “By targeting customers willing and able to pay a premium for additionality, GOs make an even more significant contribution to new RES profitability.”

It is no wonder, then, that the revision to the Greenhouse Gas Protocol Scope 2 Guidance, the foundational document for corporate renewable energy procurement, has caused alarm among producers who fear the proposed geographical limits to GO and PPA procurement could sever market access, with the income loss that entails.

In the proposal under discussion, new market boundaries are drawn along electricity market bidding zones, which would not only bar energy producers from selling GOs outside of Norway, but fragment the national market as well, slashing their income. “We are worried that we will lose access to a crucial outlet for our Guarantees of Origin,” Monsen adds. “The common European market must remain intact. A lot of new renewable energy depends on it.”

Who is using renewable energy? The location-based vs market-based debate

About 98% of Norway’s electricity production is renewable. To companies like Alcoa, one of the world’s largest aluminium producers, that is extremely appealing. In a business where electricity consumption is the largest single cost item and accounts for about 70% of the GHG emissions, clean and cheap energy is a huge asset.

Apart from being Norway’s second-largest electricity consumer, Alcoa has smelters in countries like Iceland, Brazil, and Canada, which they claim are intentionally located close to renewable energy. As explained during a GO conference in Oslo, the company’s renewable energy policy can be summarised as: build a smelter, build a power dam.

According to its 2024 Sustainability Report, Alcoa sourced 86% of its electricity from renewable sources. “Alcoa calculates its Scope 2 emissions using a location-based approach, which we believe most accurately represents the physical realities of the energy delivered to our locations,” the report reads.

The company does not buy bundled or unbundled Energy Attribute Certificates (EACs) — GOs included. Unbundling, they argue, “can allow purchasers to apply [EACs] to otherwise non-renewable energy sources when they report.” It is more impactful, they say, to either build their own clean energy installations or enter PPAs, even without acquiring the green attributes of their production.

Their stance, however, highlights two fundamental misconceptions about the GO system. Firstly, whether consumers in Norway always use clean electricity is not crystal clear. “There are power cables going to Sweden, Finland, the UK and mainland Europe through which we constantly export and import power,” Ivar Munch Clausen, Director of Business Development at Ecohz, says. “Even if you’re located in Norway, you could be using a combination of Norwegian hydro and foreign non-renewable power.”

In fact, Alcoa’s smelter and casthouse in Lista, Norway, is located less than a 30-minute drive from the village of Feda, where the NordNed high-voltage power cable links Norway to The Netherlands. “It is very hard to argue that the local grid in that area delivers exclusively Norwegian renewable power when there is electricity flowing in an out of the country so close by,” Munch Clausen adds.

Secondly, the market-based system was established precisely to get around the impossibility of tracking physical electricity flows. GOs have never claimed to change the blend of electricity coming out of your socket. Rather, they give ownership of the environmental attributes an actual volume of produced energy to support more production with actual cash.

It was also created to allow as many consumers as possible to back renewables. In the aluminium business, where operational costs are largely related to electricity, building a power plant or signing a PPA is a logical business decision. For most consumers, however, that option may not even be on the table.

“Not all companies can enter PPAs. Most of them do not have either the load or the financial muscle to even consider one. The GO system is available for everyone, including industries that want to use renewables even though power is not a huge part of their business,” Munch Clausen continues. “In short, GOs enable collective action. And if we combine the consumption of smaller users, it adds up to much more than that of the huge power consumers.”

The market incentive is working. Cumulative demand has already created a revenue stream that is stimulating the industry. “GOs are increasingly reported as an important source of income for renewable energy producers and a relevant factor when considering new investments,” says Knut Kroepelien, special advisor for the clean energy association Renewables Norway.

Some companies in the aluminium sector already see the value in GOs. For example, Rio Tinto, another major global producer, recently started purchasing EACs for its Isal smelter in Iceland, which could signal a change of pace in the industry.

At the end of the day, realising the energy transition requires every resource available. “If we can all agree on anything, it is that we need more renewable energy,” Monsen concludes. GOs are an increasingly important tool to achieve just that.