The market of Guarantees of Origin (GOs) has been there before: a two-year long price drop, then a long questioning about the floor level and a wait for the next bull run. Bull runs in the GOs market depend mostly on three main criteria: the hydrological levels in the Scandinavian reservoirs as well as the Alpine storages, on the evolution of the demand for Energy Attribute Certificates, and on the political framework.
Today, we can say that the first two elements, the demand for GOs and the Hydro levels are met since hydro storages in Norway are low and the demand for GOs keeps growing steadily, year on year. The market has already shown some reactions about this. But how about the political aspect?
The Guarantees of Origin are a political creation: a well thought idea within the European Union that would respect the market based values of the Union for solving challenges, which would help tracking the transfers of energy from producers to consumers, while taking into account the reality of the electricity physical flows, impossible to follow. A well thought process with a great intention: give the chance to consumers to chose where their energy comes from, by forcing their suppliers to acquire their energy from the chosen type of production. Europe had thus created its own accounting system measuring production and consumption of these Guarantees of Origin carried by its Renewable Energy Directives 1, 2 then 3.
The market followed and many companies started trading the GOs, giving a price signal and an incentive for the producers to invest more into renewable energy.
Unfortunately, confusion came at the political level, while the professionals of Energy Attribute Certificates are doing their best to develop the market created by the EU, essential tool for future energy policies. Indeed, too few politicians at the national level or at the European level seem willing to understand the excellent tool of energy accounting they have at their disposal, and well-functioning. It is misunderstood that the GOs system is an accounting system. It should not be voluntary! Also, it should be accounted yearly! More granularity is missing the point and would destroy the necessary liquidity for a well-functioning market. All Megawatt hours (MWh) of electricity produced and consumed should be accounted yearly in order to be able to create good energy policies which don’t cost too much to the taxpayer in subsidies, but instead become the steering tool for a faster clean energy development on the continent.
Instead, due to the lack of Full Consumption Disclosure, politicians left the door open to confusion, in the form of deviation debates about physical traceability, misleading granularity projects, more debt for subsidies, confusing power purchasing agreements, and more. Because of the lack of Full Consumption Disclosure, many interested stakeholders still believe we should try to follow a MWh physically from its production facility to the consumer. Although this is impossible, it is also a mistake. Indeed, such ambition has been given up for a long time by most other markets. Look at Crude Oil, Coal, Gas or even Currencies! Nobody tries to follow a currency or commodity physically back to their source. It makes no sense, as long as the accounting is done properly. Europe has been the leader of Climate Action during the first 20 years of the century, and it deserves to become again so. It is now time to finalise this fundamental project with the embracing of Full Disclosure, without being distracted by contrary commercial interests, which eventually could undermine its sovereignty in the strategic world of Energy.