Friday, 02 December 2022
Trading activity registered with our data partners increased by a third in November when compared to October, with the number of transactions and registered volumes increasing by 37% and 4% respectively.
As for trade activity for 2022 production GO, they accounted for a 33.11% share, down by 1.44% points when compared to the previous month. In the forward markets, the recorded share of forward-year production trades was 60.93% (-1.12% points compared to October activity). 51.66% of the trading activity in November (-12.80% points compared to October) was for short-term buyer interests (2021-2023), while demand continued to increase further along the curve.
Monthly comparison of different CY shares in trades and volumes
In terms of CY traded, forward years' share decreased by 1.12% points, from 62.05 to 60.93%. This is mainly due to a slightly higher focus on the previous year vintage year. 2025 vintage trades also substantially increased, as last month.
As for the volumes that were traded during November 2022, CY (2022) and CY +2 (2024) shares saw major decreases: they respectively reached 26.75% (-7.64% points) and 20.77% (-3.85% points) of the traded volumes. As for next year's vintage, the volumes traded increased from a 26.51% share of the volumes to 31.06%.
In November, average traded prices for GO products across all vintage years increased, with the highest price increase witnessed for 2022 Nordic Wind production (+335.65 Eurocents/MWh, +66.13%): it ended November at more than 843 Eurocents/MWh on average. Its Nordic Hydro counterpart went through a very good month in November also, with a 302.78 Eurocents/MWh increase, equal to +60.10%.
But the highest increase in percentage was undoubtedly for Nordic Hydro 2021, which increased by 74.01% (+244.05 Eurocents), from 329.75 to 573.8 Eurocents/MWh!
EU Wind 2023, as in October, recorded a sharp increase, up by 306.14 Eurocents/MWh, or +60.40%.
The cheapest product this month is Nordic Hydro 2026, with a price of on average 327 Eurocents/MWh. The highest being Nordic Wind 2022.
Spread between production years
The largest spread is now between 2021 and 2022 production years with the largest spread witnessed with the Nordic Wind product (306.19 Eurocents). Overall, the highest spreads are seen between 2021 and 2022 products, as shown by the table above.
The spreads between other Nordic Hydro vintage years are also still high, especially between the 2023 and 2024 production years (-263 Eurocents, versus around 150 last month!).
Thus, all spreads between 2021 and 2022 are positive (they are the only ones positive except for EU Wind 22/23), indicating a constant in the focus on 2022 products. Unsurprisingly, all forward years are at lower prices (compared to their CY -1).
Technological premium/discount compared to Nordic Hydro
The spread between Nordic Hydro 2022 and EU Hydro 2022 production decreased, from around 0 to -24 Eurocents almost.
The Nordic Wind 2022 vintage, used to be traded at a big premium (about 30 Eurocents) to their Nordic Hydro product counterpart, and this premium melted to a small 3.7 Eurocents last month. It spiked this month and went back to its normal level, around 37 Eurocents above Nordic Hydro.
The biggest spreads are witnessed with EU Biomass (unsurprisingly), trading a big discount compared to Nordic Hydro products.
As can be seen from the hydro reservoir levels in the Nordics (slide 1), Iberia ones (slide 2) are still below median levels (and far from recovering for the Iberian Peninsula), and slightly above median levels in Central Western Europe (slide 3). What is to keep in mind is that only the CWE region is the only of the three expected to have levels above median levels in the weeks to come. As for the Iberian Peninsula, levels are currently around 34% and are forecasted to tremendously increase in the next weeks, exceeding 2021 levels and getting closer to median levels.
In November, national GO auctions occurred in France, Hungary and Slovakia. The overview of historical auction prices for different countries is given below:
France
EEX held the 38th auction for Guarantees of Origin (GOs), with the book opening on 9 November 2022 and order matching on 16 November 2022 for August 2022 production GOs.
A total of 3 215 TWh of supported RES-E GOs were auctioned, 1.3% above the previous auctioned volume and thus significantly lower than the auctions in the first quarter this year. As usual, all offered volumes were sold (99.99% to be precise, 1 Solar MWh was not sold). Solar GOs represented around 46% of the total auctioned volume, with a 14% increase in auctioned volumes compared to the previous auction. Hydro, Wind, and Thermal GOs auctioned volumes moved by -28%, -11%, and +14%, respectively.
Read more here
Hungary
HUPX (Hungarian Power Exchange Ltd), the appointed operator for the Hungarian GOs market by MEKH (Hungarian Energy & Utilities Regulatory Agency), held its third pan-European auction for Guarantees of Origin (GOs) on 22 November 2022. This is the fifth such auction in history offering both National GOs (produced from November 2021 to January 2022) and EECS GOs (produced from January to August 2022).
Read more here
Slovakia
OKTE held the ninth electronic auction of Guarantees of Origin (GOs) on 7 November, with eight market participants. In total, around 282 GWh of GOs from subsidized renewable energy were sold, and auction revenues will be used to decrease the share of RES-support costs paid by the final consumers.
The GOs were sold in two lots, consisting of around 48 GWh from Hydro and 233 GWh from Solar. GOs for both technologies were produced during Q3 2022, with a starting bid at 1.45 €/MWh, which was 50 Eurocents higher than the previous auction.
Read more here
How many GOs are going to be issued in 2022? What about hydro GOs given the summer drought?
These are questions we ask ourselves very often when looking at the GO market and its supply side. For this reason, amongst others, we developed a forecast model for an End Of the Year (EOY) Balance for GOs issued for main renewable technologies (hydro, wind and solar).
What is the End Of the Year Balance?
First and foremost, the complete and detailed methodology will be displayed in a separate article next week, alongside country-level issuances projection statistics.
By taking production statistics from the AIB from January to May (included) 2022 as "fixed statistics", we project (using econometrical models) what could be the final issuances for every month of the year, based on previous years' issuances trends per country and technology, as well as generation data.
This is displayed in the table below. What can be taken from this?
Hydro issuances, we forecast, will be almost 74 TWh lower than in 2021 while wind and solar GO supply increased by 34 TWh and 31 TWh respectively in comparison to 2021. The overall GO supply (for these three technologies only) in the end of 2022 we estimate around 645 TWh, slightly lower than last year.
These figures display our current best approximation for the GO supply of year 2022 for hydro, wind and PV technology in the EECS area. It does not include all AIB countries yet (the list is below the graphs and table) and all technologies.
Yes, all of this needs to be improved. But, in our view, it already provides an interesting snapshot that could be valuable to you, users of Greenfact.
Effort sharing regulation
As part of the Fitfor55 package, on 8 November, the Council and the European Parliament reached a provisional political agreement on the Effort Sharing Regulation, fixing a stronger emission reduction targeting the building, transport, and agriculture sectors at 40% (vs. 29%presently legally in place) by 2030 compared to the 2005 levels. These sectors are not covered by the EU ETS and are currently responsible for 60% of EU greenhouse gases emissions.
National energy and climate action plans
On 15 November, the Commission published an implementing regulation regarding the integrated national energy and climate progress reports. The plans and progress reports are submitted to the Commission by the EU by Member States so that the institution can track whether the European bloc is on track to achieving its climate and energy targets. The current plans were submitted in 2019 for the period of 2020 – 2030; Member States are expected to submit their draft updated national energy and climate plans by 30 June 2030 and final ones by 30 June 2024. It is likely that given the constantly evolving legislative landscape, including the revision of the Renewable Energy Directive and adoption of the Fitfor55 package, the national plans will need to undergo considerable changes. This in turn, will affect EU countries renewable energy policies in a more ambitious direction.
Emergency measures
This month saw the announcement of the European Commission’s third emergency package to tackle the energy crisis, this time to boost renewables deployment. The proposal focusses on removing administrative barriers and consists of four measures, including faster permitting times for solar installations, heat pumps and repowering of renewable energy plants, as well as the introduction of the overriding public interest principle. On 24 November, the European Council reached informal agreement on the Commission’s proposal with some changes, including regulation’s application to the ongoing permit requests and the extension of application period beyond one year to 18 months with possibility for prolongation (in December 2023). Adoption is expected at the next Extraordinary Energy Council Meeting on 13 December. The package will effectively unlock around 100 GW of wind and solar projects currently stuck in permitting procedures and will help balance out the negative effects on renewable energy supply from the market revenue cap, likely easing the upward pressure on GO prices medium term. Read more about the market impact in our analysis.
The recovery one could have expected on the hydro reservoir's side can only be witnessed in the Iberian Peninsula so far, a region that had very low if not of high concern levels in the previous weeks/months.
Nonetheless, these levels and their movements cannot solely hold the rationale for the latest prices' developments. November was indeed another very bullish month, in fact, the biggest of the year so far (let's see what December can offer in terms of 'presents'). Prices jumped on average by 286 Eurocents for 2022 production, of 222 Eurocents for 2023 production. The activity also picked up during this month of November and we can expect it to remain at quite good levels even if finding volumes seems to be the last hard task of this year for many.
As per prices, we do not expect them to suddenly stop yes, but at some point, they will have to come back to more acceptable, reasonable levels. No one knows exactly when this will happen, but it will.
Should you have remarks, suggestions and/or questions, do not hesitate to contact me at leo@greenfact.com
3rd HUPX Pan-European auction - Major increases for EECS GOs by Christos Mavrogiannis