Bruno Brunetti, Head of low-carbon electricity analytics at S&P Global Commodity Insights, discusses the increasing demand for guarantees of origin (GOs) and the potential rise in prices. The podcast explores the dynamics of supply and demand in the market, the driving factors behind the GEO price, the relationship between UK and EU GOs, and the hotspots for growth in the renewable energy market.
Growing demand for guarantees of origin (GO) driven by EU directives and technical criteria for renewable energy purchases could drive up prices in the market.
The link between guarantees of origin (GO) and power purchase agreements (PPAs) creates a more stable business case for renewable developers as demand increases.
Deep dives
Outlook for Guarantees of Origin and PPA Markets
The prices of guarantees of origin (GEOs) are an important factor in investment decisions for renewable facilities and PPA deals in Europe. Currently trading at around four Euros per megawatt hour, the market is balanced with growing supply and weaker demand from corporates. However, medium-term trends suggest GEO prices could reach six Euros as demand is driven by commitments to EU directives and updated technical criteria for renewable energy purchases.
Impact of Technical Criteria and Corporate Sustainability Directive on GEOs
The introduction of technical criteria for the I-Ree 100 and the corporate sustainability directive will shift GEO demand from hydro to wind and solar. This will create additional demand for certificates and PPAs, as more companies report their commitment to renewable energy. The I-Ree 100 criteria focuses on corporate purchases of renewable energy, leading to increased demand. While some concerns have been raised about complexity and costs, the overall trend is towards more integrity and accountability in the market.
Connection Between GEOs and Power Purchase Agreements (PPAs)
GEO prices are becoming an increasingly important component of PPAs. As renewable capital prices decrease, GEOs account for a larger portion of merchant revenues for renewable developers. The stability of GEO prices offers a valuable revenue stream, while PPAs provide stability in procurement costs. The link between GEOs and PPAs is reinforced by the latest version of the Renewable Energy Directive, creating a more stable business case for PPAs as demand increases.
Corporate demand for guarantees of origin (GO) is hotting up and prices could soon be on the rise. Listen to a discussion on the growing importance of GOs not just for generators of electricity but also for a wider range of companies. Could the GO price become higher than the wholesale electricity price?
Host: Snjólfur Richard Sverrisson, Editor-in-Chief, Montel
Guest: Bruno Brunetti, Head of low-carbon electricity analytics, S&P Global Commodity Insights.
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