Soldera Markets #3 | Making Credible Renewable Claims (RE100)

Transcript of the episode's discussion between Oliver Bonallack, Stenver Jerkku, and Al William Tammsaar [00:00:03] Hey guys, and welcome to another episode of Soderren Markets. [00:00:07] I'm here with Alan Stenver, [00:00:08] and I think today we're going to look over the RE100 credible claims. [00:00:12] For those who don't know, [00:00:13] RE100 is like a global organization that sort of set the established criteria for [00:00:18] what counts as a strong, [00:00:20] credible, [00:00:20] renewable energy claim. [00:00:21] So it's super relevant to GOES and RECs. [00:00:24] And yeah, so let's kick this off. [00:00:27] You did the bulk of the reading on the RE100 document. [00:00:31] And I mean, I took a look, it looks like they've got six categories, right? [00:00:34] Do these apply to all sorts of RE-SEs and GOs, or is it just specific types? [00:00:39] Well, [00:00:39] I think the first thing we should probably start with is a bit more about just like [00:00:44] what RE-100 really is. [00:00:47] So in Europe, [00:00:50] as we've discussed on previous episodes, [00:00:52] we kind of have this nice legal framework of what qualifies as an adequate [00:00:58] renewable energy claim, [00:01:00] right? [00:01:00] It's kind of written into the renewable energy directive. [00:01:03] It's implemented in local laws. [00:01:05] It's more or less streamlined to that extent. [00:01:08] But in the era where RE100 started, [00:01:12] which was around 2014, [00:01:13] I believe, [00:01:15] that wasn't really the case. [00:01:16] Like the European geo market wasn't that well developed, [00:01:21] very similar to the carbon market today. [00:01:24] These kind of competing voluntary standard kind of approaches of, [00:01:29] hey, [00:01:30] let's just do something, [00:01:31] figure it out. [00:01:32] Corporates want to use renewable energy. [00:01:34] We need to kind of enable this. [00:01:36] And RE100 ended up being this kind of organization that set a very strict standard [00:01:42] on what actually qualifies as an adequate use of renewable energy. [00:01:47] And as a second thing, [00:01:48] became this central body where very large corporates, [00:01:52] such as Apple, [00:01:54] such as Microsoft, [00:01:55] such as Google, [00:01:56] where... [00:01:57] They make a commitment that, hey, they want to use 100% renewable energy by this date. [00:02:02] They have this kind of timeline of when they want to get to that 100%. [00:02:08] And they have this kind of commitment to RE100 that, [00:02:12] hey, [00:02:13] we're going to follow the standard and we're going to report it to you what exactly [00:02:17] we're doing regarding renewable energy use. [00:02:20] So they've been very useful, [00:02:22] like Google, [00:02:24] Apple, [00:02:24] Ikea, [00:02:25] a bunch of corporations, [00:02:26] like most large corporations you could think of, [00:02:28] you will find in their member list. [00:02:30] Now, [00:02:31] let's go back to this original question of what exactly is the standard or what [00:02:37] kind of criteria do they place on these kinds of renewable energy claims so we [00:02:42] could kind of work backwards and figure out how that applies to guarantees of origin. [00:02:46] I think that's a pretty good place to start. [00:02:48] So for them, [00:02:50] a credible claim is something that's based on credible generation data, [00:02:55] something that has proper attribute aggregation. [00:02:59] We'll talk about that a bit later. [00:03:01] It must have exclusive ownership. [00:03:03] So essentially, [00:03:03] there aren't multiple people claiming, [00:03:07] hey, [00:03:08] I'm the one using this renewable energy. [00:03:10] No, I'm the one using this renewable energy, right? [00:03:13] And as a second follow up, it is like must have exclusive claims. [00:03:16] So there isn't double counting. [00:03:17] So essentially both these exclusive ownership and exclusive claims boil down to no [00:03:23] double counting. [00:03:24] There can be two organizations that essentially think they're using the same thing. [00:03:28] There can be multiple organizations that think they own the renewable energy plant. [00:03:32] Like there has to be this understandable central logic for who owns what and why [00:03:38] and where and how do I validate this? [00:03:40] It must meet geographic market boundary limitations, [00:03:43] which just functionally means that, [00:03:45] hey, [00:03:46] if you are producing Grenoble energy in Iceland, [00:03:49] it doesn't really make sense if you use it in France, [00:03:52] right? [00:03:52] Like, that doesn't really check out. [00:03:55] That energy could never have gotten to France. [00:03:59] It requires a level of mystical thinking or this kind of very imaginative logic to [00:04:05] get to the conclusion that, [00:04:07] hey, [00:04:07] I'm using energy in France, [00:04:08] but I should consume the renewable energy part from Iceland, [00:04:11] right? [00:04:12] And then finally, it must be the vintage limitations. [00:04:16] And by that, [00:04:17] they just mean that the generation or when this renewable energy was produced, [00:04:21] that actually has to be... [00:04:23] And I quote, [00:04:24] reasonably close to the consumption period, [00:04:28] while the whole document never defines what reasonably close is. [00:04:31] So it's kind of left up to the conscience of people actually consuming renewable energy. [00:04:38] wanted to comment that super interesting and one of the things I wanted to dig in [00:04:44] and ask you about these geographical market limitations because right now you can [00:04:49] you know buy from Iceland and sell to France but there's of course a lot of buyers [00:04:56] who don't do that they say that they want reconnected geos but [00:05:02] What you could also do is, [00:05:04] you know, [00:05:04] buy from Finland or Estonia and sell in Spain and consume in Spain. [00:05:11] So are these going to get limited as well? [00:05:14] And if yes, then what sort of impact will this have on the market? [00:05:19] Yeah. [00:05:20] So... [00:05:23] Generally, [00:05:25] the Estonian and Spanish grid, [00:05:27] through a couple of connections, [00:05:28] functionally are connected. [00:05:30] There is this very plausible kind of broader energy market in Europe. [00:05:40] I think it's called the single energy market in their own documents, [00:05:43] but essentially it goes under their geographical limitations. [00:05:46] So functionally, you can, because there's a plausible path from Estonia to Spain. [00:05:51] So they have this table in one of their documents that actually defines what the [00:05:56] European single energy market is. [00:06:00] It ultimately comes down to two factors. [00:06:03] You need to be an AIB member and you need to be in the EU single market. [00:06:08] So you need to have both of those boxes checked and then you can be in the single market. [00:06:14] So as a very surprising consequence, [00:06:17] based on the voluntary criteria given here, [00:06:21] you could produce in Estonia and consume in Spain. [00:06:27] but you cannot produce in Estonia and consume in Poland. [00:06:32] So because Poland is not part of the AIB, [00:06:35] they're like one of these member states that essentially they have guarantees of origin, [00:06:40] they have all of the laws implemented, [00:06:42] but they have not fully integrated and complied with the AIB standard of how [00:06:47] guarantees of origin move around different registries. [00:06:51] And because of that, they're functionally excluded. [00:06:53] So if you are consuming renewable energy in Poland because they aren't an AIB member, [00:06:58] by this guidance, [00:06:59] you need to be using guarantees of origin from Poland exclusively. [00:07:03] Because from their perspective, [00:07:06] that's essentially like a self-contained market because it can't be nicely exported [00:07:12] into the other countries in the EU single market. [00:07:14] Why is that? [00:07:15] Do we know why Poland still hasn't joined, I agree? [00:07:18] I've read blog posts about this, [00:07:20] and the blog posts essentially say that the Polish way how they've solved [00:07:25] everything for implementing the technical specification on what is guarantees [00:07:30] abortion and how to use them and how to move them around... [00:07:33] They did a bit of, we could say, creative implementation there. [00:07:37] They have their own custom solution. [00:07:40] We've had a look at it a couple of times and had like mini heart attacks every time. [00:07:44] But functionally, it works slightly differently than what you would expect elsewhere. [00:07:49] And while they have declared, [00:07:52] even as late as I think last year, [00:07:54] like middle of the year, [00:07:55] that they want to join the AIB, [00:07:58] it's been quoted that they simply do not... [00:08:00] currently meet the technical criteria to be able to integrate. [00:08:05] Interesting consequences in Poland, [00:08:07] for example, [00:08:07] are there is no such thing as like an easy, [00:08:10] simple transfer from one account to another. [00:08:12] There is a purchase from one account to the other. [00:08:16] It needs to essentially be done in like a video game trade offer style where both [00:08:20] sides accept and like it works differently from other countries where you could [00:08:26] essentially just send guarantees of origin to an account and say, [00:08:28] hey, [00:08:29] there you go. [00:08:30] It has a different structure of a transaction. [00:08:34] It has different ways how it works because essentially... [00:08:40] I don't think their generation data is as well reported to the people who are [00:08:46] actually managing the registry as in other places. [00:08:49] Because the people that have the data and the organization you're actually sending [00:08:53] the data to and the people operating the registry, [00:08:56] these are different organizations and they somehow need to get along in the [00:08:59] background as well. [00:09:00] So it's a bit more messy in Poland. [00:09:03] And I think all of these things have just created enough friction that... [00:09:07] It's going to take time. [00:09:08] It's going to happen this year. [00:09:09] I hope so. [00:09:10] It will be cool. [00:09:11] But, you know, everything moves at the speed of government. [00:09:13] And sometimes that's not too fast. [00:09:16] I guess other, [00:09:17] like, [00:09:17] maybe surprising geographical limitations that you can read from this document are Romania's, [00:09:24] not part of AIB either. [00:09:26] So that's out. [00:09:27] Bulgaria's, not an AIB member. [00:09:29] So that's out. [00:09:30] Serbia is not an EU single market member. [00:09:33] Perhaps the most interestingly, Ireland is not grid connected to the single market. [00:09:40] So it's also a self-contained market. [00:09:42] So both countries are out. [00:09:44] The UK obviously has its own system. [00:09:46] So that's out anyway. [00:09:47] So in short, [00:09:49] mainland Europe, [00:09:50] European Union, [00:09:50] AIP, [00:09:51] then you basically have something that approximates what this group is that is acceptable. [00:09:57] But I mean, [00:09:57] from market liquidity perspective, [00:09:59] it's good that the European AIB is going to stay together. [00:10:03] One of the concerns I've heard a lot of people discuss is that if we become country [00:10:09] level instead of like reconnected like we have right now, [00:10:13] then there's going to be a lot of questions how the liquidity will look like, [00:10:18] how the [00:10:19] country prices between countries could have massive differences depending on supply [00:10:25] and demand actually it wouldn't be good for stability especially in markets where [00:10:32] the demand is very large because you know there would be huge spikes in prices [00:10:37] which will cause a lot of frustration among buyers so like i'm glad to hear that [00:10:43] it's gonna keep like a [00:10:45] AIB reconnected level because there were a lot of talks last year. [00:10:49] I heard a lot of people talk about country level reconnected solutions. [00:10:55] I love how you were mentioning this because actually in the document, [00:10:58] it also mentioned something about impactful purchasing. [00:11:02] So one of the things that they do mention is you can have even stricter preferences [00:11:07] if you believe it has a more positive impact on the market and [00:11:11] promotes the things that you want to see. [00:11:13] So under these criteria, [00:11:15] it would be considered impactful if you sourced from your area, [00:11:20] sourced from things that do not receive government support, [00:11:23] all of these things. [00:11:24] While they're not limitations, [00:11:26] it is kind of implied that, [00:11:27] hey, [00:11:28] it would be nice if you thought about how do you maximize impact. [00:11:32] And part of this is, [00:11:33] hey, [00:11:33] I want to be like really close by and I want to consume guarantees of origin that [00:11:38] were produced in the same month that I consumed my energy. [00:11:43] And if you do all of those things, [00:11:45] that's essentially more impactful since you're just like trying to be as legitimate, [00:11:50] as like close to reality as you possibly can. [00:11:53] So do you think a month is the sort of, you said reasonable, was never ever explicitly defined. [00:11:58] Do you think most people consider a month? [00:12:02] It really depends. [00:12:03] You have to kind of zoom out and think about how it is right now. [00:12:07] So right now we have this situation where a guarantee of origin, [00:12:11] once it's issued, [00:12:12] there's a 12 month trading period. [00:12:13] And then depending on country, [00:12:15] a six month period where you can still use the guarantees of origin, [00:12:18] even though you can't move them out of your account anymore. [00:12:21] And if you have this kind of a system, [00:12:23] it's definitely better than using the stuff produced 18 months ago, [00:12:27] right? [00:12:27] I think we can all agree that makes a lot of sense. [00:12:30] Ideally, [00:12:31] in a perfect world, [00:12:32] it would match very closely to the energy market, [00:12:35] but functionally pulling that off becomes very complicated because it's so granular, [00:12:40] it's so specific, [00:12:41] it's so niche. [00:12:42] If you get to this basis of, [00:12:43] no, [00:12:43] we're going to match the 15-minute hourly market, [00:12:46] you end up essentially creating a very... [00:12:50] challenging market environment for these things to actually find their buyers, [00:12:54] to actually find their consumers. [00:12:56] So while the hourly stuff is excellent, [00:12:59] and I think that's a good direction to go into, [00:13:01] we, [00:13:01] I think, [00:13:01] also need to actively see the market mature to the point where the whole market [00:13:05] could support that. [00:13:06] Currently, in the guarantees of origin market, we have a [00:13:10] like two or three major exchanges where functionally large organizations could [00:13:16] trade guarantees of origin and that's done on a monthly auction basis and what you [00:13:21] see there is the cost of doing those transactions even though it's very you could [00:13:27] say like low resolution right you're trading kind of blocks of things even there [00:13:32] you see that the fee structure is so massive that if you were like a [00:13:37] 128 gigawatt hour a year renewable energy producer, [00:13:42] you'd still be paying well above 10% of the value of the deal just in transaction fees, [00:13:49] right? [00:13:49] So if you're looking at it from that kind of a perspective, [00:13:52] if you create a really complicated market in the middle, [00:13:56] the fees just become untenable for the market as well. [00:13:59] So kind of the market needs to value these things and then we can get into like [00:14:04] nitty gritty details, [00:14:05] right? [00:14:05] that's at least how i think about it i'm interested about the geographical [00:14:09] restrictions and how governments are kind of the obstacle here so i've actually um [00:14:14] i'm looking at a sort of map of the connectivity of europe and you mentioned [00:14:18] ireland as an example but obviously an eu member state but they are you know [00:14:22] there's there's an underground circuit connection between ireland to the europe [00:14:26] it's just via the uk right so that's why yes and yeah [00:14:31] I think the rule was that you had to have connections to two other countries, [00:14:34] actually, [00:14:36] for it to be... [00:14:37] I seem to remember that was the case, [00:14:39] but functionally, [00:14:41] there are pretty strict requirements on what an interconnected market looks like. [00:14:47] It's just frustrating, [00:14:48] though, [00:14:48] because let's say you're based in, [00:14:49] like, [00:14:49] Netherlands or something. [00:14:52] There's a strong geographical, [00:14:54] you know, [00:14:54] credible claim to a geo that would be produced in the UK, [00:14:57] right? [00:14:57] Because it's like a short hop, except... [00:15:00] the regulatory frameworks just don't align, right? [00:15:03] Yeah. [00:15:04] Yeah, that's currently the case. [00:15:08] The UK has essentially siloed themselves into a very niche market at this point. [00:15:13] It used to be that you could actually move these guarantees of origin across border [00:15:17] a lot easier. [00:15:19] The UK used to be on the EU guarantees of origin system, [00:15:23] but ever since they broke off, [00:15:24] they kind of went off and did their own thing. [00:15:26] And they have this period of, hey, we can allow some interchange between these things. [00:15:30] And now they've gone like, no, there's no interchange. [00:15:33] We're just doing our own thing. [00:15:35] But the RE100 document is not only about guarantees of origin, right? [00:15:41] It's actually global. [00:15:46] Because the European guarantees of origin are actually regulated by the RED3 [00:15:52] directive coming up and the RED2 and how are all these things? [00:15:56] Just say the renewable energy directive, yeah. [00:15:59] Yeah. [00:15:59] So how are these documents connected? [00:16:01] Are they just like suggestions or are they actually like essentially guidelines for [00:16:08] upcoming laws and directives? [00:16:09] Or can they be like completely different actually when they end up in European geos? [00:16:15] Or how are all of these different docs and organizations connected? [00:16:19] So they were kind of created in this era where the whole concept of a credible [00:16:26] claim wasn't completely figured out yet. [00:16:27] And you also need to think about the organizations that are in RE100. [00:16:33] They are not like single-country, hyper-local organizations. [00:16:37] They're generally multinational gigacorporations that have energy use in RE100. [00:16:43] all continents and most countries. [00:16:47] And if you're on that kind of a scale, [00:16:50] it becomes a bit more important to have a standard that just gives you guidance on [00:16:54] each of those countries. [00:16:55] And you need to do that in the broadest possible way. [00:16:58] So when at the start of the podcast, we discussed this six criteria that has to be satisfied, [00:17:05] When it comes to the EU guarantees of origin market, [00:17:09] it's very easy to satisfy it because, [00:17:12] you know, [00:17:12] functionally government handles data, [00:17:16] government handles ownership, [00:17:17] government handles attributes, [00:17:20] government handles the cancellation part. [00:17:23] There's a verifiable consumer for it. [00:17:26] All of that is solved. [00:17:27] And that's... [00:17:29] just because of the Renewable Energy Directive and the local laws that actually implement this. [00:17:33] While in other countries, [00:17:34] there is a more free market voluntary aspect to it, [00:17:38] where the renewable energy consumption isn't necessarily codified by law, [00:17:45] but is more codified by local organizations that just have received this kind of [00:17:51] acceptance that, [00:17:51] yeah, [00:17:52] this is acceptable. [00:17:53] But essentially, they created a criteria of what qualifies as good enough. [00:17:59] And if you can't have good enough, what do you do then? [00:18:01] But yeah, [00:18:02] I think the Q&A also provided some interesting highlights, [00:18:05] which I think it's interesting to talk about. [00:18:08] So one of the things in the Q&A that really, [00:18:12] I don't know if it surprised me, [00:18:14] but was just like an interesting thing to highlight. [00:18:17] So yeah, [00:18:17] I wanted to highlight specifically question 37 in that Q&A, [00:18:22] which was, [00:18:23] why do we have to buy renewable energy in Costa Rica? [00:18:27] when the grid is over 99% renewable? [00:18:30] I found that question to be fascinating and very provocative because often when you [00:18:35] talk to traders in Europe or when you talk with renewable energy market [00:18:39] participants in Europe, [00:18:40] they kind of mention that, [00:18:42] hey, [00:18:43] I don't think this market will even exist in, [00:18:45] I don't know, [00:18:45] 10 years or 15 years or whatever because the whole energy production in Europe is [00:18:50] going to be 100% renewable, [00:18:52] so everything will be solved and you don't need these things to even... [00:18:57] have certainty that your energy is 100% renewable. [00:19:01] And I found it interesting because Costa Rica is kind of this microcosm or this [00:19:06] small example of what's the practice in a country where renewable energy [00:19:14] is most of your grids, you know, approaching 100% of your grid. [00:19:18] And in there, [00:19:19] very interestingly, [00:19:21] RE100 guidance is essentially because you have a registry that does manage the [00:19:29] energy certificates, [00:19:30] because it is specifically consumed by somebody, [00:19:33] because this system exists, [00:19:35] you have to use this system, [00:19:38] otherwise it won't. [00:19:40] conflicts with their criteria of no double counting. [00:19:45] Because if you say that, [00:19:46] hey, [00:19:47] just they're producing 99% renewable energy in this country, [00:19:50] my energy therefore is 99% renewable, [00:19:53] you might be actually claiming this renewable energy consumption with somebody else [00:19:57] that actually does have these certificates. [00:19:59] So in that situation, you're [00:20:02] no longer actually complying with the criteria, which seems very interesting. [00:20:07] So when I ask you to use renewable energy, [00:20:11] as long as these kind of registries exist, [00:20:13] there has to be this understanding that simply using energy from the grid is not [00:20:18] enough to have certainty that you're not... [00:20:21] actually making a conflicting claim with somebody else. [00:20:24] You're not actually kind of misrepresenting the facts on the ground. [00:20:27] Since if somebody is actually on 100% renewable energy and the grid is at 99, [00:20:34] well, [00:20:35] if somebody uses a very specific, [00:20:37] you know, [00:20:38] 100%, [00:20:38] then instead of 99, [00:20:40] it might be less. [00:20:42] And what you end up with actually might be a lot dirtier than this 99%. [00:20:47] Very interesting. [00:20:48] Do you happen to, [00:20:49] off the top of your head, [00:20:50] know what are the prices they're paying for Costa Rica's REX? [00:20:54] How has this impacted the market? [00:20:56] I'd be fascinated to know this. [00:20:58] I think it's a small enough market that I haven't seen prices floating around and I [00:21:02] haven't looked into it. [00:21:03] I would love to know. [00:21:04] So maybe we can update this in a future episode and talk about it. [00:21:09] Yeah, [00:21:09] that'd be interesting because especially in some large utility firms, [00:21:15] I've met people who are convinced that by 2030, [00:21:17] the entire rec market is gone because we'll be 100% renewable, [00:21:23] which is, [00:21:23] I think, [00:21:24] super optimistic, [00:21:25] to be honest. [00:21:25] But they truly believe it. [00:21:29] I currently don't see that happening, unfortunately. [00:21:32] But at the same time, it does make sense that you sort of want to have these... [00:21:39] tracking work because you know we're digitizing the whole world we're tracking [00:21:44] everything and if we have reliable automated systems where the cost of running them [00:21:50] is near zero and we can like very precisely direct [00:21:54] How does the power and the value flow around the system? [00:21:59] I think that's very important because who knows what sort of different financial [00:22:04] instruments and data you can build on top of it. [00:22:07] You can make country-specific analysis, comparisons. [00:22:12] It brings a lot of good if you can reliably and effectively track things, [00:22:16] even if you're close to 100%. [00:22:19] Assuming, of course, running the system is efficient and it's not just an overhead. [00:22:26] Yeah, exactly. [00:22:28] If the system kind of removes more value than it adds, it becomes a problem. [00:22:33] So if you are at exactly this 99.9999999% renewable energy production in the [00:22:41] country and you don't really have, [00:22:43] for example, [00:22:43] exports, [00:22:44] I don't think it would make sense to have this kind of registry system at all. [00:22:47] I think we all agree on this. [00:22:49] Because functionally, big perfect is the enemy of good. [00:22:52] And if you want to have perfect, you will end up just paying so much to get to perfect. [00:22:57] While if truly your energy production is 100% renewable, [00:23:02] does it really justify having this kind of a system? [00:23:05] I think that's a really important question. [00:23:06] Yeah, [00:23:07] if you specifically zoom in to Costa Rica, [00:23:10] ultimately they are connected with Panama, [00:23:13] they are connected with Nicaragua. [00:23:15] It's not that straightforward, but everything stays the same after production. [00:23:20] On the consumption side, you still need accounting. [00:23:22] If you're in a perfectly isolated market where nothing goes in, [00:23:27] nothing comes out, [00:23:29] then you're in a situation where... [00:23:31] Functionally, you could just make a blanket claim that, hey, everything's fine. [00:23:35] We don't need to think about it. [00:23:36] But the moment it gets a bit more complicated and the moment somebody actually needs, [00:23:40] hey, [00:23:41] as a corporation, [00:23:42] we have this policy. [00:23:43] I want to use 100% renewable energy. [00:23:45] Now you have a problem, right? [00:23:46] Because if 50% of energy, [00:23:49] in an example, [00:23:50] if your renewable energy generation is, [00:23:53] let's say, [00:23:54] 90% of the whole profile, [00:23:57] right? [00:23:58] But 80% of renewable energy is consumed by corporations with this kind of tracking system. [00:24:07] And actually, what ends up left in the grid is not just 10% dirty energy. [00:24:14] It's now half dirty energy. [00:24:17] So you can get to these kind of scenarios quite easily, [00:24:22] even if you have high renewable energy generation overall. [00:24:25] Yeah, that's super interesting. [00:24:26] So the better question is kind of when Costa Rica or if Costa Rica does hit 100% renewable, [00:24:33] whether the registry, [00:24:34] because you think it's kind of semi-obvious that it should be kind of disabled at [00:24:38] that point. [00:24:38] I'm unsure because it opens up to societal risk as well. [00:24:44] There's no guarantee that that number won't go back down again. [00:24:46] I mean, the energy mix won't change based on like political factors. [00:24:50] I mean, [00:24:51] I think tracking, [00:24:53] I kind of side with SEMR in it, [00:24:54] it's probably beneficial in nearly all cases, [00:24:57] right? [00:24:58] Nearly all. [00:24:59] I do agree. [00:25:00] I think if you're a self-contained, [00:25:02] isolated system with nothing in, [00:25:04] nothing out, [00:25:05] and you just have this strong legal framework that, [00:25:08] no, [00:25:09] we're literally never using anything that's not renewable ever again, [00:25:12] then in that case, [00:25:13] hey, [00:25:14] congrats. [00:25:14] Problem solved. [00:25:15] Yeah, you win. [00:25:17] Yeah, you win. [00:25:17] Congrats. [00:25:18] But I think that's very hard to achieve. [00:25:20] And I think, Oliver, you do raise a very good point. [00:25:25] that the political realities on the ground might not stay the same. [00:25:30] They might not be the same in 10 years, in 15 years. [00:25:34] So the idea of, [00:25:35] hey, [00:25:36] let's delete tracking altogether to just reinvent it in 10 years also might not be [00:25:40] a reason. [00:25:40] Yeah, [00:25:41] tracking like the geos and the renewable energy greatest does create like a lot of [00:25:45] interesting situations and make people think like I heard in Norway, [00:25:50] a lot of people were suddenly surprised to find that their electricity contains nuclear. [00:25:56] They were like, how did that happen? [00:25:57] You know, we're renewable in this country. [00:26:00] Why do I have nuclear in my power? [00:26:03] What happened in reality was that, [00:26:04] you know, [00:26:05] the nuclear guarantees of origin were simply bought and used. [00:26:11] But people are confused about that and how does this work? [00:26:15] But, you know, it does send like a clear message as well that people care about this stuff. [00:26:21] They shouldn't just sell away all their geos. [00:26:25] and buy it back from other countries or not at all and then have dirty energy in the mix. [00:26:30] So that's one of the things about having interconnected grid. [00:26:34] Essentially, it exposes this stuff to the people. [00:26:36] So it seems to me that having these larger market boundaries, [00:26:39] just going back to the geographical factor, [00:26:42] I guess that allows people to source Rex or goes from wherever it's come. [00:26:46] As an energy transition tool, [00:26:48] would it make more sense to... [00:26:50] We kind of criticize the UK for siloing, [00:26:52] but are they going to have a more effective... [00:26:54] growth rate for renewable installation? [00:26:57] Assuming that the proceeds from Rex go towards further development. [00:27:02] I'm just curious. [00:27:03] I think that's a really good question. [00:27:05] I think you could start breaking this down more and more into why not just in the [00:27:10] UK just go like, [00:27:12] no, [00:27:12] no, [00:27:12] Great Britain, [00:27:13] like that's our silo now. [00:27:14] We're just supporting Great Britain or even just go like zoom in more. [00:27:18] No, we're just only buying renewable energy from a couple kilometer radius from London. [00:27:25] You could get very specific with this. [00:27:27] And is that necessarily helpful? [00:27:31] I think is a very good question. [00:27:33] Generally, I think you want to have energy production where it's at. [00:27:36] It's like the most cheapest economically to achieve that because it does cost [00:27:40] something to move energy from point A to point B. [00:27:42] And I think... [00:27:44] The proximity factor will play a role anyway in this whole system, [00:27:49] because if you're producing a lot of renewable energy in an area where actually [00:27:54] it's oversaturated already, [00:27:56] the market reality will hit you quite hard. [00:27:59] So I'll give you a good example of this. [00:28:02] In many countries, [00:28:03] for example, [00:28:04] because storage hasn't been figured out to the degree where it could be, [00:28:08] solar energy tends to have quite a high spike. [00:28:12] Because we haven't figured out energy storage to the degree that the market [00:28:17] requires right now, [00:28:19] in many areas, [00:28:20] the times where the sun is shining the most, [00:28:22] we essentially have electricity prices that are close to zero, [00:28:26] right? [00:28:26] So there are, [00:28:27] I think, [00:28:27] over-market factors that generally tell you where to put renewable energy [00:28:31] production to begin with because certain areas just... [00:28:35] Might be more fitting for that. [00:28:38] And I think that'll already put the thing where it's at. [00:28:42] But generally, [00:28:43] if you're supporting the concept of renewable energy, [00:28:46] you could get very local about it. [00:28:48] I think there's merit in that. [00:28:50] But are you doing that for patriotic reasons? [00:28:54] Or are you doing that for general improvement or betterment reasons? [00:28:58] I think those are very important questions. [00:29:00] Because ultimately, [00:29:01] if we have this large interconnected grid, [00:29:03] everything's connected to everything, [00:29:05] you do have this expectation that if renewable energy production goes up, [00:29:10] everybody generally benefits, [00:29:11] right? [00:29:12] For sure. [00:29:13] And I guess if you go down the hyper-localization ideology, you just end up at PPAs and... [00:29:21] Yeah, you can. [00:29:22] But now changing topic to another interesting thing that I think is worth talking about. [00:29:28] So Stenberg previously mentioned the use of nuclear energy. [00:29:31] And I think there is a broader debate if nuclear energy is renewable or sustainable or adequate. [00:29:40] I think there are many reasons why it could be considered significantly better than coal, [00:29:45] for example. [00:29:46] I don't think that's very controversial. [00:29:50] But should it be considered renewable? [00:29:53] When it comes to the RE100 position, it definitely isn't. [00:29:57] And even among things we do consider renewable, there are even more stricter limitations. [00:30:04] So the only renewable energy in Europe that you just can take from anywhere and [00:30:11] just use it and ask no more questions ends up being wind, [00:30:15] solar, [00:30:15] geothermal. [00:30:16] That's it. [00:30:17] So what you might notice here is I didn't say hydropower. [00:30:22] It didn't happen. [00:30:24] You might also notice I didn't say biomass. [00:30:26] Because we have discussed biomass, you can get guarantees of origin for biomass. [00:30:31] They count, legally speaking, as renewable energy for your energy consumption. [00:30:35] All that works. [00:30:37] RE100 places this limitation on it that, yes, you can use hydropower. [00:30:41] You can use biomass. [00:30:44] But it needs a third-party certification. [00:30:46] It needs a lot more checks and balances to make sure that it's fine. [00:30:50] So in Europe, [00:30:50] that might be the eco-energy standard, [00:30:52] which is kind of an extra layer on top of guarantees of origin for a stamp of [00:30:57] approval that, [00:30:58] hey, [00:30:58] it's not ecologically harmful. [00:31:00] For hydropower, [00:31:02] generally, [00:31:03] depending on the kind of situation you have on the ground, [00:31:08] it can very negatively affect the local wildlife. [00:31:13] It can affect the biodiversity in the area. [00:31:16] It can cause floods in areas that previously weren't flooded. [00:31:20] It can essentially shift the landscape rate. [00:31:22] And that can have very negative consequences on the surrounding area. [00:31:26] And for that reason... [00:31:28] By default, the hydropower is not considered adequate for RE100s. [00:31:35] Similar thing goes for biomass. [00:31:37] You need a third-party certification of, [00:31:40] hey, [00:31:40] the sourced biomass really makes sense for this case. [00:31:44] There's been more checks and balances than just the government looking at it, [00:31:48] going like, [00:31:49] hey, [00:31:49] okay, [00:31:49] this is ecologically acceptable. [00:31:53] You can consume this without having those kind of doubts of, [00:31:57] did I actually cause harm with this? [00:31:59] It's super interesting. [00:32:01] Do you see this leaking or I guess leaking is the wrong word, [00:32:06] but like transferring over to the European GEO directives as well? [00:32:11] You know, [00:32:11] because let's be honest right now, [00:32:13] the prices are basically set by Nordic Hydro across the Europe. [00:32:17] I was going to say it's usually coincidental. [00:32:20] Yeah. [00:32:21] So what's your thoughts on that one? [00:32:23] It does feel like RE100, [00:32:26] while, [00:32:28] as I understand it, [00:32:28] they do pay premiums for getting that kind of stuff that they want. [00:32:32] When it comes to the market prices, [00:32:34] when you look at solar, [00:32:35] when you look at wind, [00:32:36] they don't get a premium significantly over hydro. [00:32:39] Hydro is traded the most. [00:32:41] There isn't, I guess, to that extent, extra demand for solar and wind. [00:32:46] Because when you kind of zoom out and see what's getting moved across borders... [00:32:52] What really makes the market in guarantees of origin, it ends up being Nordic hydro. [00:32:56] It ends up being massive hydropower from Norway. [00:33:00] It just kind of... I want to use the word floods. [00:33:03] It floods the market with hydropower guarantees of origin, and that ends up setting the market. [00:33:09] So anybody that... [00:33:10] doesn't follow these kind of standards, ends up getting the hydropower price, right? [00:33:17] And even if you look into solar, [00:33:19] it feels like there isn't, [00:33:22] to that extent, [00:33:23] more demand for these kind of hyper-specific things that you could see on a very [00:33:29] broad market, [00:33:30] top-down view. [00:33:32] Is that going to change over time? [00:33:34] Currently, I personally don't see an indication that it is changing. [00:33:38] I don't think across the time we've been looking at the market, [00:33:41] we haven't seen major broad shifts or kind of detaching price of solar going. [00:33:47] So I think if more organizations start adopting these kind of policies or... [00:33:54] God forbid Germany says, hey, hydropower is completely off the table or whatever. [00:33:59] I think we're going to see the premiums change immediately, you know, like that. [00:34:04] But up until that happens, [00:34:05] I just think there are so many organizations and so many consumers of energy that [00:34:12] kind of don't care past the point of it's renewable energy that they don't end up [00:34:17] asking these questions. [00:34:18] While corporations have to often ask these questions because... [00:34:23] Well, internally, they have this organization that wants to do good. [00:34:29] I think this is true in many organizations. [00:34:31] But also, [00:34:32] in a lot of organizations, [00:34:33] they just want to avoid the bad optics of, [00:34:36] hey, [00:34:36] by the way, [00:34:37] this organization has actually been doing harm with their policies. [00:34:40] They've been doing bad things. [00:34:42] Look at all of these good intentions, seemingly actions that they've masked as... [00:34:47] This is best industry standard. [00:34:49] This is what we're doing. [00:34:51] And then when you look closely, [00:34:52] you see devastated areas because they've been supporting the wrong kind of energy [00:34:57] or something, [00:34:58] right? [00:34:58] I think they're more afraid of this than the average consumer of renewable energy, [00:35:02] than the average factory, [00:35:03] than the average corporation that isn't part of RE100. [00:35:09] So do you think that's what attribute aggregation as one of the criteria was trying [00:35:13] to achieve, [00:35:14] forcing people to own also the negative side effects of whatever energy? [00:35:20] I love that question. [00:35:22] And I promised that we would talk about the attribute aggregation at some point. [00:35:26] The thing is, why attribute aggregation was a specific thing mentioned here was there... [00:35:34] I don't know if there are any more of these left significantly in the market, [00:35:38] but there has been attempts to break off specific parts of the renewable energy [00:35:46] production profile into different certificates. [00:35:50] So, [00:35:50] for example, [00:35:51] you can say that you're using solar energy, [00:35:54] but you can't say that you have the CO2 or, [00:35:59] you know, [00:35:59] climate impact of using solar energy. [00:36:02] These kind of things, right? [00:36:03] So, [00:36:04] like, [00:36:04] the carbon footprint gets made into a separate attribute and sold separately from [00:36:09] the technology... [00:36:12] Yeah, yeah, yeah. [00:36:13] And there have been historically attempts to kind of break it up into even more details. [00:36:19] And what this attribute aggregation actually says is if you're in a market that has [00:36:25] done this, [00:36:26] you can't just buy technology solar and say it's done. [00:36:29] You have to buy all of the separate pieces and put them back together and then it's done. [00:36:34] So that's why that exists there. [00:36:37] I don't know of a single market right now that actually uses this kind of a system. [00:36:43] I haven't seen it. [00:36:44] I guess this might be a scenario, for example, in India. [00:36:48] For the sake of example, [00:36:49] let's say somehow you've gotten voluntary carbon credits for your wind park or something. [00:36:55] And then at the same time, [00:36:56] you're getting renewable energy credits in this IREC standard, [00:37:00] which give you... [00:37:03] renewable energy usage and then you have a carbon credit on the side functionally [00:37:10] they say if this kind of a situation has happened no you need both you need like to [00:37:14] put it back together otherwise it's nonsense i tend to agree [00:37:22] and while I met one of my previous companies we actually did deal with carbon [00:37:27] credits and we met some let's say mega fossil fuel companies of the world who [00:37:34] actually were putting a lot of effort into breaking down all the attributes into [00:37:39] individual pieces so they can slap on them to different products you know and claim [00:37:45] that's clean water that's clean air whatever like everything like literally [00:37:51] Yeah, yeah, yeah. [00:37:53] Because there are the ESG benefits. [00:37:56] So essentially, there's the UN goals of import topics. [00:38:01] And then they break off like, no, no, like ending poverty is its own thing. [00:38:07] Like water, clean water is its own thing. [00:38:10] Quality education is its own thing. [00:38:11] And these are like properties and we're going to sell them separately. [00:38:15] But in practice, what we see happen is a force, right? [00:38:18] Because what really happens is that people just like, it's just too much information. [00:38:24] Nobody can like truly understand if it actually checks all the boxes. [00:38:30] You'd have to do like lots of research. [00:38:32] And because a lot of these ESG attributes and guidelines are, [00:38:38] let's just say, [00:38:39] they're not like... [00:38:41] you can interpret them in many different ways depending on who you talk with and [00:38:46] you can fulfill them in a lot of very different ways then what ends up happening is [00:38:52] that you can just optimize buying the attributes that are important sell everything [00:38:57] else away and in the end nobody can in practice track or even hold you accountable [00:39:03] if you actually did what you promised to do [00:39:05] In some sense, that's the free market ideal, right, for these kind of systems. [00:39:09] The more obscure, [00:39:10] the more hard to audit, [00:39:11] the more hard to track you make them, [00:39:13] the less auditable it is. [00:39:15] And the less auditable it is, the easier it is to get away with doing whatever, right? [00:39:21] That was a kind of downstream concept. [00:39:24] downstream consequences of what's happening here. [00:39:26] And I think it's very important. [00:39:28] Yeah, [00:39:28] the attribute aggregation, [00:39:30] I think we've discussed and we all agree that it's an important thing that if this [00:39:34] kind of thing exists in your market, [00:39:37] you can't just go like, [00:39:39] no, [00:39:39] we're buying technology solar. [00:39:41] Somebody else is getting the benefits of some other part of it. [00:39:47] We're ending poverty in the region and somehow that's taken out of the solar, [00:39:51] put into another product. [00:39:53] So [00:39:53] sold to another corporation, [00:39:55] the carbon footprint taken out, [00:39:58] sold to another corporation, [00:39:59] and you just get technology solar. [00:40:02] That's all you get. [00:40:03] Do not dare make any other claims about it. [00:40:05] It gets just too complicated. [00:40:07] It does remind me of this anecdote that I heard once is that a son goes to a father [00:40:12] and tells him that, [00:40:13] hey, [00:40:13] father, [00:40:14] can you please teach me how to become rich? [00:40:17] And then the father says, well, take out the sausage from the fridge. [00:40:20] So the son does that. [00:40:21] Then the father says, well, take a knife and cut it to pieces. [00:40:25] And the son cuts the sausage to pieces and says, now what? [00:40:29] And then the father says, well, look at your fingers. [00:40:31] Did they get fatty? [00:40:34] Or greasy? [00:40:36] Sorry. [00:40:37] Yeah, I already covered in sausage. [00:40:39] Well, congratulations. [00:40:40] That's your profit. [00:40:45] Makes sense. [00:40:46] So yeah, I guess we did go over the six criteria. [00:40:51] Last one, actually. [00:40:53] Finally, [00:40:54] I think a really interesting rabbit hole in the whole document I was reading was [00:41:01] project commissioning date or this commencement commercial operations date. [00:41:04] So specifically, if you have, let's say, if you have a solar energy solar park, [00:41:12] it can't be older than 15 years for you to use the renewable energy from it. [00:41:18] That's part of the rules. [00:41:21] So if it's too old, [00:41:25] RE100 companies won't use it. [00:41:27] We've even in the market seen preferences which are significantly stricter than this 15 years. [00:41:32] We've seen five years as well. [00:41:34] So it can't be older than five years. [00:41:36] But there is this preference of, [00:41:38] hey, [00:41:38] I want to support renewable energy production that hasn't paid off yet. [00:41:42] It hasn't gotten to the point where, you know, everything else is gravy. [00:41:46] Like, you know, we paid off the production. [00:41:50] Doesn't really matter too much anymore. [00:41:52] Everything past this point is profit. [00:41:53] We paid off loans. [00:41:54] Everything's great. [00:41:56] And the point is to more motivate newer construction and get that to be more rewarding. [00:42:03] Yeah. [00:42:05] What I found to be surprising among this is if you're using less than 15% renewable [00:42:12] energy under this RE100 guidelines, [00:42:16] you are allowed to use production devices that are older than 15 years, [00:42:20] but only up to the 15%. [00:42:22] Now, who argued for that loophole to be put in? [00:42:27] I'll be honest. [00:42:29] I'm not quite sure. [00:42:30] Looking at it, I don't think I get it. [00:42:34] But there is this thing that, [00:42:35] hey, [00:42:36] if the first 15% of renewable energy, [00:42:39] we won't put this requirement on you. [00:42:42] Everything past that point, you have to have your facilities. [00:42:46] So if you're using 50% renewable energy, 35% of that has to be newer facilities. [00:42:50] 15% of that can be older facilities. [00:42:55] It's especially interesting since you said it almost excludes Hydro. [00:43:00] So those are actually probably the bigger players who will benefit from this one. [00:43:09] Yeah. [00:43:10] It does almost exclude hydro. [00:43:12] A lot of the Norwegian large-scale energy generation that they have over there is [00:43:18] older than 15 years. [00:43:19] They've made these huge projects. [00:43:21] I was just surprised when I saw the number 50%. [00:43:23] I would have loved to see the discussion that led up to this. [00:43:28] Somebody had to have very strong opinions and had to push it very hard with a lot [00:43:32] of pull in order to get this kind of thing approved. [00:43:35] It just looks strange. [00:43:37] Well, we need to obviously invite one of the authors of this paper to this podcast. [00:43:44] Drill them on the specific. [00:43:46] Yeah, I'd love to learn more. [00:43:49] I'm curious, [00:43:50] from a buyer perspective, [00:43:52] looking at the commission date, [00:43:54] how is that data sort of displayed when it comes to purchasing? [00:43:57] Is it simple in terms of breaking that out? [00:44:02] Yeah. [00:44:02] When it at least comes to guarantees of origin, [00:44:05] this kind of data exists on every single guarantee of origin. [00:44:08] There's a set of data that exists always, and that's country. [00:44:15] That is how big is the production facility? [00:44:18] So, you know, is it 50 watts or is it 100 watts? [00:44:23] Is it 2 megawatts? [00:44:25] This is written down. [00:44:26] Supported, not supported. [00:44:27] So is it... [00:44:29] Has it ever received government support for either the construction or the ongoing [00:44:35] production of energy? [00:44:37] If it does, then there's a flag on the Guarantee of Origin that says that. [00:44:41] And then there's Country of Origin. [00:44:43] I believe there might be a couple of more things, [00:44:46] but generally, [00:44:47] I think we haven't seen too much interest in those. [00:44:53] Well, [00:44:53] in addition to the things I mentioned, [00:44:55] I just remembered, [00:44:56] obviously, [00:44:56] there is when it was produced. [00:44:59] I think, you know, that's kind of implied. [00:45:02] That's part of the picture anyway. [00:45:03] But a lot of the data about the actual production facility that made renewable [00:45:07] energy is attached to every single guarantee of origin. [00:45:10] And if it moves throughout the European Union's AIP system, [00:45:15] even if it lands in another registry, [00:45:17] that data is still there. [00:45:18] Super interesting. [00:45:19] I think we should do an actual specific sort of conversation about the buyer [00:45:23] preferences and what it even looks like in terms of distinguishing. [00:45:27] I'm super interested. [00:45:28] Obviously, some of those would mean geos have more or less value. [00:45:32] But yeah, we're coming out to time, so I think we should wrap here. [00:45:35] But it was a super informative episode. [00:45:36] I'm going to drop the link to the credible claims document as well if people are [00:45:40] interested in that. [00:45:41] And yeah, thanks, guys, for coming. [00:45:43] And also, if anybody has any questions, then obviously ask them. [00:45:48] Happy to dive deeper and answer them. [00:45:50] This was a pretty deep dive, and we can go way deeper than that as well. [00:45:54] All right. [00:45:55] All the best. [00:45:55] Bye.