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, the 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, peaked 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 production the EU needs to reach its 2030 targets.
Fact box: Transforming revenue from GOs into new renewable energy
Revenue from GOs 2023-2030
57 billion EUR
Estimated average cost per MW of new installed capacity (solar and wind)
1 million EUR
Gearing (debt-to-equity ratio)
Average operational hours per year across Europe (solar and wind)
2 000 hours
Additional energy production in 2030
458 TWh per year
The importance of market-based instruments for investments is also 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 thanks to the economic opportunity that GOs represent. 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.
In May 2022, the EU launched the REPowerEU Plan to build Europe’s energy independence and accelerate the rollout of renewable energy. For more information click here.
The EU Commission predicts that, under the REPowerEU plan, the block will produce close to 2 380 TWh of renewable electricity per year by 2030. With Ecohz´ conservatively estimating that GO prices will average 5.5 EUR until 2030, the GO market would reach an annual value of 10 billion EUR by the end of the decade. This means GOs could raise 57 billion EUR over the next eight years.
The Guarantees of Origin system is the EU-backed mechanism to track renewable electricity consumption. GOs allow consumers to document the origin of clean power and claim ownership of its environmental benefits. For more information, click here.