After a fast prices drop of all Guarantees of Origin (GO) during the month of December, we worried that a crash would damage the trust in the system of energy tracking that the world is currently using. Very low prices of Energy Attribute Certificates (EAC), the generic name for all certificates for energy tracking, category of which the GOs are the main product, in terms of volumes traded, legitimacy and use.
When dealing with a product that does not have high intrinsic value apart from the cost of producing a unique and verified digital certificate, a surplus of offer can easily mean that the price could struggle finding a floor during its drop. The GO market experienced this back in Q2-2019. The volatility of certificates markets is therefore normally high. For this reason, it is important to have a market with many participants who follow different needs and logics, so that buyers don’t only buy all at the same time, as well as sellers having different supply structures and logics.
This last aspect is what made the difference with the 2019 price crash. Back then, the GO market was mainly dependent on the hydraulic reservoirs in Norway and in the Alps, and most trades where exchanging GOs from hydro sources. However, since 2021, the market has grown a lot and includes a wider variety of energy sources, as well as increasingly more corporate buyers with various timing and reasons to purchase. This last element is probably the most difficult volume to estimate. No one at this stage, can reasonably approach the volume on the demand side because corporations are not disclosing their dealings or agenda. It can be any number with the whole economy as ceiling.
This is why the market managed to absorb the price drop and display its solidity. We consider this as a new positive milestone in the renewable energy world.
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