The renewable energy market in Europe broke two barriers in 2018; with supply of Guarantees of Origin nearly reaching 600 TWh – and demand surpassing 500 TWh, according to ECOHZ, commenting on new statistics from the Association of Issuing Bodies (AIB). The European renewable energy market with Guarantees of Origin continued to grow and seemed like a market more balanced and mature than earlier.
Comparing the first half year supply and demand of Guarantees of Origin for 2019 with comparable figures in 2018, shows supply is growing by 14 TWh while demand grew significantly faster, with 60 TWh.
The Netherlands has over the years installed a large amount of new wind and solar capacity and this is now impacting the volume of Guarantees of Origin issued during H1 2019. An increase of 9 TWh is almost a doubling compared to issued volumes in H1 2018.
France had a 5 TWh increase in issued volumes from H1 2018 to H1 2019 as a result of many more power plants now being able to issue Guarantees of Origin after ended feed-in-tariff periods. The demand still increased faster and grew with 9 TWh.
Dry weather in Norway during the first half of 2019 led to lower hydro power production than normal. This again is likely to further push down Norway’s share of issued Guarantees of Origin in Europe, from a 22% share in 2018 and 27% share in 2017. The Norwegian share of the total production mix has been declining the last year showing evidence of a more robust and diversified European market.
Wind is the fastest growing technology
Hydropower is still the most common technology of issued Guarantees of Origin in Europe with a supply share of 56% in 2018, compared to 64% in 2017 – but changes are occurring rapidly due to increased availability of solar and wind.
New countries will push the market forward
AIB currently has 21 member countries. Portugal and Greece are next in line, and have indicated interest in joining the AIB, and its electronic hub. Even more countries are likely to join the AIB in 2020 and will all-in-all likely bring more supply to the European renewable energy market. In parallel ECOHZ also expects a growing demand for renewable electricity from corporations and households, pushing the market to new heights.
Guarantees of Origin prices
During 2018, Guarantees of Origin prices were at historic high levels – with prices trading at EUR 1.0–2.5 for standard qualities.The combination of steady growth in demand and higher prices seemed to be a wake-up call for many stakeholders, consumers and policy makers. These price levels combined with increased sold volumes resulted in significantly higher market value. How to capture these revenue streams and ensure reinvestments in new renewable capacity became a hot topic. The market has now adjusted, and currently Guarantees of Origin 2019 wind wholesale price is EUR 0.40 – 0.50 and for 2020 EUR 0.75 – 0.85 per MWh.
According to ECOHZ Europe will need 500 TWh of annual renewable power from 2020 to 2030, requiring a lot of investments and initiatives. The cost of renewable energy is still falling, but at the same time the prevalence of national subsidy and support schemes are on the decline. Guarantees of Origin are set to fill the gap for investors, and ECOHZ therefore believes higher prices will be the norm, and with a price collapse not a likely scenario. With a 2020 price around EUR 1.0, slowly increasing toward EUR 2.0-2.5 in 2030, a cash flow of EUR 20 billion will be available to be invested in new renewables.
More and more businesses commit to renewable energy
The corporate sector is the main driver for renewable electricity although households and organisations also contribute to the market growth. An increasing number of businesses see renewable energy as necessary for future competitiveness – to attract customers, employees and investors. Several sustainability initiatives support renewable ambitions, but the most important is RE100. RE100 is a global initiative of over 190 influential corporates committed to consume 100% renewable electricity. The members purchase a huge number of Guarantees of Origin for their operations in Europe.