Guarantees of Origin (GO) Market Outlook 2025

2024: A gloomy year for Guarantees of Origin

2024 was an interesting year for Guarantees of Origin (GO). Prices systematically decreased throughout the year, falling back to levels not seen since 2021. This was not due to a lack of interest, as the Association of Issuing Bodies reported that the number of transfers increased at a higher rate than the number of issuances. Additionally, the number of expirations is not expected to grow in proportion to the issuance rate. This implies that nearly all of the new GOs are being used, and many of them also change hands, possibly multiple times.

Oversupply and its impact on GO prices

Instead, the price trend can be explained by oversupply. This oversupply is caused by increasing renewable energy production within the EEA and the fact that the pieces of regulation driving demand will take full effect only in 2025 (and beyond).

Guarantees of Origin: volatility and cautious trends in 2025

The volatility and bearishness observed in 2024 form an interesting starting point for 2025. Will anything break the fall of prices, and when? In this blog post, I’ll discuss factors influencing prices in 2025 and in the years to come. Although there are several interesting developments around Guarantees of Origin for gaseous fuels, we’ll focus on factors affecting the electricity GO space.

Key drivers of the GO Market in 2025

In general, the GO market tends to reflect the surrounding regulation, the European financial situation, and consumer attitudes. It is no coincidence that GOs are often referred to as a market-oriented instrument for the green transition. They are also seen as a consumer-driven tool for this purpose, as their use for disclosing the origin of consumed energy has always been entirely voluntary.

Regulatory shifts: how will new policies shape demand?

The role of the Corporate Sustainability Reporting Directive (CSRD)

The use of GOs is gradually becoming less voluntary than it has been in the past. While GOs have long been the only recognised instrument for making green claims within the EEA, new European regulations, such as the Corporate Sustainability Reporting Directive and the Green Claims Directive, are increasingly making their use more mandatory.

So, we cannot discuss the market developments around GO without discussing the current regulatory changes. These will mainly influence the corporate actors active with significant financial activities within the EEA.

The most significant of these regulations is the Corporate Sustainability Reporting Directive (CSRD). By 2029, this directive will require 50,000 companies operating in the EU to report on the origins of the energy they consume.

Reporting deadlines and their impact

Some companies will need to begin reporting as early as the financial year 2024. The other groupings of corporate actors will closely follow. Even though the reporting will become mandatory, it will not be mandatory to use green power. It is, nevertheless, noteworthy that under taxonomy the source of used energy will influence the interest rates corporate actors face.

Market-based mechanisms in sustainability reporting

It is noteworthy that CSRD only recognises the market-based mechanism as means of making claims on energy origin. This forces the companies willing to claim use of carbon neutral or renewable power to the use of GO either as a separate commodity or bundled in Power Purchase Agreements. Location based approach is not applicable for sustainability reporting.

Although the CSRD will push companies into the GO market, it will not force them to strategically commit to making renewable energy claims. Ultimately, the effect on demand will depend on consumer willingness to pay.

Despite high inflation in recent years, that willingness to pay still seems to exist. As use of GO is one of the easiest ways to claim sustainability through claiming use of carbon free or renewable power, the above results of the 2024 Eurobarometer seem encouraging for the development of GO demand in the coming years.

Supply growth and market dynamics

Record-breaking supply in 2024

While demand is expected to grow, supply is likely to follow a similar trend. Although the figures are only updated through August 2024, the statistics from the Association of Issuing Bodies clearly demonstrate that 2024 was another record-breaking year for GO market supply.

The Role of Power Purchase Agreements (PPAs)

Nevertheless, it is good to remember not all of these issued GO will enter the GO market. Many of them are transferred as a part of renewable Power Purchase Agreements (PPA). These contracts aimed at further accelerating the renewable ramp up and hedging financial risks often include the GO to allow the purchaser of the power to make renewable claims.

Future Pricing and market anticipation

Increased volatility and the rise of PPAs

In a world of more renewables and price volatility, PPA are becoming increasingly attractive. In the figure below we can see Montel Energy's long term forecast on the development of volatility on the power markets. This, combined with the increased pressure to claim use of carbon neutral or renewable energy is likely to make entering PPAs increasingly attractive for market actors both on the supply and demand side.

Market contango and price predictions

Power Purchase Agreements (PPAs) could potentially reduce both supply and demand in the unbundled GO market starting in 2025, as new actors are compelled to report on their sustainability activities. Additionally, companies subject to the CSRD but not operating in energy-intensive industries may increasingly opt for carbon-neutral or renewable energy contracts from their power retailers, bypassing the unbundled GO market.

Neither possibility removes the upward pressure from the unbundled GO market. As the market has been steadily in contango for the second half of 2024, we can already see some anticipation on prices increasing in the coming years. A GO produced in 2025 was consistently roughly twice the price of a GO produced in 2024 for the second half of 2024. The price difference is even steeper when we compare 2024 with production years 2026 or 2027.

This tells us the market is anticipating the prices to rise again within the next few years. This change will be driven by willingness to pay of consumers (further fuelled by lowering interest rates), changes in renewable and sustainability reporting regulation as well as the likelihood of the increase in supply not being likely to keep up with the increase in demand, although we can expect both to be on the grow.

As it is difficult to make any specific forecasts on the actual price development of GO, it seems safe to say the demand is increasing in the coming years, which is likely to also influence the price levels. This increased demand can start to have significant impact on price levels already during the second half of 2025 when the companies newly reporting under CSRD start offsetting those energy purchases that have not been covered by PPAs or green power contracts with power retailers.

While forecasting the exact effect is challenging, I am sure we can count on another interesting year on the GO market.

This article was written by Laura Malinen, CEO of EcoInsights.