Understanding the Guarantees of Origin and their impacts on the electricity value chain: a comparative case study of Norway and Germany

The Renewable Energy Directive 2001/77/EC (2001) introduced a system of Guarantees of Origin (GOs) to be able to track the renewable electricity consumption in Europe. By purchasing a GO which is an electronic certificate, 1 MWh of electricity can be claimed as being from a renewable source. The purchase of GOs was made mandatory for any renewable claim in the revision of the Renewable Energy Directive (December 2018). The ultimate goal of this master’s thesis was to identify the impacts of GOs on the electricity value chain, composed of five activities associated: electricity production, transmission, distribution, trading and consumption. In order to identify the impacts, this thesis constructed beforehand a knowledge base necessary to understand the GO system. Broadly speaking, the European Directives relevant to the GO system were analyzed, relevant published academic research was reviewed, the practical use of the GOs in electricity tracking was investigated and the GO market was described. In addition, the differences that prevail in the implementation and the use of this system among the Member States were identified and outlined by providing a comparison between Norway and Germany. The literature review, other reliable online sources and a number of semi-structured interviews with practitioners and renewable energy experts led to several findings. First, dealing with GOs has become an extra task for the agents along the electricity value chain: the eligible electricity producers receive and resell the GOs, the Transmission System Operator is in some cases assigned as the Competent Body for GOs and electricity retailers have to purchase GOs to back the electricity they sell to the customers asking for renewable electricity. Secondly, unlike the wholesale electric power that has a single price, many types of GOs exist and are priced differently depending on various characteristics (renewable energy source, location, age of the power plant, etc.). Additional revenues provided by GOs to power producers and traders are therefore largely varying and difficult to assess for the following reasons: (i) it depends on the GOs’ characteristics, (ii) GO prices are very volatile and (iii) GO prices are not transparent to market outsiders. The price paid by end-consumers for GOs is also difficult to estimate because prices are not transparent to them and the GOs are often included in products offering additional specificities, such as eco-labels for example. Thirdly, it was found that in today’s market the impact of GOs on renewable investments is very limited due to their low price and to the fact that renewable investments are triggered by governmental subsidies which are substantially higher than the GO prices. Finally, regarding Norway and Germany, the major differences identified are the issuing rules which impact a lot the volume of GOs traded in these countries and in the market in general. The demand for GOs is also substantially different in the two countries.