European renewable certificates hit all-time high amid hydropower shortage


The market for European renewable energy guarantees of origin (GOs) saw prices breaking the EUR 6/MWh mark due to ongoing shortage of hydropower and strong demand from corporate buyers.

Platts, part of S&P Global Commodity Insights, assessed Nordic hydro 2022, the most actively traded GO certificate, at a new all-time high EUR 6.08/MWh on Oct. 28.

The data showed that the value of GO and others of the same kind, which are tradeable certificates associated with green energy production, has not fallen since early September. As recently as late 2021, GOs were selling for less than EUR 1/MWh.

Severe precipitation deficit across Europe following a summer of drought has been limiting the supply of hydropower GOs, sending prices higher, according to market players.

"There is a lack of hydro all around Europe," one market participant said, adding that production from five major European producers including Austria, France, Italy, Norway, and Sweden could be down by as much as 10% year-on-year. Assuming that shortfall "it will be a lack of supply of around 35 TWh in an 800 TWh market, not counting wind and solar variation," the source said.

While supply was being squeezed, demand from corporate buyers looking to meet their net-zero goals with renewable certificates was growing. The upcoming COP27 UN climate change conference running Nov. 6-18 in Egypt was expected to contribute to the trend and raise the profile of GOs, according to certificate traders.

"For sure demand will increase, a lot of corporates will stress now how committed they are in the net-zero goals. Regardless of the energy crisis, this became a responsibility rather than a nice thing to do," a GO trader said. "I think it will depend on whether granularity is a major topic for them."

The term granularity refers to an industry push to align renewable energy certificate trade frequency with that of the electricity they relate to. Changes could see certificate trading windows of a year or more cut to an hour or even 15 minutes, leading to a big increase in market size

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