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Brexit and the effect on the GO market

Friday, 08 January 2021

Renewable electricity Guarantees of Origin (GOs) are a commodity which is traded between the EU and the UK. This article looks at some of the effects of Brexit on such GO transactions.

Update: 26 April 2021 - Greenfact has an analysis article regarding Brexit specific to REGOs available to our subscribers here.

Official statements relating to GOs

Trade and cooperation agreement

The EU - UK Trade and Cooperation Agreement was ratified on 30 December 2020, and has been in force since 1 January 2020.

While physical electricity trading is explicitly mentioned in the agreement, including details on interconnectors and day-ahead markets, no similar mention of Guarantees of Origin or slightly broader, energy attribute certificates (EAC) is noted.

The agreement does affirm the need to support renewable energy, continued cooperation in developing offshore wind assets as well as specifications and standards.

EC stakeholder statement July 2020

The European Commission (EC) have stated that from 1 Jan 2021 onwards Guarantees of Origin from the UK (namely REGOs or Renewable Energy Guarantees of Origin) will no longer be recognised by member states.

Ofgem (UK) statements

The adminstrator of the UK REGO scheme, Ofgem (Office of gas and electricity markets) has stated that they will still be accepting GOs from EU member states from 1 January 2021 onwards.

However, they intend to review this arrangement and will likely reciprocate with regards to REGO acceptance in the EU.

EU/UK GO transactions statistics

The data for this section was taken from the AIB Ex-Domain Cancellation (EDC) statistics and pertain to Q2 2019 to Q1 2020 inclusive (this corresponds to a reporting period in the UK).

UK GO (REGO) exports

For the 2019-20 period the UK exported (or cancelled on behalf of another country) approximately 7.45 TWh of REGOs. Spain (4.2 TWh) and The Netherlands (2.1 TWh) accounted for more than 85% of this demand. The largest non-AIB demand came from Poland, at 45 GWh.

This amount is significantly lower than the period prior (Q2 2018 to Q1 2019 inclusive) where 16.4 TWh of REGOs were exported.

EU GO cancellations for UK clients

For 2019-20, the UK imported 47.2 TWh of GOs from European countries. Norwegian GOs accounted for nearly 88% of all EDCs to the UK. Denmark and Netherlands accounted for more than 2 TWh each.

This amount is more than 50% higher than 2018-19, where 30.4 TWh GOs were imported.

Usage of GOs in the UK

EU GOs have three different applications in the UK, which are detailed by Ofgem but are described briefly below.

Fuel mix disclosure (FMD)
This is the standard use for all GOs, where an electricity supplier retires the GOs for their customers who wish to support green electricity.

Feed in Tariff (FiT)
This scheme is closed to new entrants, but support is still available for existing applicants. The tariff is funded by electricity suppliers, the amount which they have pay is determined in a process known as levelisation. Generally, the payments increase with electricity supplied to customers.

However, electricity which suppliers source from the EU can be exempted provided it is covered by the corresponding GO.

Contracts for Difference (CfD)
This scheme is intended to support investment low carbon electricity generation. Essentially it amounts to the UK government guaranteeing an electricity price for would-be investors.

Similar to the FiT scheme, it is funded by electricity suppliers although it is the Low Carbon Contracts Company which is responsible for setting the amounts the suppliers need to pay. Again, it is possible to use EU GOs to identify 'green electricity' which can be excluded from supply volumes, reducing payment obligations.

Note - all EU GOs imported are used for FMD, where as those GOs also used for FiT and/or CfD exemptions must meet additional criteria.

What to expect


Based on the EDC statistics, it appears EU countries have already acted to reduce their import of REGOs prior to the end of the Brexit transition period. While Spain appeared to import a significant amount of REGOs, it is relatively small compared to AIB cancellations (3.4 TWh REGO, 167.7 TWh GO for 2019-20).

Furthermore, the effective withdrawal of REGOs from the EU market will be offset by newer AIB entrants (such as Greece and Portugal) with net GO exports.

There appears to be no real changes in UK GO import activity to date. Since the UK has opted to extend eligibility of EU GOs transactions have not seen a drop-off, despite the uncertainty associated with how long this arrangement will continue.

If the UK does reciprocate and eventually stop accepting EU GOs, this would lead to a significant shortfall in demand. For the 2019-20, the total AIB cancellations were 740 GWh - on this basis the UK accounts for 5% of the GO market. This has significant implications for Norway, who account for most of the GO export to the UK.

When looking at fuel mix disclosure which accounts for all GO usage, the AIB residual mix statistics for 2019 suggest that 123 TWh of renewable generation in the UK was backed by green certificates. Given the previous figures for UK imports, approximately one third of the green certificates were EU GOs. Any changes in eligibility would have large consequences for the UK market.


REGOs no longer being valid in the EU should lead to an increase in local EU GO prices, but given the low export levels from the UK it is unclear whether a price rise would be significant.

Again, if the UK decides to no longer accept EU GOs the value of REGOs is likely to rise significantly.

The higher value GOs imported into UK are those eligible for CfD and FiT exemptions:

For the year 2020-21 (Compliance Period 19), the discounts for GOs range from 15 - 50 p in comparison to REGOs which qualify for similar exemptions, amounting to a premium of 20% for REGO products. (refer to our UK add-on page)

However, the issue is complicated by the fact that suppliers can opt in to payments for the two schemes rather than source GOs, which would cap the price of CfD/FiT exempt REGOs.

Other changes

The trades and cooperation agreement states that trade on goods between the EU and UK will remain duty free with some exceptions; GOs do not appear to be an exception.

As GOs from the EU coming to the UK will now be considered overseas imports, VAT (Value Added Tax) will have to be paid by the importing party to the UK HMRC (Her Majesty's Revenue and Customs - the national tax collection body). However, early indications are that the UK VAT rate is unlikely to change given the importance as a revenue raising tool. The net VAT amounts payable by any parties involved in the supply chain for GOs will unlikely change.

However, there may be additional administrative burden due to customs now being involved. This may indirectly affect the cost of importing GOs or discourage GO importers, particularly smaller outfits, from entering the market.

Sentiment from market players

Greenfact has reached out to a number of market players involved in EU-UK trade. The uncertainty around the long term eligibility of EU GOs in the UK appears to be slowing activity, with a bearish outlook such imports into the UK.

Conversely, traders are bullish on REGOs, with competition from EU GOs possibly being eliminated. Even without restrictions on imports, there are concerns about the viability of CfD/FiT EU-GOs, given that they must be accompanied by suitable interconnector capacity, with associated costs being unclear.


While UK GOs have effectively been ruled out for usage in the EU, the effect on the overall EU market is expected to be minimal given the small volume exported from the UK.

In the interim while EU GOs are still valid for use in the UK, there is expected to be some administrative burden for traders. However, large changes in activity or prices are unexpected due to Brexit with current arrangements.

A changes the validity of EU GOs for use in the UK would be expected to raise the value of the domestic REGOs and could lower the value of EU GOs, in particular Norwegian Hydro. However, there still remains much uncertainty as to when and if such a decision.

Disclaimer: This article is based on the author's interpretation of Brexit arrangements, and should not be considered as investment or trading advice.

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