It had to happen. The price hike that started after the summer was running too fast. Speculation itself became uncomfortable with the proportions reached. The “Any AIB connected renewable Guarantee of Origin (GO)” for the current year of production 2022 almost reached the ten Euro mark on 2nd December. We actually went from €5.95 to €9.75 per GO in only one month. The exaggeration was obvious to everyone.
So it turned. The market wished for a price correction in order to acquire stability. We must say that this correction has arrived, but not the stability: in just a few days into the month of December, the market is back at €5.75 per GO (AIB renewable connected 2022). As prices were increasing too fast just a couple of weeks ago, now this drop looks like a crash.
The volumes traded are small; smaller than on the way up. Does that mean that the market is still long? What happened with the larger than expected demand, coming among other buyers from the corporate world?
There is a problem of shrunk credit lists. Since the extreme inflation in energy prices, the GOs trading suffers to find matching counterparties as the energy companies experience difficulties to trust each other financially. So when a price starts moving, it goes faster due to the lack of pairing alternatives.
Another issue in the market of GOs is the difficult estimation of the Demand. Unlike a lot of other commodities where the demand fluctuates according to the economic or sectorial expansions and shrinking, the demand for GOs could become the whole economy. As we are very far from this today, we can observe more and more buyers who act voluntarily, in some regions and not others, with specific timing and targets. Such data is strategic and often hidden. As there is no doubt that the demand has increased especially in the corporate world, it is very hard to approach a reliable number to measure it.
We don’t know today where this price correction is going to find a floor. But we must hope that the market of GOs will gain maturity after this roller-coaster of the last weeks.
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