An Aurora Energy Research analysis commissioned by Google finds that solar and wind assets could capture 17% more of the European Guarantees of Origin (GO) market under a “100% local” scenario, covering around 18 billion € or 6% of total renewable energy investment needs between 2025 and 2030.
OXFORD (AURORA ENERGY RESEARCH)—A new report from Aurora Energy Research, commissioned by Google, suggests that increasing local requirements in the European Guarantee of Origin (GO) market could significantly redirect GO financial flows from markets with high shares of renewables on their grids (Norway and Sweden) to countries with much lower shares that have historically imported a significant number of GOs (Ireland, Netherlands, and Germany).
The analysis explores the potential impact of a “100% local” scenario, demonstrating the effects of fully local matching on a country-basis, with no cross-border trades of GOs being permitted. This would significantly increase GO prices in those import-dependent countries, creating benefits for GO suppliers and renewables developers in those countries to help decarbonize the local demand. In reality, it is expected that some cross-border trades may be allowed, which would dampen some of the price effects, but generally the model represents a world where offtakers are under more scrutiny to source GOs from local projects to align with stakeholder expectations.
The report, “100% Local? An Analysis of Local Matching in the European Guarantees of Origin Market,” finds that the share of the European GO market captured by solar and wind assets between 2025-30 could grow from 59% to 69%, or a 17% increase, under a “100% local” scenario, covering around 18 billion € or 6% of total renewable energy investment costs. The share of the market captured by solar and wind assets is a conservative estimate according to the analysts, as requiring offtakers to source GOs locally would lead to shortages in some undersupplied markets. For example, in Germany, where state-supported renewables are prevented from issuing GOs (the Doppelvermarktungsverbot rule), GO liquidity would drop by 50% until additional supplies could come onto the market.
Currently, GOs can be traded freely across borders, independently of electricity, allowing countries like Norway, which produces excess hydroelectric power, to export up to four times as many GOs as physical power. With full local matching, cross-border trades of GOs would not be permitted in any form, potentially leading to an 80% drop in GO prices in net-exporting countries like Sweden and Norway by 2030. This could reduce cumulative hydropower GO revenues by 2. billion € but would allow developers of new renewable projects in markets with lower renewables penetration to re-capture some of this value.
In a previous study for a consortium of 10 companies, Aurora found that hourly matching of GO issuance and cancellation could also help preserve market value in a full local scenario, as GOs from hydropower can be issued more flexibly than those from solar or wind power. In an hourly GO matching system, hydropower could thus become a valuable, dispatchable source of GOs, for example to support corporate PPA offtakers to match their consumption with green power on a 24/7 basis. Allowing limited cross-border trade in line with physical flows of electricity could also help to mitigate possible local shortfalls of GOs, as would be expected in Germany, and mitigate the expected loss of revenues of hydro producers in the Nordics.
Ryan Alexander, Principal, Central European Advisory at Aurora Energy Research, stated:
“Within a GO market with increased local matching requirements, increased GO prices in currently net importing countries could form an upside for renewables and encourage increased market-based renewables buildout. Allowing limited cross-border trade would help to manage any expected market shocks.”
Jannik Carl, Research Associate at Aurora Energy Research, added:
“In a scenario with increased local matching criteria for Guarantees of Origin, solar and wind developers stand to benefit the most, although offtakers could face a temporary reduction of liquidity in the GO market. National policy measures, such as a review of the German ‘Doppelvermarktungsverbot’, could be an option to combine stricter market criteria while easing pressure on consumers.”
Maud Texier, Global Director of Clean Energy and Decarbonization Development at Google, said:
“Google has a goal to run on 24/7 carbon-free energy on every grid where we operate by 2030. This new study by Aurora Energy Research provides interesting new insights into how matching clean energy purchases to local demand can create value and support the deployment of new clean energy projects where they are needed.”
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Established in 2013, Aurora Energy Research is a leading global provider of power market forecasting and analytics for critical investment and financing decisions. Headquartered in Oxford, we operate out of 15 offices worldwide covering Europe, North & South America, Asia, and Australia. Our comprehensive services include market outlook packages for energy industry participants, advisory support, and innovative software solutions. We foster diversity with a team of over 800 experts with backgrounds in energy, finance, and consulting, offering unparalleled expertise across power, renewables, storage, hydrogen, carbon, and fossil commodities. Our mission is to facilitate the global energy transition through widely trusted quantitative analysis and high-quality decision support.
