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European market for renewable power reaches new heights

“The renewable energy market in Europe broke two barriers in 2018; with the supply of Guarantees of Origin nearly reaching 600 TWh – and demand surpassing 500 TWh,” says Tom Lindberg, Managing Director in ECOHZ, commenting on new statistics from the Association of Issuing Bodies (AIB).

Year-on-year market development of Guarantees of Origin from 2002 to 2018. According to ECOHZ, H1 2019 figures from the Association of Issuing Bodies (AIB) show that supply is growing by 14 TWh while demand grew significantly faster, with 60 TWh compared to H1 2018 (graphic courtesy ECOHZ).

According to ECOHZ, comparing Association of Issuing Bodies (AIB) figures of first half-year supply and demand of Guarantees of Origin for 2019 with comparable figures in 2018 shows that supply is growing by 14 TWh while demand grew significantly faster, with 60 TWh.

The European renewable energy market with Guarantees of Origin continued to grow and seemed like a market more balanced and mature than earlier. The surplus gap in 2018 did not widen, and seems likely to diminish in the near future, said Tom Lindberg, Managing Director of ECOHZ.

Norway-headed ECOHZ is an independent renewable electricity supplier sourced from a wide range of sources, regions, and qualities. Renewable electricity is documented by Guarantees of Origin (GO) in Europe, Renewable Energy Certificates (RECs) in North America and International RECs (I-RECs) in a growing number of countries in Asia, Africa, the Middle East, and Latin America.

Record increases in Netherlands and France

The Netherlands has over the years installed a large amount of new wind and solar capacity and this is now impacting the volume of Guarantees of Origin issued during H1 2019. An increase of 9 TWh is almost a doubling compared to issued volumes in H1 2018.

France had a 5 TWh increase in issued volumes from H1 2018 to H1 2019 as a result of many more power plants now being able to issue Guarantees of Origin after ended feed-in-tariff periods. The demand still increased faster and grew by 9 TWh.

Dry weather in Norway during the first half of 2019 led to lower hydropower production than normal. This again is likely to further push down Norway’s share of issued Guarantees of Origin in Europe, from a 22 percent share in 2018 and 27 percent share in 2017.

While hydropower is the technology behind over half the of issued Guarantees of Origin in Europe, there is increased availability from other renewable technologies such as wind, biomass, and geothermal (graphic courtesy ECOHZ). 
While hydropower is the technology behind over half the of issued Guarantees of Origin in Europe, there is increased availability from other renewable technologies such as wind, biomass, and geothermal (graphic courtesy ECOHZ).

New countries will drive the market

The Norwegian share of the total production mix has been declining the last year showing evidence of a more robust and diversified European market.

Hydropower is still the most common technology of issued Guarantees of Origin in Europe with a supply share of 56 percent in 2018, compared to 64 percent in 2017 – but changes are occurring rapidly due to increased availability of solar and wind, Lindberg said.

AIB, the umbrella organisation of national issuers of Guarantees of Origin, currently has 21 member countries. Portugal and Greece are next in line and have indicated interest in joining the AIB, and its electronic hub.

Even more countries are likely to join the AIB in 2020 and will all-in-all likely bring more supply to the European renewable energy market. In parallel we also expect a growing demand for renewable electricity from corporations and households, pushing the market to new heights, said Lindberg.

Guarantees of Origin prices

During 2018, Guarantees of Origin prices were at historic high levels – with prices trading at EUR 1.0–2.5 for standard qualities. The combination of steady growth in demand and higher prices seemed to be a wake-up call for many stakeholders, consumers, and policymakers.

For the sake of the climate, I hope the renewable transition goes fast, and that we are flooded with an abundance of renewable energy. Europe will need 500 TWh of annual renewable power from 2020 to 2030, requiring a lot of investments and initiatives, said Lindberg.

These price levels combined with increased sold volumes resulted in significantly higher market value. How to capture these revenue streams and ensure reinvestments in new renewable capacity became a hot topic. The market has now adjusted, and currently, Guarantees of Origin 2019 wind wholesale price is EUR 0.40 – 0.50 and for 2020 EUR 0.75 – 0.85 per MWh.

The cost of renewable energy is still falling, but at the same time, the prevalence of national subsidy and support schemes are on the decline. Guarantees of Origin are set to fill the gap for investors, and I, therefore, believe higher prices will be the norm, and with a price collapse, not a likely scenario. If we have a 2020 price of around EUR 1.0, slowly increasing toward EUR 2.0-2.5 in 2030, a cash flow of EUR 20 billion will be available to be invested in new renewables, explained Lindberg.

More and more businesses commit to renewable energy

The corporate sector is the main driver for renewable electricity although households and organisations also contribute to market growth. An increasing number of businesses see renewable energy as necessary for future competitiveness – to attract customers, employees, and investors.

Global reporting initiatives and standards like CDP and Greenhouse Gas Protocol form a critical foundation, by requiring Guarantees of Origin to be purchased and used to document any claim of renewable consumption. In addition to this, in 2018 the EU approved a new Renewable Energy Directive (REDII), which included text strengthening the system of Guarantees of Origin toward 2030, said Lindberg.

Several sustainability initiatives support renewable ambitions, but the most important is RE100. RE100 is a global initiative of over 190 influential corporates committed to consuming 100 percent renewable electricity. The members purchase a huge number of Guarantees of Origin for their operations in Europe.

Tom Linberg, Managing Director, ECOHZ (photo courtesy ECOHZ).
“REDII is a milestone, and clearly states that electricity suppliers and
consumers of power shall (read: have to) use Guarantees of Origin to
document and report renewable electricity claims in Europe” said
Tom Lindberg (photo courtesy ECOHZ).

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