(Montel) Prices of guarantees of origin (GOs) soared to record highs this summer on the back of strong demand growth and tightening of supply amid a dry summer across Europe, market participants told Montel on Tuesday.
GOs for Nordic hydropower produced in 2018, an industry benchmark, were last seen at an all-time high of EUR 1.65/MWh, with 2019 production trading slightly higher and also at a peak of EUR 1.75/MWh, according to Cleanworld, which brokered 108 TWh of GOs in the first six months of the year.
“Only one year ago the price was at EUR 0.29/MWh but we have seen a very strong price rise since Q4 last year fuelled by strong demand,” said Cleanworld CEO Robin Timoteo, referring to GOs – certificates bought by consumers that want to verify their power use comes from renewable sources.
In some sub-markets, like for example GOs from Dutch wind and solar power, prices were higher as local consumers increasingly wanting to be seen to support local green initiatives, he said.
“Global initiatives [to boost renewables consumption] are setting the agenda in boardrooms across the world. This has now started to affect demand for GOs for real,” said Jan Atle Liodden, renewables trader at Norwegian utility Agder Energi.
Demand for GOs, which have risen by 15% annually since 2011, was up another 10% year on year in the January-June period, said Liodden, referring to figures from the Association of Issuing Bodies, a Brussels-based body that organises the system.
But supply had also tightened amid an unusually dry, warm summer, hitting hydropower reservoir levels both in the Nordic region and across Europe, said market participants.
“Even if we get a change to more normal or wetter than normal weather, the reservoir levels are at such low levels now that it will likely affect production well into 2019. This, together with strong demand growth and a strengthening of the GO system in the EU’s clean energy package, makes it hard to foresee a considerable price fall short term,” said Liodden.
EU lawmakers agreed
in June, as part of the revised renewables directive, that electricity suppliers “should” use GOs to disclose the share of renewables in their energy mix, strengthening its role as a major policy tool.
Supply had also been negatively affected by the signing of several long-term power purchase agreements from new wind and solar power facilities, which had prevented GOs from coming to the ordinary market, said Liodden.