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Navigating Volatility in Booming European Renewable Markets

Published Date
Author Andrew Cenci

In the past, we’ve reported on how increasing commitments from corporations to procure renewable energy have led to the emergence of new instruments for meeting these goals. Driven in part by corporate demand, renewable energy certification programs such as the I-REC Standard, Green-e©, the Association of Issuing Bodies (AIB) in Europe, GoldPower©, and TIGRs have emerged as solutions for international renewable energy transactions. 

In an interesting turn of events, the rapid uptake of corporate commitments that helped to drive the development of certificate markets has led to an all-time high demand for renewable energy products. As a result, availability and affordability of certificates in markets across the globe have become much more volatile. Bloomberg New Energy Finance found that demand for renewable electricity by companies in the RE100 vastly outstrips the current and projected global supply, meaning the issues of availability and affordability will only intensify. 

In part one of this series, we discussed how to navigate the U.S. voluntary REC market’s uncharacteristically illiquid supply. Similarly, Guarantee of Origin (GO) prices in Europe have increased quite dramatically over the last 6 months. According to the European Association of Issuing Bodies (AIB), GOs canceled in 2018 halfway through the year have already surpassed the level of the whole of 2017, proof that the GO market is booming and that there is no near end in sight to the price spikes buyers are facing. These changes leave many corporate buyers challenged for options to continue to achieve their European renewable energy and carbon reduction goals.

Although the challenges are similar between the U.S. and European certificate markets, strategies companies can use to alleviate the pressure differ across geographies. 

Recommendations for Europe

  • Purchase certificates in smaller tranches rather than all at once
  • Look for opportunistic purchasing moments – timing in the market can be key for price optimization
  • Explore both direct and virtual power purchase agreement (PPA) opportunities 
  • Consider green tariff purchases from local utilities 
  • Seek clean power products from countries that have lower cost and apply to your usage locations

Some of these options are easy changes to make in your procurement process, others require strategic thinking and complex internal and external negotiations. The key to making the right purchasing decision is to vet all renewable opportunities carefully to decide on the strategy that makes the most sense to achieve your company’s unique goals. 

Schneider Electric, your sustainability and renewable energy partner, is also your peer. We’re members of the RE100 and have committed to the Science-Based Targets Initiative. We have a similar load profile, goals, and challenges to many of our customers and are tackling the same problems alongside you. So, describing these challenges and recommendations for clients is not just professional. To us, it is personal. 

Today, our company is looking at all solutions, from VPPAs to onsite to longer-term EAC commitments, because every passing day means more exposure to volatile markets. We share with you our strategy not to suggest that every customer should travel this same path, but because we are in this together. And now more than ever, collaboration, engagement and knowledge-sharing are key.

For more information or guidance on best practice for buying renewable certificates and alternative solutions such as PPAs, reach out to speak with our energy experts.

 

Contributed By: Aran Rice, Vice President Strategic Renewables, Schneider Electric Energy & Sustainability Services