Guarantees of Origin: Does the Origin matter? Exploring Pricing Dynamics and Product Transparency in the Renewable Electricity Market
Master thesis
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https://hdl.handle.net/11250/3148113Utgivelsesdato
2024Metadata
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- Master's theses (HH) [1130]
Sammendrag
This study analyses the historic development of Guarantee of Origin (GO) market prices and the impact ofinformation disclosure on GO prices. A GO is a certificate that documents the generation of one-megawatthour (MWh) of electricity. It allows for transparency and differentiation based on the origin of electricity,reducing information asymmetry, and enabling consumer choice. Literature points to low GO prices as asignificant barrier to the positive impact of the GO market on renewable electricity production, yet theliterature on GO price determinants is limited. Therefore, this study aims to shed light on GO prices fromtwo perspectives. Firstly, an exploratory analysis of GO issuance, cancellation, and prices reveals increasingmarket volatility as the oversupply of GOs in the market shrinks. This trend is expected to continue, withpotentially higher average prices in the long term. Secondly, a linear regression model is used to analysethe extent to which product transparency in the form of information disclosure impacts GO prices. Theanalysis reveals price premiums based on attribute information disclosure, with GOs from certain renewableenergy sources and countries commanding higher prices. However, there is a risk of selection bias, as GOswith “negative” attributes may be hidden by generic labels. In conclusion, our study highlights two maininsights regarding GO market prices: increasing market price volatility and the dependence of individual GOprices on product transparency. While product transparency can increase GO prices, further research isneeded to investigate whether this holds for “negative” attributes, if they can benefit from greatertransparency through improved trust in and credibility of the GO market. Given that low GO prices limit themarket's ability to positively impact renewable electricity production, these avenues for higher prices mayaid the GO market in fostering sustainable energy production.Keywords: renewable electricity; guarantee of origin; energy attribute certificate; market prices; volatility;transparency