The market of Guarantees of Origin (GOs) has felt the consequences of the intensity lived by the other energy markets in Europe. Record high prices in most commodities have tighten the trader’s credit lists. Despite some very volatile markets and theoretically strong trading opportunities, some energy products became untradable. Holding a position in Slovenian power, for instance, could simply mean that you will keep that position until delivery. Traders who navigate in these markets might be on a “make of brake” mode.
The GOs, on the other hand, experienced limited volatility, probably because the traders of such certificates also manage other energy portfolios which are much more exposed to the current market volatility. Their attention was logically drawn towards the higher risk and rewarded commodities. On the other hand, the GO traded volumes haven’t suffered the fate of those other products: a liquidity crash and a large reduction of their counterparty list. The GO seems to be a safe product from that point of view, benefitting from its lower exposure at times.
So here comes the inevitable question: are we in a similar scenario than last summer? Is there a seasonality that sees the prices of GOs stabilise during the holiday season before shooting upwards once facing the beginning of winter? The level of hydraulic storages typically has the right to answer first: they are low. They have been low in the Nordics as well as in the Alps for many months now. Should to next price move be upward, then?
The market now has shown its resilience in times of geopolitical instability. “What can make the prices go down in the coming weeks?” is probably the right question.