GO markets can be volatile, and renewable producers are usually the ones to feel it where it hurts. We've built a solution for producers - but this article takes a look at the problem.
But first, a quick recap on what a GO actually is. A Guarantee of Origin (GO) proves 1MWh of renewable energy generation. According to the AIB: "There is no fixed price for a GO, and their value depends on market demand". Obviously, market price fluctuations are natural, and prices are expected to change:
- In the longer term, volatility isn't incredibly relevant, as it's regulation that drives GO price by affecting true supply and demand dynamics.
- But in the short term, things can get a lot choppier - which is why we don't advise our producers to attempt to time the market. Instead, we suggest a FAN (Frequent, Aggregated, Networked) approach to GO trading to maximize returns.
But why are GO markets particularly volatile?
This article explores this question, starting with an overview of the regulatory environment. To be clear: not all volatility can be attributed to the regulatory scene (or lack thereof), but it is helpful to cover this first to set the scene. Additionally, this isn't legal or regulatory advice, but we feel that a disjointed regulatory setup can compound many of the reasons that volatility occurs in any market, let alone the near-totally unregulated markets like GOs.
AIB market infrastructure exists but as strong technical rules, not trading rules
Because the market is fragmented, relying on a lot of peer-to-peer trades and lacking central clearing and exchange infrastructure, there's no true, central oversight body. You might be thinking "what about the AIB? They operate the AIB-Hub, and keep registries in check, don't they act as oversight?"
AIB is merely the overseer of the "technical" plumbing that prevents double counting. They publish the European Residual Mix (ERM) and European Attribute Mix (EAM), and keep records clean. AIB makes sure that GOs are standardized to meet the policy requirements of REDIII via EECS - and leans on national issuing bodies for implementation, using shared rules and technical specifications. And as for the registries these national bodies operate, beyond basic KYC checks during signup for AML and anti-fraud measures, there is no oversight on actual trading behaviors that occur. End users must sign an STC, but this focuses on correct use of the Hub, data integrity, contractual obligations, IT requirements, and reporting. There's no mention of insider trading, market manipulation, price formation rules, bidding behavior, trading venue conduct, settlement procedures, front-running, or other financial regulatory issues. Of course, registries rigorously defend against double counting via technical rules, and they have great capabilities to track GOs, but big players can still act with relative impunity when it comes to moving markets for their own benefit.
The real gap: financial regulation
Now for the gap. When it comes to regulators of energy and financial markets in Europe, you need to be looking closely at two primary entities across financial and energy regulation.
GOs are interesting because if they were to be regulated financially, Europe-wide regulation would likely exist at the intersection of the two:
- The Agency for the Cooperation of Energy Regulators (ACER). This is the EU's energy-markets agency. They publish REMIT which governs EU wholesale electricity and gas markets. It bans insider trading and manipulation, mandates transaction and fundamental-data reporting. REMIT also allows for the reporting of suspicious transactions by market participants - but only for certain instruments.
- European Securities and Markets Authority (ESMA). They write technical standards and drive supervision across national financial regulators. ESMA is also the harmonisation layer for MiFID II and MiFIR, which essentially make up the EU rulebook for investment firms and trading venues. ESMA and ACER also cooperate where energy and financial markets intersect (e.g., energy derivatives).
However …
Both ESMA and ACER essentially shake off the responsibility of regulating spot GO markets.
- ACER does not include GOs under REMIT. ACER explicitly stated in a Q&A that contracts for guarantees of origin are treated like green certificates and are not wholesale energy products, therefore they cannot be reported. ACER Guidance reiterates that green certificates (incl. GOs) and emission allowances are out of scope, even though ACER notes they can have an influence on wholesale energy prices.
- As for ESMA, they only "catch" GOs within their scope when they are clearly financial instruments. This only includes GO derivatives: for instance EEX's GO futures fall firmly within that catchment, and are subject to MiFID & Market Abuse Regulation (MAR). The same cannot be said for spot.
So there are no penalties for GO spot trading misbehavior?
Edge cases could arise when spot GOs are admitted to organized trading venues, and some argue that as a result, they should fall into the category of a financial instrument. However, this is currently only advocacy (see the opinion of the trade body LEBA from late 2024).
This isn't a conclusive or consensus viewpoint, and most GOs aren't even sent to organized trading venues in the first place - they're brokered or transferred between independent entities. So, until an ESMA decision, or that of a national financial regulator, the answer is yes: there are no trading penalties because there are no trading rules to break.
Why this lack of regulation drives volatility:
1. Low Liquidity
Now we've mapped the lack of regulation for GOs, understand one thing first before we blame that altogether: EU Guarantees of Origin (GOs) are less liquid than mainstream energy commodities due to short validity windows and a disclosure-driven, issue-transfer-cancel lifecycle, GOs simply exist for less time than other 'assets', meaning free float is of unique importance to GOs and frequently recalculated.
This low liquidity means order books have less depth and resilience. Huge volumes aside, even modest trades can move prices because the impact of trades increases as liquidity falls. This means a utility, trader or corporate buyer placing a big buy order can shift pricing without intending to (although, as mentioned , there are no true penalties for harboring such intentions).
2. Transparency (access to data) & Speculation (Lack of data)
In addition, information asymmetry plays a large role. Some participants, especially those with knowledge about the market leanings of big players, sit closer to price-sensitive data on supply, demand or production. Financial regulators would usually use transparency practices such as trade filings (e.g SEC Form 13D) to narrow these gaps, precisely because they stabilize pricing and expectations by evening access to information.
Speculative behavior is also rife in GO markets. Usually combated via targeted position limits (as seen in wheat or nat-gas) or position reporting (e.g SEC 13F), these are totally absent. So, speculative flows can dominate order flow and amplify moves in the GO market. We won't take a position on the matter (no pun intended), but we will say this: position limits are present in other EU markets, and MiFID II has demonstrated such tools can be effective at easing volatility, especially when paired with hedging exemptions or only applied to specific months of the year.
It's not always manipulation
Let's be honest. Short-term volatility sometimes looks like manipulation, but the context matters. Here is a reality check you can use internally. A fast price jump can be:
- Pure mechanics when a large buyer impacts a thin book
- Or speculation when narratives outpace access to data
- But it becomes manipulation when there is intent to mislead prices or information
All are features of lightly supervised markets and unsupervised markets (including GOs).
GO market safety: need to know
If you're a producer, your goal isn't wrestling with traders without any supervision. It's steady revenue, low effort, and tidy audits. Three actions reduce exposure to the unavoidable pain without requiring market timing expertise.
- Aggregate where volumes speak loudest: Bundle monthly GO volumes into institutional-scale packages across spot and forward that command premium pricing in our auction through sheer numbers. No more broker dependency.
- Don't try to time the market: Sell consistently to avoid falling into the trading trap. When market swings could make you uneasy as a solo seller, aggregation and frequent sales can get you to safety. Oftentimes, these huge, predictable volumes can be a decisive factor for a great deal in a "choppy" market. A lot of buyers aren't interested in timing the market mayhem, either - they want predictability.
- Automate transfers. Every manual registry transfer during volatile periods creates settlement risk and operational overhead. Platform-grade automation eliminates high-friction manual processes while maintaining full audit trails from issuance through cancellation.
- Information gaps make hedging smart. A source of market intelligence replaces opacity with transparent supply-demand analysis and, most importantly, forward guidance. Forwards are a key tool for maximizing your potential GO value - and you need a provider that will get your forward volumes to auction, fast.
If you want this operationalized end to end, use Soldera to manage your GOs for free. And for sales, we run a success-fee only model on our auctions, meaning we act as your aligned counterparty without ever trading against you. You're also free to sell outside of our auctions with no fee whatsoever.
At auction, we take our volumes to highly reputable buyers, and only sell to the highest bidder. On top of this, our platform manages GO workflows with registry-integrated automations, full automatic invoicing and contracting, and so much more. Consider becoming a member for a GO toolkit that makes volatility a fear from the past.
