Spread narrows between old and new vintage renewables carbon credits: sources

The spread between old and new vintage renewables credits have narrowed over the last few weeks, with some buyers bidding one price for both old and new vintage credits, sources told S&P Global Commodity Insights.

On June 1, a bid for 120,000 mt of VCS-certified Renewable Energy (Hydro) credits was heard at $4.50/mtCO2e for vintage 2010 credits from Turkey, S&P Global reported earlier. On the same day, VCS certified CORSIA eligible and CORSIA aligned Hydro credits for 2020-2021 vintages were offered at $5.89/mtCO2e from Turkey.

The prices indicated a narrowing spread between bids for old vintages and offers for new vintage credits despite the CORSIA eligibility premium.

On May 23, a bid for VCS certified non-CORSIA eligible Renewable Energy (Wind) credits was heard at $5/mtCO2e for vintage 2010+ credits. The bid was a blanket price for all vintages above 2010 with the specification that the credits are not sourced from either India or China.

A broker told S&P Global that as overall prices of renewables had dropped in the last few months, buyers started to look for old vintage credits expecting prices to have dropped even further. But the resulting increased demand pushed up prices of the older vintage credits and narrowed the spread between the new ones.

A second broker, who was receiving common bids for old and new vintage credits, was surprised at the development and said they were receiving combined bids for 2010+ vintages with some buyers least concerned about the specific vintage.

Meanwhile, a developer of renewables credits said, "Because of the overall drop in prices, there are few trades happening in the market overall. Prices of earlier expensive new vintage have decreased, and older vintage prices have increased as buyers have been buying them because they are cheaper. So, the gap has reduced."

Another source said that because of the spate of retirements of old vintage credits last year, there were not too many old vintage credits left in the market. The reduced supply of old vintage credits had pushed up their prices. "It is easier to sell older vintage credits at higher prices these days, especially if they are non-hydro," said the developer.

While some market participants were not seeing a consistent trend in the renewables space to identity a narrowing spread. "The market is fragmented with random project specific trades happening at varied levels between $3.50 - $5.50/mtCO2e," said a source.