GOs No Longer Issued Automatically in the Wholesale Market

Landsvirkjun has notified electricity retail companies in the wholesale market that GO (Guarantee of Origin) certificates will not be issued automatically from 2023. The GOs will be sold at a discount in 2023, and the retailers will have the option of either buying transferrable certificates at market value, or non-transferrable certificates at a fixed price.

Since 2016, electricity wholesale retailers have automatically received GOs with their purchases. However, this change is made in accordance with the Guarantee of Origin system which is in place in mainland Europe. The new GO system does not introduce changes to Landsvirkjun’s tariff for the wholesale electricity market. Households will still enjoy economical and stable electricity tariffs. Electricity prices are only a quarter of households’ electricity bills, with other costs deriving from, e.g., distribution and transmission. Should customers choose to support renewable energy generation by purchasing GOs, the effect on total cost is expected to be negligible.

A GO is a certificate that documents that the energy purchased was generated with renewables. GOs are market-based instruments, independent from the electricity delivery. Companies, institutions, and individuals can certify their energy procurement by purchasing GOs, simultaneously supporting renewable energy generation.

This system has taken roots since its establishment, with the value of GOs now having increased by fiftyfold. Landsvirkjun’s role is to maximise the return of the resources it is entrusted with; hence, it is no longer considered justifiable to hand over valuables of such magnitude gratuitously.

In 2021 Landsvirkjun’s revenues from GOs were approximately ISK 1 billion, and this year they are expected to reach ISK 2 billion. Those who purchase the GOs are mainly general customers in Europe, who want to support the development of renewables.

The purpose of GOs is to support the development of renewables, thus, the energy transition. Companies that generate electricity from renewable natural resources, e.g., hydropower, geothermal, or wind power, offer a more valuable product.

Increased dividends from these resources are used to further develop green energy generation. Landsvirkjun plans to increase its renewable energy generation, and forthcoming projects will most likely be a Búrfell wind farm, as well as the construction of the power station Hvammsvirkjun at the river Þjórsá.

Increased revenues from GOs will further strengthen the foundation and outlook for the national energy company, which has paid ever increasing dividends to the Treasury in recent years.

The European system of GOs, counting 28 member countries, was adopted in Iceland by law in 2008, with Landsvirkjun offering GOs from 2011.

Iceland is an EEA member state, and thus obligated in accordance with the Directive to issue GOs to electricity wholesale retailers in the country and participate in the GO market. It should be noted that energy retailers and energy customers are not obligated to purchase GOs.

This system is a mitigating measure in the fight against climate change, and its goal is to support renewable energy generation and increase its magnitude throughout Europe.