Soldera's Q2 GO Outlook | State of the GO Market | Soldera Markets #9

Transcript of the episode's discussion between Oliver Bonallack, Al William Tammsaar, and Stenver Jerkku

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Hey guys, and welcome back to another episode of Sodera Markets.

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We are the podcast to talk about all of the developments in the Renewable Energy

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Certificate and Guarantee of Origin Space.

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Today we're doing our state of the geomarkets.

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So it's our outlook for 2025 Q2.

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If you missed our 2025 Q1, you can go back and check and see how our predictions stacked up.

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But today I'm joined here with Al and Stenver.

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So it's nice to have you guys.

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Yeah,

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I guess we start by looking back at Q1 and see how we kind of did with our

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predictions last time.

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How do we do?

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Yeah, I think generally we hit the nail on the head.

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I think we got most things right, except one, which we'll talk about in a bit.

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But in the first quarter,

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actually,

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we saw even more market activity than we expected with the March 31st disclosure deadline,

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which affected most countries that use guarantees to origin.

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As a special highlight,

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however,

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I would like to point out the fact that we saw record cancellations of guarantees

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of origin in Norway.

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And this is incredibly relevant because historically Norway is very bad at using

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their own guarantees of origin.

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So we saw an increase right now of around 22 terawatt hours of more consumption in

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their domestic market than last year,

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which is a huge increase.

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The final numbers are still pending.

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We'll get to see how everything played out after they have calculated the residual

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energy mix and everything.

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But usage of guarantees of origin in Norway has gone up significantly.

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And I think that's major progress for the market.

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Since historically,

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the reason why Norway is such a major exporter is because their domestic market thinks,

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oh,

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we're green anyway,

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doesn't put money into this and sells off essentially the greenness of their

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electricity to other countries.

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And now both of them think that everything's fine.

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While in reality, the energy producers in Norway...

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They're selling their green electricity to someone else,

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not you,

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like the factory that's not buying it.

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It's great to see that they're starting to buy because I actually was just yesterday,

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came back from direct market meeting in Amsterdam,

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and people are starting to get very critical of Norway.

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Actually,

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there were sessions and seminars where people put it straight on the slides and

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were criticizing Norway for that.

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And somebody even was asked on stage that,

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hey,

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if Norway would leave the AIB,

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would it raise the geo prices?

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And he was like, yes.

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So like, yes, people are getting critical of Norway and I think it's rightfully so.

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But a very interesting counterpoint, actually.

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I met the director of IREC and he said that we had a quite interesting conversation.

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He said that we can't blame Norwegian government for that because Norwegian

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government is not responsible for reporting like we should be blaming consumers.

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I actually want to address that because this is such an interesting point.

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This brings me back to the carbon markets.

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In carbon markets, it was the same thing.

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Everybody was shifting the blame.

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It's not Vera's responsibility.

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It's the project's responsibility or the VVP's responsibility or whatever other

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term that nobody understands.

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This is the law.

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You know, you joined AIB, it's the law, you know, you need to follow the rules.

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You need to enforce the rules.

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If you're not enforcing them, like who is like, I'm sorry.

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Like I'm in the firm belief that it's Norway's government fault.

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Not anybody's government's fault for not enforcing the rules they have agreed.

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And I will fight that opinion.

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Like anybody that comes to tell me it's not government's fault and consumers fault.

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No, yeah, consumers break the rules, but who's enforcing it is the question.

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And like,

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this is not the voluntary carbon market where nobody's enforcing and everybody's

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just chitchatting.

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Yes.

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Another thing that I will point out is Norway is not part of the European Union.

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So that makes everything very complicated because the renewable energy directive

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that we have in Europe,

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Norway hasn't even fully adopted it.

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Not RET2, definitely not RET3.

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So everything's a bit weird and strange compared to other countries that have

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guarantees of origin.

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They work on, in some sense, outdated requirements at this point.

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Yeah,

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I'm very excited to see where all of these conversations go of Norway potentially

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joining the EU or at least transposing like renewable energy directive to its full extent.

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Because right now it's in this like very strange borderland between being adopted

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fully and not being adopted at all,

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where everybody's just kind of closing their eyes and going like,

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okay,

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it's fine.

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It's okay.

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It's okay.

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Just keep exporting.

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It's fine.

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It doesn't make sense that you sell away your renewable power and then at the same

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time you claim that we have renewable power.

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This is not good for the market.

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I'm very scared of the credibility of the market.

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I worked in carbon markets and we need to get rid of these discrepancies.

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So despite all of that, I mean, what's behind the driving cancellations in Norway then?

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Do we know?

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A big part of this is like CSRD because there are a lot of Norwegian companies or

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companies that have a Norwegian presence that follow the CSRD.

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And then they do all of the nice things that they have to disclose the energy mix

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and they have to follow certain protocols.

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And it does seem that that has moved the needle.

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There are also major industrial players in Norway that have announced that

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yeah okay we're taking it seriously we're working on it all of this has moved

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demand forward significantly and that's very positive it seems like the market over

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there is moving in the right direction i guess the only question is how long is it

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going to take for everything to kind of settle out and start making perfect sense

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Yeah,

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and I actually heard in the conference that,

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if I'm not mistaken,

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but the Iceland aluminum refineries now started buying geos.

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So those are all very, very good signals and very encouraging of that.

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And applaud all the stakeholders involved who have done the hard work in these

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local markets to push this forward and make sure we have a credible system across

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the EU.

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All of this being said,

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we are still in a sort of oversupplied market state,

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I think,

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when it comes to guarantees of origin.

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There's quite a big overhang.

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We've seen some reports that have essentially said that the overhang didn't really

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increase last year significantly.

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We're still dealing with about the same amount of guarantees of origin circulating

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in addition to whatever is being produced.

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It hasn't gotten worse, but it also...

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So far, hasn't gotten significantly better.

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And I think the prices also reflected that across the last quarter.

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We did see 2024 prices go down and down and down, stabilizing at some point.

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And we did see 2025 prices stabilize a bit faster and, well...

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We basically just had a sideways kind of a couple of months.

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I would say pretty good market action, but at price points that aren't very inspiring.

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Actually, I'd like to inject some of the learnings from direct market here again.

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You mentioned the word pretty good market action.

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What do you mean by that?

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Volumes were good.

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Like we did see like pretty good trading volumes.

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So here's a nice question, right?

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So we had good volumes,

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we had record cancellations,

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but we had sideways market,

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which in trading term is called crab market,

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right?

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Actually,

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a lot of traders in the conference,

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like they expressed the concern about the fact that we have a

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we are having a sideways market,

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nothing is happening because,

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you know,

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traders,

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you know,

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they take positions and they trade positions.

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And if the market is not moving, there's nothing to take over there.

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And,

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you know,

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it's clear some firms are struggling actually on that front and some organizational

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changes are happening.

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Rumors are going on in some places.

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But can you explain to that or what's your hypothesis on why we have record volumes,

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record cancellations,

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but not price moments?

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So I think a lot of this comes down to the uncertainty.

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And that's also something that we,

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I think,

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can smoothly transition into uncertainty in the market of like guarantees of

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origins role going forward,

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especially due to all of the geopolitical turmoil.

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So we have our own position.

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Obviously, energy independence also means having your own production capacity.

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It means having a strong base of renewable energy.

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It means having good storage, and it means having strong baseload.

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Stuff like nuclear or, well, potentially gas, depending on response speed, right?

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But ultimately, we need to be energy independent.

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This is just a priority for Europe as a geopolitical entity.

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But we have seen the omnibus package.

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So for context, European Union, I don't think has still completely accepted it.

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The proposal was made to essentially simplify the CSRD reporting scope,

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this thing that has been driving significant demand,

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to reduce the scope from 50,000 companies to 10,000 companies.

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And to significantly simplify the kind of data points required in it,

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I don't think it affected renewable energy.

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It affected all of these like qualitative questions.

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But a lot of this has damper on sustainability as a theme that corporations

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prioritize or believe in.

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I'm interested,

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sorry to sneak something in here,

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but last episode,

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I mean,

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last quarterly report for the Q1 Outlook,

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you mentioned that eventually if you try and model everything,

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it gets to the point where you're trying to model the entire world economy.

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And I thought that was a really profound point.

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But I would say that recently the world economy has been pretty volatile.

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And I think you can completely disregard it and isolate GOs to their own little vacuum, right?

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So how has the recent volatility on the world financial stage impacted GOs at all?

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Well,

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I think this is one of the things that we ultimately see is that the sustainability

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has taken a backseat to questions of defense.

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I think defense has become a more major theme in global discussion.

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And I think that is reflected in, to some extent, the excitement around guarantees of origin.

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Now, the flip side of this is that we did see record cancellations.

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I think we will,

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after all of the numbers have come in,

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we'll see that the adoption of guarantees of origin is at an all-time high.

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While at the same time, this kind of vibe of the market, you could say, is not optimistic.

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And because of these animal spirits essentially driving what people think things

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are worth,

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we're ultimately going to have depressed prices if people just have this vibe of

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Well,

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maybe guarantees of origin,

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maybe they aren't the thing,

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even though the numbers would suggest heavily that they are.

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I asked that question actually from many people in conference as well,

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and this was a big discussion topic over there.

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People had very differentiating opinions on it, actually.

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It was quite interesting to see.

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Many said, we don't know, no idea how it's going to affect, of course.

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A lot of uncertainty.

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Some believe the bearish narrative,

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believe that the tariffs will start,

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you know,

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further reducing the sustainability importance and like all the light green stuff

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will be starting to be rollbacked.

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And some believe that they'll have no impact.

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because geos are not in the US market.

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It doesn't matter that the European laws and objectives still apply and the

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companies doing business in Europe still need to,

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you know,

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be compliant with EU laws.

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In fact,

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like the Germany,

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I think just announced with the new government coalition that they're going to

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firmly stay on path to the 2040 net zero commitments.

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And in fact, they increased some requirements as well.

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Which was an interesting side note,

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they actually are considering accepting international carbon credits for the

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reduction targets as well,

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but that's another story.

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That will be very interesting.

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Yes.

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All right.

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But yeah,

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another thing that we gave an overview of last time when we had this call was the

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German elections.

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And as Denver already mentioned that the German election,

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they went exactly as everyone predicted,

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ended up with a CDU,

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CSU and SPD coalition.

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The negotiations possibly even went better than expected in the sense of there were

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negotiations which ended up getting more green topics into the picture.

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And overall,

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I'd say this was even better,

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possibly from a sustainability perspective than we were expecting as this kind of

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baseline scenario.

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And I think we should mention that,

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obviously,

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you know,

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for those who haven't been following politics too closely,

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last time we were worried about,

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you know,

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a certain party getting into German political power and that didn't happen,

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which is overall,

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it's a good thing for the geo market.

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So I guess now let's look at short term market drivers.

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So what do we think is going to happen in the sort of near to immediate term that's

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going to be impacting geos that traders should be keeping an eye on?

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So one of the major things to highlight is just the fact that so far this year,

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we have produced 47 terawatt hours less than last year in terms of renewable energy.

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At least 47 terawatt hours less.

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It's been less wind this time around.

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And it's been actually even a bit less hydro this time around.

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And all of this has created this picture where we're actually quite behind on

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renewable energy generation than what you would otherwise expect.

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i think this is something people are possibly sleeping on because again the market

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overhang like the total amount of floating supply that has been carried over year

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to year

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is somewhere in the ballpark of 180 terawatt hours.

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That's it.

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So the lowest the overhang has ever been is around 90 terawatt hours.

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The highest it has been is like 180 terawatt hours.

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The difference is around 90 terawatt hours.

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That's the difference of like this overhang.

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I think the underproduction has actually eaten into this overhang significantly already.

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If this continues, who knows?

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Can't predict the future.

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But even if we don't like compensate somehow for this underproduction going forward

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into this year,

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I think this will have profound effects on supply and demand already.

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And I think that is a very bullish signal.

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Now,

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the second part we need to consider is hydro,

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since now that we're entering the time where we're getting snowmelt and we're

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seeing Norway's hydro really start kicking in and doing more and what's happening

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with the reservoir levels.

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Again,

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they are at what you could say unusually high levels,

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but the total energy stored,

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I'm saying a number off the top of my head and perhaps we can fact check you this

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if I'm wrong.

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But I believe the total storage is less than 12 terawatt hours total.

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So when people talk about the effect of reservoir levels,

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I think they are somewhat overemphasizing how much this could possibly affect

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market dynamics compared to what people have been sleeping on,

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which is like major underproduction actually across the whole EU region right now.

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So I'd say actually we ended up this quarter in very positive supply and demand dynamics.

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And I think I'm just sad this has not really materialized in the prices yet.

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I think we will see some changes coming up.

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But again, can't predict the future with complete accuracy.

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I do have, looking at the numbers, a sort of bullish feeling about it.

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That's cool to hear.

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Does this apply to both 24 and 25 or only 25?

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I would say it more applies to 25 because 24 is really heavily dropping off a cliff.

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So what you have to keep in mind is that in a couple of countries,

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you can't use 24 geos for 25 consumption.

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Yes,

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that reduces the amount of areas where you can realistically even use the old

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guarantees of origin.

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They have less market staying power.

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So if you have them for speculative reasons, like at some point they will just go to zero.

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But that's like part of the picture, right?

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And ultimately, well, we are still in overproduction.

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So I think there will just generally be a lot more people trying to get still

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offload their 24 geos when trying to buy them.

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Another thing that I would like to highlight is actually while we have been talking

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about the March disclosure deadline,

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Germany does not have a March disclosure deadline.

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Their deadline is in, I believe, June.

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It's like a bit of time to consume 24 geos.

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But for the second half of the year,

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obviously,

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they will rapidly be losing value anyway,

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because everything will just start expiring.

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So that's kind of the last run out the door.

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I don't think the market liquidity will be significantly high,

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except for these regions,

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for example,

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in Estonia,

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where you can buy guarantees of origin,

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which are just about to expire and then have another six months where you can use them.

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Like,

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you know,

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in those kind of arbitrage situations,

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I think that kind of demand will stick around.

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But it has limited use cases in the market.

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I wasn't aware of this until you mentioned it recently.

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Do you want to quickly go over that little like 12 to 18 months difference with

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this sort of EU law?

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Because that's the base, isn't it?

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According to the Renewable Energy Directive,

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guarantees of origin can be traded for up to 12 months.

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12 months is the limit for trading period.

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That's like you can't have guarantees of origin that are tradable longer than that.

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But you can,

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however,

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specify in your laws,

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if you want,

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up to a 18-month period from issuance where they can be used.

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So that means for the last six months,

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you can't transfer them off of your account,

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but you can cancel them.

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You can use them still.

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Like that, there's like this sort of grace period.

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But what that grace period allows you is if you are,

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for example,

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a major utility,

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you can buy these 24 geos and keep using them on an ongoing basis for whatever you

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need if the law doesn't tell you to do otherwise.

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And I think that's like a major point of arbitrage.

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I believe Italy changed their laws recently to also a law force.

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That's been a kind of point of drama there.

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What's your opinion on that?

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Is that a good thing or is that a bad thing?

[00:18:51]
Personally,

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I feel guarantees of origin from one production year at minimum,

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what our law should say.

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Same production year, same consumption year.

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So like if you are consuming in 24, you're producing in 24.

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If you're consuming in 25, you're producing in 25.

[00:19:07]
I think that makes sense.

[00:19:09]
The market...

[00:19:10]
already has differentiated prices and liquidity for different vintages,

[00:19:15]
this wouldn't be a major step for the market.

[00:19:18]
Any markets inside of the EU already do this,

[00:19:22]
but I think this should be enforced overall because it creates a very clean supply

[00:19:28]
and demand break.

[00:19:29]
So if you have these kind of years of major overproduction,

[00:19:33]
it doesn't end up kind of haunting you like some sort of ghost for the next four

[00:19:37]
years while you try to get rid of like this huge overproduction that didn't really

[00:19:42]
have like appropriate demand on the other side at the time.

[00:19:45]
Yeah, I agree.

[00:19:46]
It's sad to see Italy adopted this change.

[00:19:50]
to sort of give you more time to hold your geos after trading and you know being in

[00:19:56]
Estonia and I was already critical of other countries I can definitely be critical

[00:20:00]
of Estonia here as well I think Estonia should change this you know they should

[00:20:05]
also cut it after 12 months and

[00:20:07]
you know even get to the german system as you mentioned one vintage for one year or

[00:20:13]
even you know eventually more granular like maybe rex do it but i agree like it's

[00:20:18]
uh we should be moving towards more specific not like less yes and uh i am

[00:20:25]
completely okay with the six month holding period whatever actually it should be

[00:20:29]
just whatever the disclosure deadline is right

[00:20:32]
But you should be able to hold it for how long you need to actually report your

[00:20:36]
consumption year.

[00:20:37]
That's fine.

[00:20:38]
But I don't think you should be able to like, yeah, carry over 24 production into like late 25.

[00:20:46]
Does that make sense?

[00:20:47]
Yeah.

[00:20:47]
Yeah.

[00:20:48]
You're right.

[00:20:48]
Actually this, I think that's a way better way to put it actually.

[00:20:52]
Yeah.

[00:20:52]
It wouldn't really require a lot.

[00:20:53]
The market can do it.

[00:20:55]
The market's completely capable of handling this.

[00:20:57]
There's no legal barrier to do this.

[00:20:59]
Like the Renewable Energy Directive does not limit you in doing this.

[00:21:03]
There are countries that already do this.

[00:21:05]
I just think we should accept this as a common practice because that already brings

[00:21:10]
us just a bit closer to this granularity.

[00:21:13]
And it also connects the market a bit more

[00:21:16]
Like,

[00:21:17]
I don't know how we would handle liquidity if we get into this like hourly level,

[00:21:21]
but liquidity is a completely reasonable,

[00:21:24]
easy to handle question when we talk about like yearly production.

[00:21:28]
Yeah.

[00:21:28]
So if any policymakers here listen to this,

[00:21:31]
please,

[00:21:32]
please force us to have at minimum yearly vintages for yearly production.

[00:21:37]
Everybody will be happy.

[00:21:38]
Nobody will be, well, maybe some will be sad.

[00:21:41]
I'm sure some would be sad.

[00:21:43]
any pain like that would be very temporary and you would be already playing a very

[00:21:47]
dangerous game if you were hurt by this so just to wrap up the short-term supply

[00:21:52]
conditions before we look at demand we're seeing continuing renewable

[00:21:56]
underproduction and we're also looking at sort of hydro reserves in the nordics and

[00:22:01]
in iberia that are well above seasonal averages so in demand what are we seeing

[00:22:06]
yeah so as we've mentioned a couple of times there was this march 31st disclosure

[00:22:11]
deadline this has now passed what we are already seeing in the market is that

[00:22:15]
there's not a lot of volume trading hands at all right now like it's pretty light

[00:22:19]
in that sense likely going to be in this sort of trading hangover phase for like at

[00:22:25]
least a couple more weeks as people get like their stuff together and start

[00:22:29]
figuring out the next next compliance targets

[00:22:31]
As an important highlight, Germany's disclosure deadline is at another time.

[00:22:35]
So that does affect the dynamics a bit.

[00:22:38]
But overall, you can expect at least this month to be relatively slow when it comes to trading.

[00:22:44]
The second element in this picture is,

[00:22:47]
well,

[00:22:47]
2024 GEOs are losing value and we're losing value fast.

[00:22:52]
And as...

[00:22:54]
24 vintage geos become more readily available as solar production kicks in,

[00:22:59]
as we see wind parks do berthing,

[00:23:02]
as we see snow melt and hydro production.

[00:23:06]
25 geos will become more readily available as 24 geos start rapidly expiring.

[00:23:12]
And because of this,

[00:23:13]
you can expect that 24 GOs,

[00:23:16]
you are going to be in trouble if you're still holding them at this point.

[00:23:19]
This is an annually recurring thing.

[00:23:22]
You really shouldn't be holding on to 24 GOs longer than you have to if you have

[00:23:27]
any financial interests in them for selling.

[00:23:30]
If you have only financial interests in terms of buying or holding or having this

[00:23:35]
nice six month grace period,

[00:23:37]
very cool.

[00:23:37]
But if you are in this situation where you're still expecting to sell your 24 geos,

[00:23:42]
it's kind of getting late,

[00:23:43]
you know,

[00:23:43]
like they're expiring actively.

[00:23:45]
Are you addressing real,

[00:23:46]
are there people out there who are actually in that situation or is this kind of

[00:23:49]
just like hypothetical?

[00:23:50]
Oh my God.

[00:23:51]
Every time.

[00:23:52]
Like, I swear.

[00:23:53]
Well, at Soltera, we help a lot of very large customers handle their guarantees of origin.

[00:23:58]
And one of the things that we chronically have seen with many customers is that you

[00:24:02]
finally open up the registry account and you realize that there's like an absurd

[00:24:07]
amount of expired geos from years where like guarantees of origin were worth like

[00:24:12]
six or seven euros.

[00:24:13]
And then you're doing the bath in your head and you're looking at this and going like,

[00:24:16]
wow,

[00:24:16]
this is a half a million dollar graveyard.

[00:24:18]
What am I looking at?

[00:24:19]
Like, it's...

[00:24:20]
It feels so bad.

[00:24:22]
You know,

[00:24:22]
this is ultimately how we help in Soldera is that we make sure everything's handled

[00:24:26]
and sold.

[00:24:27]
Like when you see that this isn't happening in a company and you just open up the

[00:24:31]
accounts and see what's happened before,

[00:24:33]
it kind of like,

[00:24:34]
I don't know,

[00:24:34]
it makes me sad.

[00:24:35]
As a renewable energy producer, you should be getting all the money you should be getting.

[00:24:39]
Yeah, I mean, it's the key to transition after all.

[00:24:42]
Let's talk about forwards then.

[00:24:44]
I think that's a very interesting topic we haven't gotten there.

[00:24:47]
Or is there anything we're missing before that?

[00:24:49]
So big uncertainty when it comes to forwards, obviously.

[00:24:52]
And I think we see this reflected in the prices.

[00:24:54]
Prices, I would say, on the forward curve are historically low right now.

[00:24:59]
they're a bit over a euro the foro premium is still there obviously the market is

[00:25:05]
valuing 26 vintage geos quite a lot higher than 25 like current year geos but since

[00:25:13]
overall prices are relatively low compared to what we've seen in the last couple of

[00:25:18]
years we have seen a lot of market interest in actually locking in these prices on

[00:25:23]
both sides so the liquidity is quite high it's just that prices that are

[00:25:27]
I wouldn't say necessarily inspiring.

[00:25:29]
You know,

[00:25:30]
there is a completely likely scenario where we end up getting into next year and we

[00:25:34]
are at the kind of prices that we're looking at right now.

[00:25:37]
They could also be significantly higher.

[00:25:39]
They could also be a bit lower.

[00:25:41]
I think it's a bit like asymmetric right now in the sense of how much lower can it

[00:25:45]
go compared to how much higher can it go?

[00:25:47]
I don't know how well this is factored into the forward prices right now.

[00:25:51]
It's really a question of every person's ultimate goals and objectives as they're

[00:25:57]
managing their guarantees of origin.

[00:25:59]
It really depends, right?

[00:26:01]
Do you want the stability?

[00:26:02]
Do you want the security of knowing what your geos are going to be worth?

[00:26:05]
Do you want to risk it a bit more and have more ongoing market exposure?

[00:26:09]
that's really a personal question at the end of the day i i think the risks are a

[00:26:13]
bit asymmetric right now in the sense of there's a lot of room up but there doesn't

[00:26:18]
feel like there's a lot of room down currently my feeling about this what i am

[00:26:22]
seeing is that over the last quarter and likely we're going to keep seeing this

[00:26:27]
forward deals will keep making up a very large amount of market transactions this

[00:26:31]
kind of market activity will likely keep going what sort of premium are we looking

[00:26:35]
at right now for forwards

[00:26:37]
Currently off the top of my head, we're looking at now this is very current.

[00:26:41]
And obviously I have to preface every time we talk about prices, it will change tomorrow.

[00:26:45]
Like this is a very relative thing.

[00:26:47]
The market is quite volatile.

[00:26:49]
Spot prices are a bit less than 0.7 euros per megawatt hour when it comes to spot.

[00:26:56]
And it's like a bit above a euro when it comes to forwards.

[00:27:00]
So we are looking at over a 30% premium, 30 something percent premium.

[00:27:04]
It is like a premium.

[00:27:05]
Definitely.

[00:27:06]
But when you look at it in terms of like absolute cents,

[00:27:09]
we're looking at maybe like a 30,

[00:27:11]
40 cents premium per megawatt.

[00:27:13]
So what's our recommendation now?

[00:27:15]
Currently, our recommendation is still locking in some volume.

[00:27:19]
Our current recommendation, our recommendation system is that we either recommend 60% or 30%.

[00:27:25]
Like we don't really get too much more specific on this.

[00:27:29]
And this is essentially based on our understanding of how is the

[00:27:36]
Right now, feeling more towards this 30% than the 60%.

[00:27:40]
I don't think the prices are necessarily very inspiring.

[00:27:44]
But on the other hand,

[00:27:45]
the stability that you can get from it to protect you from the downside is worth exploring.

[00:27:51]
Obviously, can't be generalized as overall financial advice.

[00:27:55]
But our position is there's a lot of room up.

[00:27:59]
There's some room down.

[00:28:00]
But it's very asymmetric in that sense.

[00:28:02]
Yeah, I guess it entirely depends on risk profile, right?

[00:28:05]
I mean,

[00:28:05]
if you're a producer who's,

[00:28:07]
you know,

[00:28:07]
kind of not struggling,

[00:28:08]
but you might not be getting by as easily as others,

[00:28:10]
your risk profile is going to be lower.

[00:28:11]
So...

[00:28:12]
Yeah,

[00:28:13]
and you have to keep in mind,

[00:28:14]
the most important thing for renewable energy producers is cash flow.

[00:28:18]
Like they need to have predictability in their cash flow.

[00:28:21]
They need to understand how the money is going to work out.

[00:28:23]
And having for prices locked in just allows them to do this a bit easier.

[00:28:28]
So I definitely understand the interest in locking in for prices.

[00:28:31]
But liquidity is very much there.

[00:28:33]
Like you could probably lock in whatever volumes you want right now.

[00:28:37]
But on the other hand, again, that inspiring.

[00:28:39]
It's all I'm going to say.

[00:28:40]
Let's jump into the long-term market drivers.

[00:28:43]
Obviously,

[00:28:43]
these are the things that are going to make the market change the most

[00:28:46]
significantly over a long period of time,

[00:28:48]
but they are equally the most speculative.

[00:28:50]
So yeah, let's dive in.

[00:28:52]
I think the first is CSRD scope production.

[00:28:54]
Yeah, most definitely.

[00:28:56]
I think this has been the biggest potential upset in the guarantees of origin market overall.

[00:29:01]
It's just the fact that before it used to be very nice that,

[00:29:06]
hey,

[00:29:06]
you can just depend on the fact that 50,000 companies over the next couple of years,

[00:29:11]
they will have to actively think about how they are disclosing their energy consumption.

[00:29:16]
Where does it come from?

[00:29:17]
What does it do?

[00:29:18]
If the omnibus goes through, which there is, I think, a strong indication that it will,

[00:29:22]
This will push back the clock and likely reduce the amount of companies that have

[00:29:27]
to report this overall from 50 to 10,000.

[00:29:30]
Overall,

[00:29:31]
a sort of bearish element and likely what is depressing the forward prices for

[00:29:37]
guarantees of origin,

[00:29:39]
since it's being factored in that the estimated demand is lower than it was previously.

[00:29:45]
Most likely, it's feeling like it will go through.

[00:29:48]
I guess we will see next time we have a quarterly outlook at the very latest,

[00:29:52]
but this will reduce the amount previously estimated amount of demand from some

[00:29:58]
level down to some new level,

[00:30:01]
which is just lower.

[00:30:02]
So the supply and demand dynamics change because of this.

[00:30:06]
So the scope of companies reduces from 50,000 to 10,000,

[00:30:10]
but what are the sort of scale of those companies within that scope,

[00:30:13]
right?

[00:30:13]
Because you don't just want to immediately assume it's a 5x reduction, right?

[00:30:16]
Because companies are larger.

[00:30:18]
Yes, the requirements will stay around for the largest 10,000 companies.

[00:30:23]
And these are ultimately the ones consuming a big amount of the electricity on the grid.

[00:30:30]
In that sense, this is a sort of long tail situation.

[00:30:33]
I do not believe we are cutting it down by five times.

[00:30:37]
We're likely cutting it down maybe by half of like the expected CSRD consumption or

[00:30:44]
consumption directly driven by CSRD over the next couple of years.

[00:30:48]
And just in terms of timelines, so the package has already been finalized.

[00:30:52]
So anyone who wants to go and sort of estimate how much impact that will have,

[00:30:57]
they can go and check that out.

[00:30:58]
But it still has to go through the legislative process, which could take a few months.

[00:31:01]
Although I'm reading that there are calls to make it fast-tracked so we don't

[00:31:04]
actually know exactly when it will be announced.

[00:31:07]
Yeah,

[00:31:07]
there's also a vote,

[00:31:08]
I believe,

[00:31:09]
happening quite soon to stop the clock,

[00:31:12]
as they say,

[00:31:13]
for new companies getting enrolled into having to do the CSRD reporting.

[00:31:18]
I don't know what the status is with this,

[00:31:20]
but likely that's a really important part of the picture in the short term.

[00:31:24]
But again,

[00:31:25]
when we're talking about long-term drivers,

[00:31:27]
currently,

[00:31:28]
even the threat of CSRD scope getting reduced is having a effect on how for prices

[00:31:36]
are getting modeled.

[00:31:37]
I can't tell you if this is an appropriate estimate or not.

[00:31:42]
It feels like the impact has been quite major.

[00:31:46]
And I guess we will see over the next couple of months if for prices rebound after

[00:31:52]
some more clarity has been created about what exactly is going on.

[00:31:56]
I mean,

[00:31:56]
I guess to take a sort of extra speculative bullish approach,

[00:31:59]
the argument could be made that once they've kind of made this categorization

[00:32:03]
between the large companies and the smaller companies.

[00:32:06]
They then have kind of more potential to implement strategies that might be kind of

[00:32:11]
bullish on the geo market towards the larger companies who can afford to kind of

[00:32:15]
implement those changes without sort of negatively affecting the bulk,

[00:32:18]
who I guess were the reason this kind of got scaled back in the first place.

[00:32:21]
Right.

[00:32:22]
So, I mean, we'll see how it develops.

[00:32:24]
I don't think it's an immediately super bearish thing, kind of just off the bat.

[00:32:27]
We'll have to see how it goes.

[00:32:28]
second major element that is a very interesting thing to keep track of from the

[00:32:34]
sideline is hydrogen so i don't know how much we have talked on this podcast about

[00:32:40]
hydrogen and how it relates to guarantees of origin there's such a thing as green

[00:32:45]
hydrogen production which is essentially hey this hydrogen has been synthesized has

[00:32:50]
been created with electricity from renewable energy sources

[00:32:55]
Now,

[00:32:55]
the European Union has a sort of rulebook for how these kind of claims can be made,

[00:33:01]
but it's currently incredibly strict.

[00:33:03]
Like,

[00:33:03]
you have to have temporal and location matching,

[00:33:06]
so the production device has to be relatively close to the place where you're

[00:33:12]
actually

[00:33:12]
creating the hydrogen it has to be an unsupported electricity has temporal

[00:33:18]
requirements meaning the exact hour that you're consuming the electricity it needs

[00:33:23]
to have been producing the electricity and all of this has created a very high bar

[00:33:28]
to actually get over considering the state of

[00:33:32]
the electricity market when it comes to guarantees of origin,

[00:33:35]
it has created this very strict list of things that are actually quite hard to

[00:33:38]
comply with.

[00:33:39]
Now,

[00:33:39]
there is a push to make this significantly easier to relax these kinds of requirements,

[00:33:45]
which would make it significantly easier to produce green hydrogen.

[00:33:51]
It would lower the compliance barrier to do so,

[00:33:54]
and it would have a major potentially increase in demand for guarantees of origin.

[00:34:00]
Because ultimately, you can have green hydrogen when it's produced from green electricity.

[00:34:06]
I mean, let's hope the hydrogen lobby can have a significant impact here.

[00:34:10]
Because it feels to me like not having this already just kind of undermines the

[00:34:15]
purpose of GEOS within the Renewable Energy Directive,

[00:34:17]
right?

[00:34:18]
It's like you're saying that we have an instrument that allows for trackable energy consumption.

[00:34:22]
And yet in one of the key use cases,

[00:34:25]
which is green hydrogen,

[00:34:25]
you're not allowing it to be implemented.

[00:34:27]
Right.

[00:34:27]
So I don't understand why this is not.

[00:34:29]
Exactly.

[00:34:29]
They are allowing it to be implemented,

[00:34:31]
but the bar is so high that it might as well like not be there.

[00:34:35]
Right.

[00:34:35]
Yeah.

[00:34:36]
It almost seems like they hired some wrong consultants to put those papers together.

[00:34:42]
Because obviously these weren't like geo market players and the people who actually

[00:34:46]
deal with this stuff.

[00:34:47]
The way it's structured and how I read it and all these requirements,

[00:34:52]
it really feels like it's done by carbon market people.

[00:34:55]
And these two things are not the same.

[00:34:57]
They're not the same country.

[00:34:59]
Whoever wrote this and pushed this through, it seems like they were just not energy people.

[00:35:05]
They were carbon people.

[00:35:06]
I'm sorry if they were, but they weren't using the systems we have in place.

[00:35:10]
They were inventing new systems.

[00:35:12]
And that's very bad.

[00:35:15]
we we shouldn't be creating extremely complex systems that just attract consultants

[00:35:20]
and completely destroy the use cases because i spoke with many hydrogen players in

[00:35:25]
the rec market and they said it's just very bad shape like yeah saying you know

[00:35:31]
like uh europe's biggest export is regulation i think this is one of those

[00:35:35]
instances again we we are very

[00:35:37]
very good at putting together arcane sets of rules requiring professional

[00:35:42]
consultants to just go like,

[00:35:44]
ah,

[00:35:44]
well,

[00:35:44]
it says this over here.

[00:35:46]
You can't do that.

[00:35:47]
No, no.

[00:35:47]
It's not even well done rules.

[00:35:49]
Like it doesn't fit into the frameworks we built out in the guarantee of origin framework, which

[00:35:56]
Frankly, it's actually, I would say, pretty good framework.

[00:35:58]
Of course, there's improvements we can make and there always is.

[00:36:01]
But I mean,

[00:36:03]
compared to carbon markets,

[00:36:05]
this is like,

[00:36:06]
you know,

[00:36:07]
iPhone versus like Disney's phone with the cord.

[00:36:10]
You know, there's other comparisons.

[00:36:12]
I fully agree.

[00:36:13]
And,

[00:36:13]
you know,

[00:36:13]
even if you wanted to have this,

[00:36:15]
like,

[00:36:15]
temporality element that,

[00:36:16]
hey,

[00:36:17]
okay,

[00:36:17]
in the same timeframe,

[00:36:18]
well,

[00:36:19]
you know,

[00:36:19]
the guarantee of origin,

[00:36:20]
like,

[00:36:20]
the lowest,

[00:36:21]
like,

[00:36:21]
resolution we have right now is a month.

[00:36:23]
So at least, like, you know, go, like, okay, for now, we'll just go month.

[00:36:27]
When we get hourly geos, we'll think about it.

[00:36:30]
But for now, it's a month.

[00:36:31]
But then instead,

[00:36:32]
you have this,

[00:36:32]
like,

[00:36:33]
no,

[00:36:33]
no,

[00:36:33]
it needs to be trackable down to the exact hour,

[00:36:35]
even though we don't have a mechanism for

[00:36:37]
to do this i don't know it's your problem figure it out like that's kind of it's

[00:36:41]
not reasonable for the state of the infrastructure to support it it's just kind of

[00:36:45]
wish casting some sort of like i would like a system to exist that would handle

[00:36:50]
this and ultimately like we just don't have it i guess like the drive to improve

[00:36:55]
that sort of infrastructure and granularity isn't going to be there unless we have

[00:36:58]
all the market participants who are sort of involved and want to make that push

[00:37:01]
happen so yeah i still think we need to we need to onboard every every sector we

[00:37:05]
can

[00:37:05]
Norway will keep being a topic like in terms of long term like will they join the

[00:37:09]
EU in that case everything will get resolved by just them accepting the actual

[00:37:14]
regulation for guarantees of origin and how they are reported.

[00:37:17]
Right now we're kind of in this like middle in between state that it's very awkward

[00:37:21]
and my hope is that over time it'll get better.

[00:37:24]
We'll see.

[00:37:25]
But they are a big market player in the guarantees of origin market.

[00:37:29]
And at the end of the day, you can't afford to ignore them.

[00:37:31]
You have to figure out what's happening in Norway because it does affect,

[00:37:35]
especially on the supply side,

[00:37:37]
it does affect what's happening.

[00:37:38]
I can't guess I asked you to simplify this in like a super easy way.

[00:37:42]
But could you explain to me,

[00:37:44]
who's kind of relatively new to the guarantee of origin ecosystem,

[00:37:47]
how you have countries like Poland and Romania who are in the EU,

[00:37:50]
but not in the AIB.

[00:37:51]
But then you have countries like Norway,

[00:37:53]
who are kind of like,

[00:37:53]
you know,

[00:37:54]
like these third states who are somehow in the AIB.

[00:37:57]
Like, I can't wrap my head around it.

[00:37:58]
Yeah.

[00:37:59]
So AIB,

[00:38:00]
the association of issuing bodies is a sort of,

[00:38:02]
it's a sort of meta registry,

[00:38:04]
which means that they connect registries between each other.

[00:38:08]
So guarantees of origin from one country can move to another one.

[00:38:11]
You could think about this similarly to how we have in banking, we have Swift.

[00:38:15]
So essentially there's this system where banks communicate with each other.

[00:38:18]
And then, you know, you can do from one bank to another bank to somebody's account.

[00:38:23]
This is the kind of role that the AIB fills.

[00:38:26]
They make sure,

[00:38:27]
like in this example,

[00:38:28]
right,

[00:38:29]
that the banks can communicate and that there's like this single source of truth

[00:38:32]
that both banks can agree.

[00:38:34]
Yes, money has been sent out.

[00:38:36]
Yes, money has been received.

[00:38:38]
All of this is, we're on the same opinion on this whole process.

[00:38:41]
Everything's fine.

[00:38:42]
Now, AIB comes with requirements.

[00:38:45]
It requires that you have implemented the sort of renewable energy directive standards.

[00:38:49]
And Norway has exactly up to that point.

[00:38:52]
Now,

[00:38:52]
why isn't Poland inside VIP is a much better question,

[00:38:56]
and that is actually purely technical.

[00:38:59]
They could join anytime they wanted to.

[00:39:01]
They just don't have the technical capability to get everything connected.

[00:39:05]
They can't integrate with Swift, like that's ultimately the problem here.

[00:39:09]
So they are very challenged in actually getting everything connected exactly to the

[00:39:15]
point where it meets their technical barriers or requirements that they could get in.

[00:39:21]
While Norway is complying up to the point and they have a technical integration,

[00:39:25]
so they get to be inside the island.

[00:39:27]
I didn't know.

[00:39:28]
That's a very interesting to know.

[00:39:30]
If Norway will switch to Graxel, will they just like suddenly have everything they need?

[00:39:34]
You mean Poland?

[00:39:35]
Yes.

[00:39:36]
Yeah.

[00:39:36]
Sorry.

[00:39:36]
Poland.

[00:39:37]
Yeah, yeah, yeah.

[00:39:38]
They would.

[00:39:38]
But,

[00:39:38]
uh,

[00:39:39]
well,

[00:39:39]
as we,

[00:39:40]
I think have discussed before,

[00:39:41]
Poland's like guarantees of origin system is one of the most like arcane,

[00:39:45]
strange places in the renewable energy market right now.

[00:39:48]
I mean, there's one company that manages the registry.

[00:39:51]
There's another company you need to report the numbers to.

[00:39:54]
You can't do it electronically.

[00:39:56]
It needs to be a physical document.

[00:39:57]
There's a lot of like very strange things happening there.

[00:40:00]
I'm sure they're moving in the right direction because they have declared that they

[00:40:04]
want to join the AIB.

[00:40:06]
And I think in the background, there are developments for joining the AIB.

[00:40:11]
But Poland, just like every country, will move at the speed of government.

[00:40:15]
And that means we really don't have a deadline for this.

[00:40:18]
Like it will happen when it happens.

[00:40:20]
By the way,

[00:40:20]
if anybody listening knows any more information about this or is like an expert on

[00:40:23]
the topic,

[00:40:23]
please get in touch with us because we definitely want to dive into that.

[00:40:26]
It's super interesting.

[00:40:28]
Yeah, talk to us about Polish Geo.

[00:40:30]
I actually talked with many producers in Poland and they said they are just

[00:40:34]
currently stacking the Geos on their account and struggling to sell them away.

[00:40:38]
So Poland has a serious liquidity issues currently at...

[00:40:43]
They're trading at a discount to like AIB connected guarantees of origin as well.

[00:40:47]
So it's actually like costing the renewable energy producers of Poland that they're

[00:40:53]
just not able to like get AIB connected.

[00:40:56]
So I think from a government perspective,

[00:40:58]
this is kind of like failing the,

[00:41:00]
you know,

[00:41:00]
goals of what is the registry supposed to do for you.

[00:41:03]
Yeah,

[00:41:03]
but interestingly enough,

[00:41:04]
there is some sort of possibility to use Polish geos in some other AIB countries.

[00:41:11]
I don't know how exactly it works,

[00:41:13]
but the fact is that the prices are very closely correlated only with discount.

[00:41:17]
Yeah, it's called the next domain cancellation.

[00:41:20]
That's actually how everything used to work before the AIB existed.

[00:41:23]
I think the financial equivalent would be something like I write it down in my book

[00:41:28]
that you received money and like the other country goes like,

[00:41:31]
oh,

[00:41:31]
okay,

[00:41:32]
I guess you received money.

[00:41:33]
Sure.

[00:41:33]
Like, you know, but there isn't like the swift in between.

[00:41:37]
It's just somebody sending an envelope of like,

[00:41:39]
I don't know,

[00:41:40]
ask me later for the money,

[00:41:41]
but just make sure that they,

[00:41:43]
you know,

[00:41:43]
have it marked down.

[00:41:44]
Like promissory notes, is that what it was called?

[00:41:46]
Like an archaic banking?

[00:41:46]
Yeah, it kind of feels like a promissory note.

[00:41:49]
Yes,

[00:41:49]
it's full on like,

[00:41:51]
you know,

[00:41:51]
exactly this like correspondence banking kind of like arcane shit,

[00:41:55]
like in the middle.

[00:41:56]
Like this is the kind of thing that used to be very normal in the renewable energy

[00:42:02]
market and is actually normal in,

[00:42:04]
for example,

[00:42:05]
biogas market still x domain cancellations where just in one country they write it

[00:42:09]
down in their own ledger of oh I cancelled it for you but you're not in this

[00:42:13]
country this other country's registry now needs to come look at my registry and go

[00:42:17]
like oh okay I see that I will write it also down in my registry and it's a sort of

[00:42:22]
like it's the medieval version of AIB that's essentially what this is

[00:42:27]
That's how the biomethane and biogas still works, right?

[00:42:30]
Yes.

[00:42:30]
In many places,

[00:42:31]
between many registries,

[00:42:33]
because we don't have the same kind of like AIB nice infrastructure between everything.

[00:42:37]
In many places, that's exactly how this works.

[00:42:39]
Like two registries essentially have to agree with each other.

[00:42:43]
It's like banking before SWIFT, exact same logic.

[00:42:46]
Like we need to have like this bilateral agreement that, okay, what's the procedure here?

[00:42:50]
EU plus AIB.

[00:42:51]
It's very good invention.

[00:42:53]
It's pretty nice.

[00:42:53]
All right.

[00:42:54]
We've got a few more.

[00:42:55]
Well,

[00:42:56]
the second half of long-term market drivers,

[00:42:57]
we've divided into structural demand growth,

[00:43:00]
which I'm really curious how you've done this division,

[00:43:02]
but it'd be great if you could shed some light on that.

[00:43:04]
Yeah.

[00:43:05]
I guess there's like regulatory developments, which is just how are the laws going to move.

[00:43:09]
And the second part of it is what are we seeing companies do?

[00:43:14]
Like where are companies moving?

[00:43:16]
How does everything work out?

[00:43:18]
And part of this is that there's more interest in voluntary using geos,

[00:43:23]
even though you're not forced to.

[00:43:25]
Like there actually has been voluntary growth in using guarantees of origin.

[00:43:29]
There has been like voluntary traction on it.

[00:43:31]
As Denver mentioned before in Iceland, they are using more geos than they did before.

[00:43:36]
There is continuing adoption and we have seen this in the past quarter and there's

[00:43:41]
no reason for us to expect that this will not continue into the future.

[00:43:45]
There's also this element of like just countries doing stuff on their own.

[00:43:48]
One of these things is that the energy intensive industries,

[00:43:52]
they can get discounts for consuming renewable energy and we are seeing new kind of

[00:43:57]
demand sources pop up on that end as well.

[00:44:00]
There are multiple countries where you can see if you consume carbon-free electricity,

[00:44:06]
we will give you a discount essentially on your levies.

[00:44:09]
Like you have to pay us less if you're using green electricity.

[00:44:13]
And that's just kind of an indirect subsidy for buying guarantees of origin ultimately.

[00:44:19]
So that is just a new kind of demand source.

[00:44:22]
We do see this with many kind of labels as well, but these are like government initiatives.

[00:44:28]
Finally, and most importantly, the market still continues being in contango.

[00:44:33]
The belief continues being that the market will be better next year than it is this year.

[00:44:39]
And it does feel like that is the truth.

[00:44:41]
The market state right now,

[00:44:43]
again,

[00:44:44]
also not very inspiring,

[00:44:46]
but we have a lot of things going for us.

[00:44:48]
The supply and demand is actually looking pretty good.

[00:44:51]
Demand keeps growing relatively stable.

[00:44:54]
We're even producing less than last year so far.

[00:44:56]
Overall, everything looks pretty good, but make sure and just wait for the market to catch up.

[00:45:03]
Nice.

[00:45:04]
Well, we've come to the end of our quarterly Outlook wrap up.

[00:45:08]
So that's great.

[00:45:09]
We should do another one of these in Q3, obviously.

[00:45:11]
So I want to keep an eye out for that.

[00:45:13]
But yeah, it was really great to do this.

[00:45:14]
Thanks, Al and Stembo.

[00:45:15]
Any final words?

[00:45:16]
Thanks, Al, for the great overview and lots of work that you and the team have put into it.

[00:45:21]
And I truly, truly appreciate the effort.

[00:45:24]
A lot of insights and hopefully this was interesting for viewers as well.

[00:45:29]
And I'm glad to see people becoming like in the geo markets.

[00:45:32]
You can definitely see the vibe and shift changing where people are starting to

[00:45:36]
demand more unification,

[00:45:38]
clarity,

[00:45:38]
and things starting to basically be more fair and equal everywhere.

[00:45:43]
So those are very, very good things.

[00:45:45]
Nice.

[00:45:47]
Thanks for having me.

[00:45:48]
I hope everybody learned something.

[00:45:51]
I sure feel like I did.

[00:45:53]
It was very nice talking through all of this.

[00:45:56]
Looking forward to doing this in the next quarter as well.

[00:45:59]
Yeah,

[00:45:59]
but echoing Stanford's words,

[00:46:02]
there's clearly a trend of things getting better in terms of expectations,

[00:46:06]
in terms of regulations,

[00:46:07]
in terms of like what we actually expect this market to do for us.

[00:46:11]
And I don't think there's like really a reason to expect that the market will start

[00:46:17]
expecting less suddenly from it.

[00:46:19]
So overall, quite positive.

[00:46:21]
I'll just as a final word mention that.

[00:46:23]
Yeah,

[00:46:23]
about Saldera,

[00:46:24]
like if anybody's looking for pure guarantee of origin automation,

[00:46:29]
cancellation,

[00:46:31]
issuance,

[00:46:31]
sales,

[00:46:32]
everything in a single bundle package,

[00:46:34]
whether it's a producer,

[00:46:36]
trader,

[00:46:36]
it doesn't matter.

[00:46:38]
We offer the platform for guarantees of origin management and it's also free to use.

[00:46:44]
So that's also always very positive.

[00:46:46]
So all the software parts are free.

[00:46:48]
We only take fees from market activities.

[00:46:50]
Nice.

[00:46:51]
Link in the description and catch you in the next one.

[00:46:53]
All right.

[00:46:54]
Thank you so much.