Guarantees of Origin: Does the Origin matter? Exploring Pricing Dynamics and Product Transparency in the Renewable Electricity Market

Abstract

This study analyses the historic development of Guarantee of Origin (GO) market prices and the impact of information disclosure on GO prices. A GO is a certificate that documents the generation of one-megawatt hour (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 a significant barrier to the positive impact of the GO market on renewable electricity production, yet the literature on GO price determinants is limited. Therefore, this study aims to shed light on GO prices from two perspectives. Firstly, an exploratory analysis of GO issuance, cancellation, and prices reveals increasing market volatility as the oversupply of GOs in the market shrinks. This trend is expected to continue, with potentially higher average prices in the long term. Secondly, a linear regression model is used to analyse the extent to which product transparency in the form of information disclosure impacts GO prices. The analysis reveals price premiums based on attribute information disclosure, with GOs from certain renewable energy sources and countries commanding higher prices. However, there is a risk of selection bias, as GOs with “negative” attributes may be hidden by generic labels. In conclusion, our study highlights two main insights regarding GO market prices: increasing market price volatility and the dependence of individual GO prices on product transparency. While product transparency can increase GO prices, further research is needed to investigate whether this holds for “negative” attributes, if they can benefit from greater transparency through improved trust in and credibility of the GO market. Given that low GO prices limit the market's ability to positively impact renewable electricity production, these avenues for higher prices may aid the GO market in fostering sustainable energy production. Keywords: renewable electricity; guarantee of origin; energy attribute certificate; market prices; volatility; transparency