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New Norwegian government proposes the removal of the GO system

Thursday, 14 October 2021

Norway's Labour Party (Arbeiderpartiet) that emerged as the largest party in the September parliamentary elections this year, has recently proposed in the joint Hurdal platform to remove the Guarantees of Origin system in Norway and prioritise the country's energy needs. 

Following last month's elections, Norway's Labour Party (AP) lead by Jonas Gahr Støre has agreed to form a new minority government with the Central Party (SP). Yesterday (13 October 2021), the new AP-SP government approved and released the Hurdal platform which outlines the new government's priorities under the Støre administration between 2021-2025. 

Removal of Guarantees of Origin system

Within the government platform, among various policy proposals, the AP-SP government has agreed to remove the system of Guarantees of Origin to prioritize the power needs of the Norwegian industry. 

This move has sparked some concern over the legality of this move considering Norway's EEA agreement that provides for the inclusion of EU legislation. In the EU's Renewable Energy Directive (RED II) that aims at increasing the renewable energy share in the European energy mix, the Guarantees of Origin are regarded as an important tool within the European energy transition.  Additionally in the European Commissions recently presented "Fit for 55" proposal package aimed at ensuring that the bloc reduces Greenhouse Gas (GHG) emissions by at least 55% by 2030 compared to 1990 levels, the role of the Guarantees of Origin system has been reinforced.

The joint document recognises this by stating that the "EEA agreement forms the basis for Norway’s relations with Europe. The room for manoeuvre in the agreement will be studied and used actively, and targeted efforts will be made to defend Norwegian interests vis-à-vis the EU”. 

Norway's current role in the GO market

Norway plays an integral role within the European Guarantees of Origin market. Norway is the largest issuer of guarantees of origin by a margin, but only around 14% of the electricity in Norway is disclosed with GOs. Hence, most of the issued GOs in Norway are exported, especially to countries like Germany and the Netherlands where the demand is high.

In 2020, Norway's production issuance was 149.4 TWh of renewable energy GOs which represented a 22% share of the total production issuances within the AIB in the same year. The bulk of Norwegian GOs mostly come from hydropower accounting for more than 90% of the total issued volume with smaller additions from Wind GOs that are growing annually. 

Norway is also a major trading hub for GOs since the transaction cost for GOs in the Norwegian NECS-registry is comparatively low. Several big players in the GO market have accounts in the Norwegian NECS-registry. Additionally, due to its higher market share, the price of Nordic Hydro GOs is considered the benchmark price in the market for European GOs. Norway, Sweden, and Finland issued 204 TWh of GOs from hydropower production in 2020, corresponding to a market share of 30%. 

Should the new government in Norway move ahead with the cancellation of the GO system it could potentially impact the renewable energy industry that receives additional revenues through the trading of GOs. It would decrease Norwegian GO exports which could translate to about 120 TWh of GOs removed from the market, significantly reducing supply within the market which could potentially cause price increases in EU GO products. Currently, 2021 Nordic Hydro GOs are trading at around 92.5 Eurocents/MWh.

Source:

Hurdal platform (in Norwegian)

AIB