Aurora Energy Research

Guarantees of origin market set for growth trajectory, projected to reach €3.7bn by 2030

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Aurora Energy Research projects that the Guarantees of Origin (GO) market will soar to 3.7 billion €in 2030 alone.

• Report underscores significant growth in both demand for and supply of GOs, although the regulatory environment will be a key determinant of how the market evolves.

• Shifting to a system of hourly GOs could increase revenues for renewables assets from GOs by at least 33%.

OXFORD (AURORA ENERGY RESEARCH)—The Guarantees of Origin (GO) market is expected to grow substantially, with estimates projecting reaching a size of 3.7 billion € by 2030 and GO cancellations expected to increase by more than 80% since 2022, a comprehensive study by Aurora Energy Research, the world’s largest dedicated power market analytics provider, suggests. 

While these certificates are primarily sourced by electricity consumers as part of their strategic efforts or green targets, Aurora assesses that GOs will also play a pivotal role in facilitating the transition to green hydrogen. Demand is particularly strong from corporate off-takers in Germany, France, and Italy, which together comprised 50% of total GO cancellations in Europe in 2023.

On the supply side, Aurora identified a persistent undersupply of GOs in key markets including Germany, the I-SEM, Belgium and selected other markets, primarily attributed to local regulations that impose restrictions on subsidised renewable assets, preventing them from issuing and monetising GOs. At the same time, Aurora expects the share of GOs issued by hydropower assets—previously the largest provider of low-cost GOs to consumers across Europe—to drop from around 60% at present to 35% by 2030, as more renewables issuing GOs come online elsewhere in Europe. 

Ryan Alexander, Research Lead at Aurora Energy Research, emphasised:

“We expect GOs to only gain importance over the coming years, as they are the EU’s main instrument to track the origin of electricity, and demand for them is growing. At the same time, there are deep regulatory and commercial uncertainties in this market, which will make it challenging for renewables developers and off-takers alike to navigate over the coming years.”

The future of granular GOs

Granular hourly GOs are crucial for accurate electricity usage tracking and green hydrogen production. EU regulation requires hourly GOs by 2030 as one of three ways in which domestically produced hydrogen can be claimed as green, making their implementation a central component of the energy transition. Jannik Carl, Research Associate at Aurora Energy Research, commented:

“If markets were to shift to a system of hourly and local GOs, revenues for Renewable Energy Systems operators could increase. When modelling Spain in 2030, we found a potential increase of GO revenues across technologies of at least 33% compared to the current annual system.”

In 2030, the Spanish market hourly GO prices are estimated to be 2.5 times as volatile as Day Ahead market prices in the same period, highlighting the risk to off-takers of committing to match 100% of their load profile to green generation on an hourly basis without a proper procurement strategy in place.

The benefits of high hourly GO prices in Spain would accrue to all types of renewables assets but particularly to hydroelectric assets, Aurora assesses, as they can more closely match the average electricity demand profile. As neither wind nor solar assets can flexibly adjust their production patterns, this highlights the role storage technologies could play in a world demanding 24/7 certification of green power consumption to reduce volatility.

Rebecca McManus, Senior Research Associate at Aurora Energy Research, commented: 

“By opening up the GO market to batteries, regulators could create new revenue streams for battery asset owners, while driving costs down for consumers in the transition to 24/7 green power.”

 

Bidders take low profit-margin risk in second storage auction

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Bidders in a second auction for standalone battery operating support have once again settled for low profit margins, taking significant risks to secure an advantage in the country’s emerging energy storage market, Aurora Energy Research company has noted in an analysis covering the procedure.

Bids submitted to the first auction, held last summer, were equally low. Clearly, participants are prepared to take risks to establish their places in the energy storage market as early movers, even if the viability of their investments is put at risk.

With a price ceiling of 115,000 euros per MW for a year, the average winning bid was below 50,000 euros per MW for a year, indicating fierce competition.

The current maturity of energy storage technology results in CAPEX figures of around 600,000 euros per MW, leading to IRR levels marginally below 5 percent.

Basic market assumptions regarding the IRR rating in the standalone battery category define as viable an investment with an IRR of at least 10 percent, equally viable yet with relatively low returns if ranging between 5 and 10 percent, and unsustainable below 5 percent.

The second auction attracted an estimated 55 bids representing a total capacity of 1,668 MW, of which 48 were deemed valid.

Last summer’s first auction attracted a total of 93 bids representing a total capacity of 3.5 GW, with 90 of these bids deemed valid and officially accepted.

Three CCGTs to vie for two grid spots covering 1.9 GW, Aurora study shows

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Three new combined-cycle gas turbine (CCGT) power plants will be vying for two spots on the electricity grid to cover an available capacity of 1.9 GW, a latest study conducted by Aurora Energy Research and covering the period between 2022 and 2030 has shown.

The Aurora Energy Research study estimated the grid’s available capacity at 2.7 GW but subtracted 820 MW to be offered by the Mytilineos group’s already-completed CCGT in Viotia’s Agios Nikolaos area, slightly northwest of Athens.

The three candidate projects are a CCGT power plant being co-developed by GEK TERNA and Motor Oil in Komotini, northeastern Greece; a power plant being constructed by power utility PPC, gas company DEPA Commercial and the Copelouzos group’s Damco Energy in Alexandroupoli, also in the northeast; as well as PPC’s Ptolemaida V, when it converts from a lignite to natural gas-fueled facility in 2028.

Development of Thermoilektriki Komotinis, the GEK TERNA-Motor Oil CCGT in Komotini, has reached an advanced stage and is considered the most efficient power plant in Greece. Once operational, it will emit 75 percent less CO2 than a lignite plant.

Work on the Alexandroupoli CCGT began last January and is slated for completion in 2025. PPC holds a 51 percent stake, DEPA Commercial has a 29 percent share, and the Copelouzos group’s Damco Energy maintains the remaining 20 percent. This facility will be equipped to also run on hydrogen and mixed fuel.

 

PPA market could achieve supply-demand balance by 2030, study notes

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The country’s PPA market is greatly imbalanced as numerous investors behind a large number of RES projects are keen to establish power purchase agreements, promising priority status for their licenses as well as favorable borrowing terms, but, on the other hand, the number of interested customers, major industrial consumers, willing to purchase power through PPAs is limited, a study by Aurora Energy Research has shown.

This imbalance, in which supply of green-energy PPAs exceeds demand, is significantly reducing PPA prices to levels well below those reflecting the actual cost of such agreements, according to the Aurora study, whose findings were presented at the recent 4th Power & Gas Forum in Athens by Evaggelos Gazis, Aurora’s Head of South Eastern Europe.

The study found that the fundamental fair value of typical fixed-price PPA contracts in 2025 could range between 60 and 100 euros per MWh.

A fair value for a 7-year PPA starting in 2025 is over 70 euros per MWh for solar and over 80 euros per MWh for onshore wind, the Aurora study determined.

Though supply for PPA contracts is currently much higher that demand, increased demand from utilities and aggregators could balance the market by 2030, the study noted.

The fair market value of a PPA depends on the asset’s capture price, the value of risk and hedge as well balancing cost and value of Guarantees of Origin (GO) certificates, the study pointed out.

PPA contract prices driven lower by market imbalance

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Power purchase agreements (PPAs) have fallen to levels of between 40 and 50 euros per MWh because of two key factors, firstly, the need of many RES project investors to establish bilateral contracts in order to upgrade their projects and meet priority-status standards set by power grid operator IPTO, and secondly, as a result of low absorption rates of production as large-scale consumers who could absorb big RES quantities have already made intra-group arrangements, a leading official at Aurora Energy Research has told energypress.

In addition, potential off-takers are limited and have low creditworthiness, the official noted.

“The supply and demand imbalance is putting downward pressure on PPA prices, resulting in PPAs trading at levels significantly below their value,” the official pointed out.

PPA contracts running from 2025 and 2035 in the Greek market should actually be worth between 60 and 90 euros per MWh for solar energy and between 70 and 100 euros per MWh for wind energy, the official noted.