2022 saw significant environmental certificates growth in volume, greater complexity and much higher GO prices due to a host of factors including geopolitics and stronger commitment to reaching emissions reduction targets.
This article looks back at what happened in 2022 and provides a preview of what’s likely to come in 2023.
In early 2022, in conjunction with x-markets consulting, CerQlar published a whitepaper predicting strong growth. In fact, growth exceeded our expectations!
High prices and volatility make GOs a priority
GO prices increased 10-fold (at the peak), putting a spotlight on the certificates. High prices plus volatility clearly impacted GO portfolio performance.
As portfolio values rapidly grew, it became evident to the market that active daily and intraday position management is a must-have.
Geopolitics spur renewed commitment
Geopolitics and the common decision to focus on REPowerEU acted as a catalyst for action. However, many countries across the European Union (EU) are doing far more to reach climate goals than what’s set out in the plan. They’re supercharging their commitments and proactively searching for ways to further increase renewable energy output.
Legislative changes make it easier
Significant changes were made to legislation to enable renewable energy projects to be implemented far more quickly than before. New legislations from 2022 in the EU and member states allow for faster realization with simplified and accelerated approval processes. One concern remains. Despite many positive developments, long production timelines, in part caused by ongoing supply chain problems, are slowing projects down. In 2023, the market must actively search for ways to speed up implementation.
Fuel disclosure gains traction
As we predicted, a mandatory full fuel mix disclosure is gaining momentum across the continent. These regulations require certification of all sources of consumed electricity, including nuclear and fossil fuels. This expansion of transparency requirements into other energy sources, like oil and coal, will likely add a considerable number of new certificates.
In total, the most ambitious scenario that we included in the predicted growth scenarios in our Q2 whitepaper looks highly likely. We forecast more than 8 billion certificates in 2030.
Technology is in focus
At virtually every conference we attended in 2022, technology was on the agenda, for example data interfaces to registries (API) and straight-through-processing (STP) within a companies’ IT platform.
Across the spectrum, all types of market participants are looking for a robust and easy to handle process to cope with growth, to avoid errors with minimum additional effort and to assure a permanent and intelligent monitoring.
Especially when it comes to the management of open forward positions, it is important for GO businesses to get more transparency in real-time and further enhance risk management solutions to avoid financial and reputational damage.
Anecdotally in interviews we conducted, the need was seen and now confirmed by every market player to whom we spoke.
What is expected for 2023
The growth rate we predicted for GOs is feasible – and it’s becoming even more likely now, given the developments the market saw in 2022.
As can be seen in the graph below, the GO market is a multi-billion Euro market already, and will likely increase in value to more than EUR 130 Billion by 2030.
It is critical for market participants to actively manage their exposure and risks.Even medium-sized buyers and sellers, have to handle significant portfolio value and deal with much higher market volatility.
Time for action
The developments in the GO markets have been significant in 2022. GiIven the growing worldwide commitment to reducing carbon emissions, the future for the GO market will be busy. It’s important that key stakeholders in GO businesses understand the backdrop, the monetary significance of GOs and take action to increase transparency and control.
Our first whitepaper predicted this rapid growth and highlighted the need for technology to lay a strong foundation for efficiency, transparency, and control. In 2023 we will release more research with updated scenarios and predictions and will measure the significant progress the industry has made.
Cheers to a strong 2023!
