GO local, think global

The Montel energy podcast – market insights from people in the know. In this week’s episode, we discuss the latest developments in the guarantee of origin market and the outlook for prices for green energy certification going forward. Will the market be equally volatile this year? 

Hosts: 

• Richard Sverrisson, News Editor Montel,
• Olav Vilnes, Nordic News Editor Montel. 

Guests:

• Nicholas O’Keeffe, senior portfolio manager, Danske Commodities,
• William Dixon, senior originator, Agder Energi. 

Transcript

Richard Sverrisson, News Editor Montel: 0:03

Hello, and welcome to the new Montel Weekly podcast. Joining me, Richard Ferrison is Ola Ness, the Nordic News editor at Montel. Welcome, Olav. Hello. Today we'll be talking about a very niche subject, the trading of renewable certificates or guarantees of origin. We will listen to or we'll hear a discussion between two key portfolio players in the market and myself. That was recorded at an event in Amsterdam, but I thought, although you could tell us a little bit more about the market before we go into the details and that the technical nitty gritty, why is the guarantees of origin or why are they important?

Olav Vilnes, Nordic News Editor Montel: 0:44

It's an interesting market. I mean, it's, um, from a, a Norwegian perspective, I always followed this market quite closely. But since Norway's the largest supplier of geos into the market, I mean, you have a hydropower output in Norway up to hundred and 30 T hour a year. Mm-hmm. So on a good year, they can provide a third of the geos in the, in the entire market. The Nordic, the Nordic region combined with Norway, definitely the biggest. Contributor, uh, cover a

Richard Sverrisson, News Editor Montel: 1:10

third of the entire guarantees origin. Oh, the entire

Olav Vilnes, Nordic News Editor Montel: 1:12

market. Yeah, that's, that, that's correct. Uh, and, uh, and the main buyers will be countries, uh, like Germany, the Netherlands, that the, where consumers want to buy. Renewables want to show their cash customers or their own, uh, if their households, just to be sure that they feel that they use renewable energy. Hmm.

Richard Sverrisson, News Editor Montel: 1:30

So. The rest of the market that would be hydropower produced, say, in the Alpine area, or, I mean, could any wind turbine get a guarantee of origin, for example?

Olav Vilnes, Nordic News Editor Montel: 1:41

Yeah, I mean, historically you could say that you have had, uh, two ways of supporting renewables. I mean, the traditional way is to subsidize the, the, the construction of renewables through feeding tariffs or green certificates or whatever. That's a standard way of, of building renewables. But parallel to this, you've also had this, uh, voluntary market. Guarantees of origin where people are actually buying extra to just have the opportunity to call their own power consumption green. Mm-hmm. And in some areas that's required. I mean, on an EU level, if you, if you want to have your, uh, your household, if, if you, Richard have your, at your home, you have a, a declaration of what kind of, uh, power you use. Mm-hmm. And even if you live in Norway, you have 98% hydropower. Mm. You will be surprised when you look at your bill and they say it's like, uh. 40% coal or 20% nuclear and so on. Mm. And that is because they are actually. Buying out, uh, they're selling out geos to other countries, to customers in other countries in a European wide market. So this is actually

Richard Sverrisson, News Editor Montel: 2:42

for some, it's quite controversial.

Olav Vilnes, Nordic News Editor Montel: 2:43

It's very controversial. And I mean, they, the industry up here hate it. Mm-hmm. Because they the heavy industry industry. Yeah, yeah, yeah.

Richard Sverrisson, News Editor Montel: 2:50

The power of the buyers of the power, um,

Olav Vilnes, Nordic News Editor Montel: 2:52

they're bias of the power. I mean, they, they have, of course, they, they always told the customers that we only use renewables. Mm-hmm. Then they had, they asked, kind of have this mechanism that forced them to buy extra pay, extra to buy geo so they can tell them that they are renewable. And then of course, if you are living in a country with no, or maybe surrounded by coal plants in the, in the rural area or in Poland, for example. You can only, you can just buy these geos and then you say, okay, we juice. Yes. Use renewables. Mm. Makes nonsense for a, for a person up in Northern Norway where surrounded by hydropower plants.

Richard Sverrisson, News Editor Montel: 3:25

Absolutely. Absolutely. Uh, we will come back to that a little bit later in the recording and some of the, maybe the controver controversies, uh, surrounding the market, but are the prices of guarantees of origin, are they enough in and of themselves to support renewables or love?

Olav Vilnes, Nordic News Editor Montel: 3:41

They have never been, and they've always been very low. Historically, they've been like a. 20 euro cents per kilowatt hour, which is very low compared to the power price, which is more like 40, 50 euros per megawatt hour. Mm. You have seen ave a sharp increase. Last year was a really strange year in that sense. I mean, you, you saw the price rise from half a Euro to two and a half euro for Nordic hydropower Mm. For the go price. Mm. In, in just about nine months.

Richard Sverrisson, News Editor Montel: 4:04

Wow. What was the main, what were the main drivers there? Uh.

Olav Vilnes, Nordic News Editor Montel: 4:06

There is two things I I, I mean, if you talk to analysts, they say underlying growth that have been there for many years now, you have had like seven, eight years of double digit growth in this market on the, on the demand side with supply failing to follow in the same pace. Uh, so in that sense you had a very strong demand rise driven by companies who want to portray to the customer that they only use renewables, okay? Ikea, Google, apple, all these huge corporations. They have committed to the customers that we will only use renewables by 20 20, 20 30, or whatever target they have. And then they use, if they can't produce it themselves, they buy geos to sort of, to make sure that they can call their, to cover that short,

Richard Sverrisson, News Editor Montel: 4:43

any potential shortfall of own generation, own renewable generation and, um, and the, the power use. Yeah,

Olav Vilnes, Nordic News Editor Montel: 4:49

that's correct. So I think that is the demand driver. Mm-hmm. And then you had of course also some supply issues last year with, with the drought in the Nordic region, which, uh, cut hydro, uh, hydro supplies short. Together with that, you had maybe speculators coming in mm-hmm. Buying up. Up, uh, seeing prices going up and accelerating the sort of the, um, the, the increase there. For example, in the autumn, you had a price there of two, 2.4 euros for, uh, for these geos, that's a

Richard Sverrisson, News Editor Montel: 5:13

substantial rise, then

Olav Vilnes, Nordic News Editor Montel: 5:14

substantial rise, and it fell quite sharply later in the autumn.

Richard Sverrisson, News Editor Montel: 5:17

Okay.

Olav Vilnes, Nordic News Editor Montel: 5:18

And you couldn't really see any big fundamental reason for such a sharp fall. So that, so it fell back

Richard Sverrisson, News Editor Montel: 5:23

from 2 42 what? Um,

Olav Vilnes, Nordic News Editor Montel: 5:25

to the low, almost 40 on euros. Okay. Early this year. Earlier this year, yeah. And now even below on Euro.

Richard Sverrisson, News Editor Montel: 5:31

Okay. So now, now we're about 70. Are we? Something like that, yeah. 70,

Olav Vilnes, Nordic News Editor Montel: 5:35

80. For the 2019 production,

Richard Sverrisson, News Editor Montel: 5:36

what was the main driver for that? Fall in prices then.

Olav Vilnes, Nordic News Editor Montel: 5:39

Man drive for the fall is hard to tell. I think maybe it is not the rain in the Nordic region in September that haven't contributed. Mm-hmm. Maybe you had this psychology that people came in there to sort the price. Oh, they, they won't continue rising. Mm-hmm. We should just sell off now. Maybe the, uh, new producers are coming in from Spain, Italy. Okay. So they,

Richard Sverrisson, News Editor Montel: 5:58

that's what I've heard as well, that maybe some big companies. From that part of the world sold off a lot of their, yeah.

Olav Vilnes, Nordic News Editor Montel: 6:03

Of their

Richard Sverrisson, News Editor Montel: 6:04

production or their guarantees of origin. And

Olav Vilnes, Nordic News Editor Montel: 6:05

maybe they've been sitting on the fence as well. When prices were very low, it didn't really wasn't that important to get rid of it. But then it had high prices that they all wanted to go, ah, okay. Go into the market to sell off. And Spain is also a young market in this area. In this market. They came in in 2016. So they've only been in there for about three years.

Richard Sverrisson, News Editor Montel: 6:22

Can we expect more of this kind of volatility this year, do you think?

Olav Vilnes, Nordic News Editor Montel: 6:26

Perhaps not as much as we had last year, but uh, I think it'll be a volatile market. Mm-hmm. Definitely. Mm-hmm. The demand is still there. It's rising. The weather will always change, as we all know. And, uh, there are new comp countries coming in. Mm-hmm. You also have some issues that can affect the market, like Brexit, for example, can remove, uh. Some demand if there's no deal, a no deal Brexit. Okay. Um, so, so, yeah. Yeah.

Richard Sverrisson, News Editor Montel: 6:49

So we'll watch, we'll watch closely the events going forward and you can of course, uh, read, uh, more of our stories on the matter on, on Montel. So Olaf, thank you very much for that explanation and the introduction here. I. As mentioned before at a recent event in Amsterdam, I had a chance to look at the geo markets from a perspective of two traders. Those listeners with a keen ear would be able to hear my Icelandic name slipping into the discussion. At some point, Nicholas O'Keeffe fell. Nicholas. Hello. He's from Danke Commodities and expert in, uh, green markets, and also William Dixon from AGTA Energy. William. Hello. Hi. So we are at the Rex Market Meeting Conference in Amsterdam, uh, where all the talk is about guarantees of origin, renewable certificates, and how to decarbonize Europe. It's quite a niche market though. Um, Nicholas, this guarantees of origin is, could you explain it for the, for the man on the street? What, what does this mean? What, what is, what is a guarantee of origin and why is it important? I. Uh, if it is,

Nicholas O’Keeffe, senior portfolio manager, Danske Commodities: 7:51

well, thank you for the good question. I'll try to do my best to answer that. Well, a guarantee of of your origin is, uh, electricity attribute tracking instrument that makes, uh, it possible for electricity consumers to, uh, in a compliant way certify that their electricity consumption is produced by, uh, renewable energy. In Europe, this is important because it creates transparency. To the energy system. It also provides the possibility of, of being able to prioritize between different options. So from a cons, uh, Schumer perspective between different offerings, but on a higher level, it also helps policy makers in tracking their efforts to, uh. Transition the energy system from fossil based energy, uh, for electricity, uh, to more of our, our renewable, renewable system. And

Richard Sverrisson, News Editor Montel: 8:50

would you concur with that, William?

William Dixon, senior originator, Agder Energi: 8:51

Yeah, certainly. I mean, you know, I mean, certainly in the past few years with the whole disclosure initiatives and the, as I say, the rise of the ethical consumer, I think we see a lot of people choosing. You know, where they want to be able to document their consumption is from. And yeah, a lot of, a lot of different preferences around Europe. A lot of different, let's say tastes, I mean, you know, of course there are fossil and there is nuclear issuance as well. And people do, do people like to say consume this volume, but also renewables, different types. Do you have a preference in wind? Do you have a, you know, a country specific thing? Do you have an age specific thing? So yeah, I mean, we start seeing above, uh, you know, documenting consumption, being renewable. Then you start getting the different layers of, uh, of, of demand within the system. So I think for everybody it's, it's, it's, uh, it's a good thing for Yeah. You know, documenting what they, uh, what they're looking for.

Richard Sverrisson, News Editor Montel: 9:38

I want to go a little bit about the market dynamics. I mean the, the talk here and the talk generally was about last year and what happened last year. Prices rose and now they've fallen back. Can you explain a little bit why Nicholas?

Nicholas O’Keeffe, senior portfolio manager, Danske Commodities: 9:50

Well, I would explain the. The rapid increase in prices and the rapid decrease in price to, uh, the fact that there is somewhat lacking liquidity in the market. Mm-hmm. There could be different reasons for this, but when you. Put the market into the context of the fundamentals. There is nothing really fundamental in terms of change in supply or demand during that time. Mm-hmm. Which would cause such a increase in price up to 700% increase in price over that span of time. From what to what? It more or less sort of started, uh, start of last year, so in, in 2018. At, at what price level and where did it finish it? Well, I mean, now. Price. Where did it peak, you mean? Yeah. You know, basically when we discuss prices, it's wholesale prices. So the amounts are substantial when you trade them, uh, through the wholesale market. Mm-hmm. And, and it's also hard to, uh, give it index price and indexation of prices is one of. Of, of the elements to, uh, support this market in the future, but without such, it's difficult to pinpoint exact prices. Hmm. But you could generally say that the prices in the wholesale market for geos were between 20 euro cents up to maybe 30, 35 euro cents, depending on the aesthetic onset, previously on the different type of products, et cetera.

Richard Sverrisson, News Editor Montel: 11:16

Were they picked at 35? Euro sense. And they peak around you two euros.

Nicholas O’Keeffe, senior portfolio manager, Danske Commodities: 11:20

Yeah.

Richard Sverrisson, News Editor Montel: 11:20

Yeah, yeah. And now they've come down to 20 to 35, is that correct?

Nicholas O’Keeffe, senior portfolio manager, Danske Commodities: 11:25

Yeah. Well, I mean it depends also on what, uh, you talk about in regards to whether it's, uh, with, uh, spot delivery, I. Of certificates or if you are, are, are, are discussing bilateral forward contracts. Yeah,

Richard Sverrisson, News Editor Montel: 11:39

sure, sure. I mean, is this, would you also concur with that? Would you agree that it's a, it's, it's a lack of liquidity here? I mean, I mean

William Dixon, senior originator, Agder Energi: 11:46

it's, it's an interesting one because if, if we take, say the fundamental situation last year, I mean we started the year, was it like maybe an average spread of maybe 52 50 4 cents at the beginning of 2018. And, and that had risen up from 30%, 30 cents rather for the previous year. And then. I think we peaked, there was a very strong correlation last year between the hydrological balance in the Nordics and then the geo price. So I think the, let's say the peak of the deficit, if you will, on the Nordic hydro was maybe, I think it was week 42, maybe week 37, somewhere around there. But that was also when the peak of the, of the geo prices was. And of course, you, you, you, you're setting forward prices. On the resource available. And, and we're having, we were having, let say one of the, the driest years ever, I think, uh, or maybe not ever, but certainly in

Richard Sverrisson, News Editor Montel: 12:31

recent memory anyway. In recent memory, yeah. I mean,

William Dixon, senior originator, Agder Energi: 12:34

don't remember too far back, but, um, it was, uh, there was a few people saying it was one of the driest years that they, they could remember Since

Richard Sverrisson, News Editor Montel: 12:39

2011. Yeah, exactly. Yeah. I can't remember anything back free on then. Anyway, you know.

William Dixon, senior originator, Agder Energi: 12:45

Yeah. So, uh, no, but you know, you, you kind of base the prices on the fundamentals, which are currently available, and if you're experiencing dry conditions, you're experiencing low reservoir levels, then there's an element of like, well, how much have I forward sold? And how much have I forward sold, and how much do I need to buy back because my assets are not gonna like generate enough. So at what point do people start potentially panic and thinking, okay, maybe I need to get some volume back. But then you're thinking, okay, well if the resource is this low at the moment, if it's gonna be snowing in the, at the end of the year, is snow gonna come? You know, and then when it does snow, is it gonna remain a snow on the mountain side? You know, what is the delay? I mean, let's say if you take wind for example, you know the generation is pretty instant, but then with hydro there's quite a delay. And then what is that lag? And at what point have you got obligations to deliver? What are your, you know, what are your commitments versus what is, what is your deficit reduction at the moment? I think anyone within a, certainly within a nor a Nordic generation portfolio, would've seen a little bit of a, a reduction in, in, in forecast towards the end of last year.

Richard Sverrisson, News Editor Montel: 13:37

So you are sort of saying there are. Clear fundamental reasons for the, the upta and certainly that we saw towards the sort of, um, I

William Dixon, senior originator, Agder Energi: 13:45

would, I would say, yeah. I mean, and then since then we've had a few, let's say different things which have come to the surface. Okay. Yes. There was, there was a bit of, you know, strong rainfall within, uh, in the Nordics, in, in, in Q3. We've had a few court cases with. You know, certificates from outside the EECS area, different levels of demand, different level, different countries purchase at different times of the year. Mm-hmm. And when a lot of these, like say, stars align it, it can make the price go down. You know, if someone looks out the window and sees it raining and say, oh, well it's raining. Mm-hmm. Then, uh, then therefore the price should go down. Then that's, uh, that drives the market in, in some instances.

Nicholas O’Keeffe, senior portfolio manager, Danske Commodities: 14:18

I, I agree with. Uh, Dixon. And when you also take the fundamentals Mm, and look at the liquidity factor of the market, then, then, uh, it's like you leverage the whole market. So could you explain that a bit? So coming back to the liquidity, meaning you have a dry season. In, uh, in, in Norway. So certificates have got a 12 months sort of expiring. Mm. And this in a sense means that you've got 12 months to, uh, use those certificates to kind of cover your consumption the last 12 months. So that somewhat reduces the. Fundamental seasonality mm-hmm. On both the demand and the supply side. Mm. As you would expect year on year to be somewhat manageable. But it's true that, you know, that is what we also saw. Mm. Uh, coupled with the fact that, um, there, there was low wind in, in many places of Europe Mm. Uh, really drew up the prices, which would have done anyhow. That would have increased the prices, let's say, in proportion to the effect, the real effect of that on the fundamental demand and supply. Mm-hmm. But meaning that you could expect a, a, a price increase, but not maybe 700%. Yeah, that's, but um, and, and what explains this is, is the liquidity. And the liquidity comes in. So two forms. It comes in the form of certain market cycle maturation, saturation, if you have Mm. And, and then it comes in the form of being, uh, like, uh, blood for, you know, pricing of the product. Mm. And from a saturation point of view, and exactly like di, how Dixon explained that when producers all of a sudden see that they've, they've gone short. Then, you know, all hell breaks loose. Mm-hmm. Like what showed last year. But saturation is more that, and we don't have the transparency to fully understand it, but it could be simply, I've been in this market for a number of years now that. The fundamental demand side has been already saturated through or answered, uh, with forward contracts. So what remains as liquidity in the market is more or less the delta between the supply and the, the, the, the demand. Mm. For the rest of it in regards to base load now, uh, geos represent about 35% of the total production of renewable energy, uh, electricity in, in Europe. So you have a certain way to go to fully reach the ceiling. Mm mm But until then, you know, the liquidity is, is the main driver. Uh, for prices, not vice versa.

Richard Sverrisson, News Editor Montel: 16:54

Okay. And William, you would say, or Dixon maybe I should call, you think called West? Um, what, what would you say are the things to look out for this year? I mean, are the same, the same aspects gonna be driving prices? Yeah. I mean,

William Dixon, senior originator, Agder Energi: 17:07

you know, if, if, let's say. I think if you look at the geo issuance in recent years and you take renewable, how, you know, I think it was like maybe 68% of the renewable, uh, issuance was hydro and, and 50% of that is Nordic. So I think there's a, there's a strong correlation between what is, what is what is happening in the Nordics. I. But then the thing you can't accommodate is for, you know, what is the, what is the rate of, of new, of new stations, new generation coming to the market. Mm-hmm. Um, you know, we hear a lot of stories about subsidy free developments, but then that potentially nets off the demand of, of somebody else. And then France will, uh, bring, you know, uh, volume to the market. But that's only gonna start coming to auction by the end of the year. Spain came into the market in 2016, had a great year on hydro, and that was down 43% or something like this on production. So this all kind of like starts throwing into the mix.

Richard Sverrisson, News Editor Montel: 17:52

But in times of solar, it's gonna be a big growth market. Spain, yeah.

William Dixon, senior originator, Agder Energi: 17:55

I mean in, in, in one way. Yeah. You know, solar will come to the market, but you know, you look at countries, I think Netherlands has increased massively on solar, but it's still a technic, it's still kind of small volumes to compared to the overall thing. Again, it depends what you know, people's demand is. I mean, will we see an increase in the next year in the demand for nuclear volumes based on it being, let's say carbon free or something like this? People start looking for. Other opportunities. Okay. Yes. You know, renewable is one thing, but then this whole kind of, let's say blue energy transition as some people are starting to talk about.

Richard Sverrisson, News Editor Montel: 18:24

Mm-hmm. Mm-hmm. I mean, there's a lot of vari, you touched on it earlier about the variance between some geos and others in the price. Yeah. Um, what explains that, why are, say, why are geos from Dutch wind? Why are they more expensive than nice landing hydropower? I

Nicholas O’Keeffe, senior portfolio manager, Danske Commodities: 18:40

think locality has got to do with that case in particular. Mm. But for the rest of it, where you see price differences is, uh, between technologies. Mm. And that's where it becomes all a bit fuzzy. We joke about it that one reason why Wind. Certificates given that the supplier is equal for both reflects in a higher price is because those companies that are willing to pay the price for them to use for promotions for their products and services find it more aesthetically pleasing to have a picture of a windmill on their homepage than a solar product

Richard Sverrisson, News Editor Montel: 19:13

or a hydro

Nicholas O’Keeffe, senior portfolio manager, Danske Commodities: 19:14

turbine, or, or, or any other reason. But it, there are many reasons, but, but it's

Richard Sverrisson, News Editor Montel: 19:19

part of this, the sort of local is good. Feeling that you get in just standard consumer products, whether it be beer or potatoes or, or meat or whatever. Yeah. The same thing applies to renewable energy,

Nicholas O’Keeffe, senior portfolio manager, Danske Commodities: 19:30

and as long as the windmill is built behind the garden of your neighbor and you can buy the certificates from the windmill, then everyone's happy. Right? Not in my

Richard Sverrisson, News Editor Montel: 19:38

backyard close, but close enough so I can close enough, so I can get the guarantee origin.

William Dixon, senior originator, Agder Energi: 19:44

I mean that's, I mean, you know, you look at Germany, they're kind of doing the same model. It's kind of like, you know, the regional product, but at what, at what stage does a regional product. At what point would you go for something cheaper elsewhere, you know? Mm-hmm. There's, there's a lot of, there's a lot of variables to consider and you know, the Icelandic argument has long been discussed and a lot, some people, they say it's not their preference because it's not physically connected to Europe. And some people, that's a

Richard Sverrisson, News Editor Montel: 20:04

criticism of the whole geo market that, yeah. Yeah,

William Dixon, senior originator, Agder Energi: 20:07

I mean, technically, you know, a geo from Iceland can't be, let's say physically exported, but you can use it to document consumption in Cyprus if you wanted it to.

Richard Sverrisson, News Editor Montel: 20:14

Um, so, so some people found find that, you know, they, they have a problem with that because it's not, you know. Yeah. But it's,

Nicholas O’Keeffe, senior portfolio manager, Danske Commodities: 20:20

it's, I guess it's like charity, right? It's, it's about choice. And you, uh, through charity, voluntarily, uh, send off somebody to, uh, support, uh, social responsible. Project somewhere, you don't necessarily need to import the, the whole project to your house. And, um, it, it also, uh, stems from the fact where this is really not a, sort of a issue is that it's, it's about emissions in the end of the day and, uh, global

Richard Sverrisson, News Editor Montel: 20:50

emissions. Yeah. Well, yes,

Nicholas O’Keeffe, senior portfolio manager, Danske Commodities: 20:52

you can't really have them local unless you live in a water balloon. Well, precisely. Thank,

Richard Sverrisson, News Editor Montel: 20:57

thank you for that. Uh, thank you for that lovely, uh, metaphor. The bigger picture is that we're trying to decarbonize and that we're, you know, the bigger picture is more important than where the, the guarantee of where the renewable Exactly. Or power was generated.

William Dixon, senior originator, Agder Energi: 21:14

Exactly. I mean, ultimately, yeah. You know, this is the aim and then you start seeing like in recent times when, when. When the price gets to a certain level, does someone, you know, not, you don't wanna say become not bothered, but when do they not want to go for the go? And then maybe you start going for, let's say, not cheaper products, but traditionally biomass has been a product which has not really been in demand. But when wind and hydro was soaring in price, you know, biomass was getting sold out. People wanted to be green, but they were just willing to kind of go, okay, well let's, let's go, let's go for the biomass. Mm-hmm. And at what point does someone, you know. There's a, there's a potentially a lot of demand coming in the few years, if you believe what you read. There's an electrification of all sorts of things. Transport is gonna come in, you know, in by certain dates. Norway is gonna be flying electric planes, you know, all of this. If it's gonna be documented by, you know, GOs is gonna have an impact. So at what point do people start, you know, forward selling and, and going for that? And do you go for an expensive hydro? Okay. Biomass is under a little bit of debate in the future years, but you know, whether that's, uh, there's a, there's a case going on at the moment about. Biomass being the sustainability criteria, a portion of biomass not being renewable. But then at certain points do you find someone that says, well, if that part of biomass isn't renewable, then why is the rest of it is renewable? And then the consumer influences start coming in and, and we'll see how things, I think develop

Richard Sverrisson, News Editor Montel: 22:24

consumer choice is, becomes quite important there. Technology can play a part as well, can it not in tracking where the energy comes from. I know there's some blockchain projects which would aid to be able to track where, where the. Say, megawatt hour or kilowatt hour was produced and where it was transported and where it was ended up being consumed, would that provide more transparency to, to this market, Nicholas?

Nicholas O’Keeffe, senior portfolio manager, Danske Commodities: 22:46

Uh, yeah, but I don't think it would really, uh, help in supporting one of the roles of geos, which is, uh, reducing anxieties. Mm-hmm. About, uh, uh, things.

Richard Sverrisson, News Editor Montel: 22:56

Okay. Can you, can you explain a bit more who's anxiety? Your anxiety or market anxiety? No, but

Nicholas O’Keeffe, senior portfolio manager, Danske Commodities: 23:01

I mean, uh, general anxiety and those that, uh, the buy GOs in many cases because of their concern in regards to, uh, climate change.

Richard Sverrisson, News Editor Montel: 23:09

Okay. So it wouldn't change that. So,

Nicholas O’Keeffe, senior portfolio manager, Danske Commodities: 23:11

no, I don't, I think, you know, there are still too many questions that, uh, remain uncertain in regards to the, the integrity of the system in regards to whether or not it will make the current system more effective or more transparent, or somehow bring more value to, to the table. Mm-hmm. And that, uh, hopefully, but, uh, I don't see that. Uh, right now. Mm-hmm. How about

Richard Sverrisson, News Editor Montel: 23:34

you? What do

William Dixon, senior originator, Agder Energi: 23:35

you, I mean, people have been speaking of course, about, you know, all the blockchain for, for a couple of years now, and. You kind of, you can troll and follow it. And it's, it seems to be something that people kind of want the geos to kind of go into, but they haven't quite worked out how it's gonna work. And I think CQ have been working with something to try and make it work. Some of the large, uh, consumers have also been looking at blockchain solutions. Who that, who did you say the, the Dutch Registry, cq. And, you know, at the end of the day, do you see what, what is gonna be the impact of uh, let's say a blockchain scenario? I mean, if I wanted to deal with Nicholas, then we just do it and no questions asked. And then we're bringing in potentially a. Another platform. I don't know. You know, where does, it'd be interesting to see how it comes out, but May

Nicholas O’Keeffe, senior portfolio manager, Danske Commodities: 24:14

maybe, with blockchain, I will never again have the opportunity to sit down with him to drink a beer, a new one. That's a shame. The exec

Richard Sverrisson, News Editor Montel: 24:20

just, it'll be done there. Well, that would be complete disaster.

William Dixon, senior originator, Agder Energi: 24:23

May as well go home early. Yeah,

Richard Sverrisson, News Editor Montel: 24:27

no, that would be a shame. William, you, you also mentioned Spain, and you, we've talked about different markets. Where do you think of the growth market? I mean, there's a lot of talk about PPAs. Uh, maybe there's, where's the potential, where's the potential here? I mean, uh, Germany has sort of, is coming to the end of its feeding tariffs. Um, or some of the plants will be, would that provide when they, when their subsidies end, then they will. Be able to generate GOs. Yeah. Would that boost the supply in the market?

William Dixon, senior originator, Agder Energi: 24:56

Potentially? I mean, yeah. I mean supply at the moment. Let's say for example, Lithuania joined last year, but it was only on an import only basis. So they have generation, which is currently not, technically not been exported. You know, Greece has been in the rumors for a while. The UK has been for a while, but then, you know, Brexit might impact this. Portugal is also there, but also Poland is there. You know, there's a lot of nations here, which have technically got. Demand. And it's always the case of what comes first in a scenario. It's, it is the, the, the, the generation comes to the market before the demand comes. And then you've gotta like, you know, it's, it becomes a, a process of not education 'cause that sounds like condescending, but you just get people on board with the geo mechanism. And then, yeah, I mean, Germany, it could impact it, you know, 2020 winter or did we say today, 2021, wind turbines start coming to the market. But then you start asking yourself, well, are those turbines gonna get knocked down and built again to get the new, let's say, rate of, of incentive? Or at what point does someone say, okay, I would like to buy 21-year-old German wind. So, you know, what is the, what is the preference of the, of the consumer as well?

Nicholas O’Keeffe, senior portfolio manager, Danske Commodities: 25:53

Well, maybe they're will more willing to buy it as if it stands behind the neighbor's garden and you can buy it locally, but not on the blockchain. Well, maybe if you don't like your

Richard Sverrisson, News Editor Montel: 26:06

neighbor,

Nicholas O’Keeffe, senior portfolio manager, Danske Commodities: 26:07

you don't

Richard Sverrisson, News Editor Montel: 26:07

want a beer, have a beer with it. That's the perfect, perfect solution. Then if there was one thing, guys, if I can just round up, if there's one thing you'd like to see one change in the market, what, what would you like to see happening? In the market that you are very active, you are very knowledgeable about.

William Dixon, senior originator, Agder Energi: 26:23

For me, it would be when you see a price of volume associated with it.'cause I think, you know, we see a lot of prices. You, you know, you, I don't think you need to be a, a wizard to effectively try and coordinate a Friday closing price, which would get published around Europe and, you know, you could sell three GOs and make that happen. So I think, you know, what's important to see is the volume behind the price. You know, a terawatt could get sold at one Euro, and if three GOs get traded at 20 cents. Unfortunately, it's the 20 cents which gets reported. And I think there needs to be a bit of a consistency there. So

Richard Sverrisson, News Editor Montel: 26:53

this is a request maybe for those people putting prices on screens and to back it up the price with the volumes there. Yeah, yeah, yeah.

William Dixon, senior originator, Agder Energi: 27:00

I mean, yeah, yeah. Mentioning no names, but I mean, people, you know, people know, like where, let's say, potential flaws are in terms of, you know, it, you know, someone can show a price and say, well, this happened, but the, well, what was the volume behind it? And if it's, if it's one go, then you know, is it, is it a valid, uh, reference?

Nicholas O’Keeffe, senior portfolio manager, Danske Commodities: 27:16

Absolutely. How about you, Nicholas? I think for the, this kind of market to be able to, uh, mature so that it, it can create greater value for everyone involved is that it also needs to focus more on providing end users, the ones that actually cover their consumption with geos. More transparency in regards to how their money is being used because, um, I think. One of the value drivers, uh, potentially for this market is the willingness of consumers and company being households and companies to pay for these products. And I think that their willingness to pay increases the more transparent the market becomes in regards to what effect over time their. Money, not just funding

Richard Sverrisson, News Editor Montel: 28:05

you and Williams, uh, beer at, uh, at these events. Yeah.

William Dixon, senior originator, Agder Energi: 28:08

Well, for the expenses in next week, but yeah. No, I, I, I take it. Yeah. That's, that's the only reason we don't, we we're

Richard Sverrisson, News Editor Montel: 28:16

thirsty, man. We're in the

Olav Vilnes, Nordic News Editor Montel: 28:20

Don't think I can claim this one.

Richard Sverrisson, News Editor Montel: 28:21

Well, I think, I think I'll leave it there. Gentlemen. Thank you very much for illuminating, uh, this market and clarifying some issues. Thank you very much, Nicholas. Thank you very much. And that's all for today. For more energy news, go to monte news.com or follow us on Twitter. Thank you for listening. Goodbye.