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European Q3 renewable energy certificates demand grows faster than supply

Highlights

GO supply more than 120 TWh greater than demand in Q3

Demand grows faster than supply year on year

High GO prices slowed demand in September

European Guarantees of Origin supply outweighed demand by more than 60 percentage points in the third quarter of 2021, AIB data showed.

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Transaction-based issuance of all technologies GOs, or supply, totaled 195 TWh during the quarter, while transaction-based cancellation, or demand, totaled 71.5 TWh. Although supply was greater than demand in the quarter, the demand for GOs has increased at a faster pace, compared with the same period a year ago, the data showed.

Hydro, wind, solar GOs

Hydro GOs supply continued to dominate the market in Q3 with around 108 TWh, almost unchanged from the same period a year ago, while the demand for hydro GOs reached 37 TWh, more than 6 TWh higher than a year ago. The supply was higher than Q3 2019, even with hydro stocks in deficit in Europe, particularly in the Nordics region, as more installed capacity was added across the year.

Wind GOs had the second highest supply, with around 36 TWh of GOs issued in Q3. The level was slightly lower than 2020 and 2019, due to low wind speeds and production in Europe in 2021. The demand for wind GOs grew at a faster pace than supply, compared with the same period a year ago. Wind GOs demand was more than 15 TWh in Q3, up about 17% from a year ago. The demand for wind GOs in Q3 2019 was at 9 TWh.

The sought after solar GOs had supply almost 18% higher than Q3 2020, with 14 TWh of GOs issued this year. The claim for deep-green technologies also pushed demand for solar GOs, with consumption 20% higher than the same period a year ago.

Biomass saw small growth in supply, with around 15 TWh of GOs issued, while demand was almost unchanged from Q3 2020, supporting buyers' appetite for deep-green technologies.

Other technologies, such as geothermal and fossil GOs saw a decline in supply, while demand grew 13% and 26%, respectively, with most fossil GOs accounting for activities around natural gas in the Netherlands, a country that implemented the energy-mix full-disclosure system using GOs earlier this year.

GO prices soar

GO prices reached all-time highs late-September, when the benchmark Nordic Hydro 2021 was trading at Eur1.11/MWh Sept. 30, according to S&P Global Platts, tracking a period of reduced hydro and wind power production in Europe. The prices were more than 30% higher than Sept. 20, and almost 60% higher than hydro and wind GOs early-July.

The prices jumped in response to the end of the European holiday season, as trading activity picked up, increasing liquidity amid low supply. Other technologies followed the trend.

Market sources expect an ever-growing interest in renewable energy certificates, as energy transition picks up pace and governments start imposing climate targets.

AIB data showed more countries adopting the AIB/GO scheme, with Belgium Wallonia becoming an AIB member Nov. 10, while Hungary, Montenegro, Bulgaria, and Bosnia Herzegovina slated to join next year.