Podcasts

🌍 Soldera Market Discussions: GO Ecosystem Overview

Join Stenver Jerkku (Founder & CEO) and Al William Tammsaar from Soldera as we explore the fundamentals of Guarantees of Origin (GOs) in the European renewable energy market. In this premiere episode, we break down:

→ What are Guarantees of Origin and how do they work? 🌐
→ The regulatory landscape across different European countries 📜
→ Complex market dynamics and challenges
→ The role of AIB in standardizing the market
→ The future of hourly GOs and energy storage

Key insights we explore:
→ How GOs separate physical electricity from its green attributes
→ Why biomass facilities face unique verification challenges
→ The impact of Norwegian hydropower on market supply
→ Current price trends and market movements
→ The effects of Italian government auctions on prices

Don't forget to like, comment, and subscribe to stay updated on all things GO!

#Renewableenergy #GuaranteesOfOrigin #Sustainability #CleanEnergy

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit podcast.soldera.org

Transcript of the episode's discussion between Oliver Bonallack, Stenver Jerkku, and Al William Tammsaar [00:00:03] Hello everybody, and welcome to the first episode of Soldera Market Discussions. [00:00:07] I'm joined by Al and Stenver from Soldera. [00:00:10] So yeah, hi guys. [00:00:12] It's good to be just discussing guarantees of origin and renewable energy certificates. [00:00:16] First time in a podcast format for Soldera. [00:00:19] So yeah, [00:00:20] we get to get an introduction from both of you and a little bit of background on [00:00:23] Soldera more generally. [00:00:24] And then why don't we go into giving a high level overview of the Go ecosystem for the viewers. [00:00:29] Yeah, thanks for inviting, Oliver. [00:00:31] And yeah, I'm the founder and CEO of Soldera. [00:00:34] I've been in the environmental asset space for more than 10 years. [00:00:38] I have a technical background. [00:00:40] I've done multiple companies in the space everywhere from region ag, [00:00:44] where we help farmers become carbon farmers and help them create carbon credits. [00:00:49] all the way to carbon-grade trading platforms and now Soldera, [00:00:52] where we help producers remove all the compliance and administrative burden related [00:00:58] to guarantees of origin and also their trading side as well. [00:01:01] And yeah, [00:01:02] I'm really into tech, [00:01:04] into using AI solutions to solve all the issues we have and essentially making sure [00:01:09] that all these systems that should be automated will be automated. [00:01:13] And yeah, Ella. [00:01:14] And hi, I'm Al. [00:01:15] By background, I'm a product manager and data scientist. [00:01:18] I've been working with Stenwer for about a decade, [00:01:21] solving a bunch of different environmental technological problems. [00:01:25] It's been a great time and currently we're working on this. [00:01:29] So we're, [00:01:29] as Stenwer said, [00:01:31] significantly simplifying how renewable energy producers approach guarantees of origin, [00:01:37] how they manage the renewable energy, [00:01:39] trying to get that down to [00:01:42] having to do almost nothing. [00:01:43] That's the dream, right? [00:01:46] Sure. [00:01:47] So yeah, what does that currently look like? [00:01:48] I mean, what are we simplifying? [00:01:50] For those who don't really understand what guarantees of origin are, [00:01:53] or maybe they do, [00:01:54] but all they know is it's something complex, [00:01:56] right? [00:01:56] What does that simplification process actually look like? [00:01:59] I'll quickly cover high level how they work and then maybe I'll get into the nitty gritty details. [00:02:05] So essentially like what are even guarantees of origin? [00:02:08] I guess it's a good place to start, right? [00:02:10] So imagine at your home where you have a choice whether to buy regular electricity [00:02:16] or renewable electricity, [00:02:18] then you may start thinking like, [00:02:20] how do they get those green electrons to my house in case of the renewable electricity? [00:02:25] Well, [00:02:26] the answer is they don't, [00:02:27] because if you take power from the grid, [00:02:29] it's like taking water from the ocean. [00:02:31] You have no idea where it came from. [00:02:32] So to solve that issue, [00:02:34] then on top of the electricity markets, [00:02:37] they build the guarantees of the emerging market. [00:02:39] And it simply proves that the electricity was from a renewable source. [00:02:46] It works very simply. [00:02:47] It's like accounting. [00:02:49] Every megawatt hour you sell to the grid, [00:02:51] government related entities, [00:02:53] usually the TSO will give you one guarantee of region and on the other end, [00:02:57] you buy it. [00:02:57] But in order for you to get that, there's tons of bureaucracy. [00:03:02] And we noticed that 30% of producers are not even utilizing that option. [00:03:06] They just leave money on the floor in the EU. [00:03:09] And is it really as simple as not even, [00:03:11] you know, [00:03:12] these producers aren't aware or is it more I think they're aware, [00:03:15] but it's too difficult for them? [00:03:17] It's there's just too much bureaucracy or they're not aware. [00:03:20] It's either of those two. [00:03:21] And even if you do get through the bureaucracy, [00:03:24] whenever you go making, [00:03:25] doing deals, [00:03:26] you need to do like KYC stuff. [00:03:28] That's another layer of complexity. [00:03:30] The bigger you get, the more [00:03:32] KYC burden you have, all the deal making, everything about it is like it just sort of takes time. [00:03:38] And at the same time, [00:03:39] the market access for them is limited as well, [00:03:41] because if you're too small, [00:03:42] nobody wants to bother doing this with you because it's just not worth their time [00:03:47] or effort. [00:03:49] what do you see the current stage of the guarantee of origin ecosystem being right [00:03:53] now especially someone who's trying to build a startup in it you know an intense [00:03:57] regulatory environment it'd be great to get your insights here as well out that [00:04:01] that seems like a daunting task for a lot of people but it's something that you two [00:04:04] just see a problem that needs solving right so because he has some thoughts [00:04:08] Yeah. [00:04:09] So on a very high level, guarantees of origin are regulated by the Renewable Energy Directive in Europe. [00:04:17] So that's kind of like a pan-European union thing that just exists and is [00:04:23] implemented a bit differently in each country. [00:04:26] But ultimately, guarantees of origin are this kind of cross-border phenomenon, right? [00:04:31] Like you can... [00:04:32] move it anywhere you can consume it anywhere within the European Union it's [00:04:36] ultimately like all the same guarantee of origin. [00:04:39] Now when we get into the nitty-gritty of exactly how it works country by country [00:04:43] there are like major differences sometimes in what kind of documents do you need to [00:04:48] issue do you need to do in anything like on a monthly basis for example report to [00:04:53] the amount of electricity you're producing directly [00:04:56] For reasons, there can be audit requirements. [00:05:00] You know, [00:05:00] you need to go to a certain auditor, [00:05:03] get like a stamp of approval that yes, [00:05:05] this renewable energy device is real, [00:05:08] even though it's clearly connected to the grid and it's producing something. [00:05:12] every five years yeah that 100 megawatts is still there it hasn't left anywhere [00:05:16] yeah it hasn't left like definitely real sometimes it's it does get a bit goofy but [00:05:21] like this bureaucracy is different by from country to country but ultimately [00:05:26] everybody's kind of trying to do the same thing like the rails are the same the [00:05:30] specific implementation is a bit different [00:05:32] And managing that is just kind of a varying degree of a hassle depending on which country you're in. [00:05:37] But ultimately, [00:05:38] everything is manageable since, [00:05:40] you know, [00:05:41] governments like standardizing things like there are forms, [00:05:44] there are procedures to doing everything. [00:05:46] And what we've really drilled down on is how do we streamline everything for the producer? [00:05:51] How do we make it as simple as possible? [00:05:53] How do we make it so you don't have to do all of these things? [00:05:56] We just handle the complexity in the background after you give us a couple of topics. [00:06:00] That's ultimately the decision. [00:06:02] Tell them about the German example. [00:06:05] The German example. [00:06:06] So in Germany, there are multiple degrees of guarantees of origin. [00:06:11] So there are obviously the international guarantees of origin, [00:06:14] which you can import into the country and then consume in the country. [00:06:17] There are also regional guarantees of origin, [00:06:19] which inside of Germany essentially are a different registry, [00:06:23] but they ultimately fill the same goal and you can't get both. [00:06:26] there's essentially like a regional tag of hey this is a guarantee of origin super [00:06:31] real and then on top of everything else there's essentially this fact that if you [00:06:36] get some sort of a state subsidy you can't get guarantees of origin but that's [00:06:39] claimed by the energy the balance responsible party whoever is like trading your [00:06:44] electricity has to just kind of keep track of that and also manage that and like [00:06:49] They can display that this part of my electricity is green from essentially paying out those subsidies. [00:06:55] So there's kind of like multiple layers to this. [00:06:57] And once you get beyond the 20 years of getting a subsidy, you have to move into the other system. [00:07:03] So now you're getting guarantees of origin instead of a subsidy. [00:07:06] And it becomes like kind of this like mess to keep track of, like what exactly is happening. [00:07:11] And the best part is [00:07:12] in some situations you can move in and out of getting guarantees of origin and not [00:07:16] getting guarantees of origin depending on perhaps the market conditions are a bit [00:07:20] better this time so we'll use the market conditions the electricity price basically [00:07:25] you know yeah and when it comes to actually declaring the volumes like for every [00:07:30] production device one by one you essentially have to like type in an sms code every [00:07:35] time you want to get guarantees of origin [00:07:37] So like all of this together kind of creates this long list of just like random [00:07:42] steps you have to do and things you have to think about to even get them. [00:07:45] And if you consider that from an electricity producer's perspective, [00:07:49] this makes up maybe 5% of their revenue. [00:07:51] It can be a very important part of the profit margin, [00:07:54] but if it makes up 5% of your revenue, [00:07:56] you don't want to do this full time. [00:07:58] That's not like your core business, right? [00:08:00] They want to put less than 5% of the resources there. [00:08:04] And, [00:08:05] you know, [00:08:05] we've visited the producers in Germany and some of them have like people whose only [00:08:10] job is to literally just verify the monthly volumes with SMS. [00:08:15] They like literally enter the data, [00:08:17] imagine like this Windows 95 style, [00:08:20] you enter the data in essentially that. [00:08:23] And then every device needs their own form filled. [00:08:26] And then you have to verify it on your mobile phone by SMS. [00:08:30] and solidera just automates all like it's done quickly just bringing the [00:08:33] conversation back to geography specific guarantees of origin explain how that [00:08:37] relates to importing and exporting different guarantees origins yeah i know it's [00:08:41] hard to speak generally in a market where everything's so complex and diverse but [00:08:46] is it easy to say that those goals are constrained to that particular geography or [00:08:50] can they be switched into the international type that can be then sent elsewhere [00:08:54] it depends another good example of this is Sweden so in Sweden they also have this [00:08:59] internal guarantees of origin system and an external guarantees of origin system so [00:09:04] if you want to export it to other countries you need to fill out special paperwork [00:09:08] and now you're getting a different kind of certificate compared to the internal one [00:09:11] which usually is like small producers people that put less time into it like [00:09:16] they get the internal one. [00:09:17] Big producers get the external one. [00:09:19] It's worth more. [00:09:20] It's kind of like, you know, again, a bit random like that. [00:09:24] They're used for slightly different things sometimes, [00:09:27] but ultimately you need to fill out like an additional layer of paperwork and then [00:09:31] you can get the external ones. [00:09:33] In almost every country in Europe, though, you can [00:09:37] just get the guarantee of origin as regulated by their noble energy directive and [00:09:42] export that, [00:09:43] import that, [00:09:44] do whatever with it. [00:09:45] There are no major limitations in most places. [00:09:50] But for example, [00:09:50] if you're in Spain and you receive subsidies, [00:09:52] you can't export, [00:09:53] but you can use internally. [00:09:54] Like there are these kind of small rules everywhere you need to keep trying this. [00:09:59] it's a bit different from country to country on when exactly can you import when [00:10:03] exactly can you export but ultimately the principle behind it tends to be were they [00:10:08] produced by complying with a similar set of requirements and constraints ultimately [00:10:14] that's what it comes down to if it's a bit different in like another country it [00:10:18] might not be considered equivalent but in europe generally [00:10:23] all of the guarantees of origin in each country are interoperable. [00:10:26] So if you are, for example, in Germany, you can use Estonian guarantees of origin. [00:10:32] Like, that's not a problem. [00:10:33] And does it relate to connectivity in transport? [00:10:36] Like, the transmission itself, is distance a challenge? [00:10:39] Because I guess the end goal of a fully functional go market is that anybody can [00:10:43] purchase renewable energy that's then being serviced to them from anywhere else. [00:10:47] But I guess, what are the actual physical constraints? [00:10:50] I guess you need to consider this fact that guarantees of origin are traded [00:10:55] separately from like the physical electricity. [00:10:58] So when a guarantee of origin in Estonia gets exported to Germany, [00:11:02] the electron doesn't necessarily like follow the same trajectory, [00:11:05] right? [00:11:05] generally people have large organizations that use guarantees of origin have [00:11:10] certain limitations like it needs to be connected in like a viable way the place [00:11:15] where you're buying guarantees of origin from and the place where you're consuming [00:11:18] them so for example you couldn't use icelandic guarantees of origin in germany that [00:11:24] would be a bit weird it's still done right now and that's a bit problematic but [00:11:28] essentially guarantees of origin and the physical electricity are not connected [00:11:34] But there is this important thing we need to talk about, which is called the residual energy mix. [00:11:40] And this is like super relevant when it comes to guarantees of origin, [00:11:43] because that's the main thing that it affects. [00:11:46] So if you are in a country that has [00:11:50] Let's say you're in Germany, [00:11:51] Germany, [00:11:51] a lot of your electricity like physically still comes from fossil fuel sources, [00:11:57] right? [00:11:57] You're burning fossil fuels. [00:11:59] And ultimately, what guarantees of origin kind of do is that it spreads this out into other countries. [00:12:04] So you essentially say, [00:12:06] hey, [00:12:06] Estonia or hey, [00:12:07] like Lithuania, [00:12:09] I like that you're producing this much renewable energy. [00:12:11] I'm essentially going to like on paper import this into my own country and [00:12:15] In exchange, [00:12:16] you're essentially getting the remainder of what is left over in my country after I [00:12:21] have consumed the guarantees of origin. [00:12:23] So there is this kind of equalizing system. [00:12:26] That's why we need this concept of a renewable energy mix, [00:12:28] which is everything that is left over after consuming guarantees of origin. [00:12:33] So there is this kind of exchange between countries. [00:12:36] It's even doubt it's kind of complicated, [00:12:38] but ultimately what it results in is, [00:12:40] hey, [00:12:41] I got clean energy and everybody that isn't consuming guarantees of origin, [00:12:45] they essentially got what was left of. [00:12:46] There's also, [00:12:48] so the entire guarantee of origin market is regulated by an organization called AIB, [00:12:53] and they have been creating these European level directives to guide the market and [00:12:59] standardize the market. [00:13:00] One of the directives that they're working right now on is Red 3. [00:13:04] And actually, it does have a lot of references towards moving like more localized systems. [00:13:11] So you can only use the guarantee of origin within the same tree. [00:13:15] I guess that's a separate discussion if that's a good idea or a bad idea. [00:13:19] So the AIB's role in guarantees of origin is essentially they work as this [00:13:24] standardizing body of like getting the nitty gritty details that aren't written in [00:13:30] the European directives, [00:13:31] getting those agreed between countries and getting that fully interoperable. [00:13:35] So they kind of function as this bridge between countries. [00:13:38] So you could move things in and out in like an easy and very technically simple way. [00:13:42] because otherwise you would need to essentially call germany and go like hey i have [00:13:47] some stuff in like the estonian registry would you uh please like mark that [00:13:52] somebody has consumed them i'll cancel them over here and then that gets really [00:13:55] messy and instead there's kind of a system of like okay i exported it here i'm [00:14:00] importing it there like we're still keeping track of it like across multiple [00:14:04] registries but ultimately they set these [00:14:07] standards of the nitty-gritty details of what is a guarantee of origin, [00:14:11] like how is it managed, [00:14:12] like what exactly does it look like, [00:14:14] what kind of documents do you need to provide the public about how this registry works. [00:14:19] These kind of things are generally defined by the AIB, [00:14:23] while the European Commission essentially defines the high-level stuff of what [00:14:27] exactly is the goal, [00:14:29] where are we going, [00:14:30] what kind of systems do we want. [00:14:32] That's more something happening on the European Union level. [00:14:34] This is why we have Al in our teams. [00:14:36] I'm curious, you said that there's kind of like a shift towards this more local consumption model. [00:14:41] Do you think they're going to encounter friction when it comes to, [00:14:44] for example, [00:14:44] in the German case, [00:14:45] where regional governments that kind of guarantees their origin as something that [00:14:48] are at odds with subsidies as a sort of [00:14:51] reward or like a compensation method, [00:14:53] whereas the broader trend is that there is a market being created here. [00:14:57] So how are those things going to be resolved? [00:14:59] Quite a lot of different things to discuss about that exact same thing. [00:15:03] The German market and most markets actually that have this system of if you get a subsidy, [00:15:08] you don't get currencies of origin. [00:15:11] They're discussing a lot moving into still giving out guarantees offer agent [00:15:16] because some countries are doing like there's simply a tag on every kind of [00:15:20] guarantee offer agent if it's with support or without support. [00:15:23] So like German producers are literally losing out because in their country, [00:15:27] they don't get guarantees offer agent marked with support. [00:15:31] And the price difference on the market, [00:15:33] while there is some price difference, [00:15:34] like a few cents to ten plus cents or something like that, [00:15:39] it's usually not that big. [00:15:41] And it's really hurting the local producers and all of those governments that are [00:15:46] seeing that are noticing that and are like, [00:15:48] why aren't we capitalizing on this opportunity, [00:15:51] basically? [00:15:52] Yeah, [00:15:52] generally what you see in countries that don't limit this, [00:15:56] they simply, [00:15:57] when we're doing the calculations of how much subsidy should I pay you, [00:16:01] they just factor in that, [00:16:02] hey, [00:16:03] guarantees of origin have like a specific kind of value. [00:16:05] I can just subtract that from the payment. [00:16:07] You can have your guarantees of origin, like everything makes sense. [00:16:10] that just makes it so all of your electricity is more trackable without creating [00:16:14] these kind of parallel systems and creating like more tracking mechanisms for hey [00:16:19] like what's the composition of my electricity usually that's kind of the reason why [00:16:24] it ends up playing out this way is hey i don't actually want to manage like this [00:16:30] market mechanism you can have it i'll just keep that in mind [00:16:33] When I'm calculating what exactly is like a good subsidy pay to still motivate [00:16:39] renewable energy producers to keep building new renewable energy production sites. [00:16:44] So before we get into another regulatory debate as to, [00:16:48] I mean, [00:16:48] whilst it seems quite obvious that the renewable energy producers should be able to [00:16:52] sell goods as well as getting subsidies. [00:16:55] I think it's a good way to get into the conversation of how does the market [00:16:58] actually decide what is preferential, [00:17:01] what is preferable, [00:17:02] sorry. [00:17:02] Because, [00:17:02] you know, [00:17:03] Stanley, [00:17:03] you mentioned that there's price differences between goes with support and goes [00:17:06] without support. [00:17:07] So yeah, let's talk about, you know, how does the market decide? [00:17:11] Well, a big chunk of the market, a large part of it is driven by voluntary demand. [00:17:16] So it's either ESG or people switching to that type of power. [00:17:21] So there's a lot of brokers and traders out there. [00:17:26] And when they speak with these end consumers and buyers, [00:17:30] some of them have more stringent requirements and they're like, [00:17:33] we'll only buy guarantees of origin, [00:17:36] which are unsupported and for plants that are less than five years old. [00:17:40] because we want our money to directly incentivize construction of new plans. [00:17:45] And then there's other players in the space who are more like, we just want our power to be green. [00:17:51] We don't really care about the details. [00:17:53] And that's how the demand on a large bar comes from. [00:17:58] Now, I can't speak about specific subsidies because there is compliance demand on the market as well. [00:18:05] In Estonia, for example, if you buy an electric car, [00:18:08] you get the subsidy from the government. [00:18:10] But you only get that subsidy if you start using renewable energy going forward every year. [00:18:15] Now, this subsidy specifically, for example, doesn't have any requirement. [00:18:19] So basically, [00:18:20] that's on the bucket of use whatever you want, [00:18:22] just make sure it's green because it's like green subsidy. [00:18:26] so so that's that that's really how the different demand sources come from and then [00:18:30] there's some like super innovative players like google for example who want to have [00:18:34] hourly tracking because right now the guarantee of reaching it works like for 12 [00:18:38] months from the moment it's created the moment where you have to consume it [00:18:42] otherwise it's simply taken away and like destroyed you have 12 months and this [00:18:47] this this is another topic that's a longer discussion but like [00:18:51] Currently, [00:18:51] you can use a guarantee of origin like solar electricity produced in summer during [00:18:57] the winter, [00:18:58] which doesn't make all the sense, [00:19:01] but it does make the market simple. [00:19:03] So, you know, it allows the market to grow. [00:19:06] Like if you want to invent an iPhone, you don't start with iPhone, you start with Nokia, right? [00:19:11] So like you have to like build up to it. [00:19:13] But some companies are very forward looking. [00:19:15] so they're already doing this hourly matching so they only buy guarantees of origin [00:19:20] which are created in the same hour that was also done where the consumption took [00:19:25] place basically so you touched on the shift to hourly go consumption what does that [00:19:32] currently look like i know it's a regulatory target so people want to get there [00:19:35] eventually i mean that's going to be pushed but are people already doing that [00:19:39] voluntary voluntarily is it is the onus on the producer to sort that out yeah what [00:19:44] is that [00:19:45] Yeah, it's actually very hard to do right now. [00:19:47] Like there's not a lot of like compliance options to do it. [00:19:51] There's four countries or five countries that are like leading into trying to test it. [00:19:56] Estonia being one of them and Belgium and so on. [00:19:59] I think Netherlands was as well and even Dutch. [00:20:03] Yeah. [00:20:03] So some of the countries are like experimenting with it, [00:20:07] but it's expected to come like in 27, [00:20:10] 28 timeframe, [00:20:11] something like that. [00:20:12] And a lot of people in the space are even like skeptical that we'll get it so soon. [00:20:16] But you can still do it. [00:20:18] There's companies out there like technology companies that specialize on doing it [00:20:22] and sort of build their own trusted body on top of the governmental body. [00:20:27] And they do the hourly matching and they map it back to the specific monthly credit [00:20:32] that the government has given out. [00:20:35] It remains to be seen if any of those play will succeed or not. [00:20:39] We're definitely very excited about that. [00:20:41] We very much like to see innovation. [00:20:43] And having been in the carbon credit space, we've definitely seen our share of greenwashing and stuff. [00:20:48] So we want to make sure that this market is very legitimate and we're very [00:20:54] supportive in whatever makes sure that the quality keeps going up and down essentially. [00:20:58] But yeah, [00:20:59] long story short, [00:21:00] in the newest version of the European Renewable Energy Directive, [00:21:03] they essentially wrote like [00:21:04] hey it would be very cool if you all could start looking in this direction and like [00:21:09] figuring it out like that is something we're interested in but there wasn't a lot [00:21:13] of push other than hey please start looking at this if you're a government agency [00:21:18] that manages these things please like start looking that's essentially the phase [00:21:23] we're in with these kind of things right now [00:21:25] There's a couple of pilot tests and there are obviously technology companies that [00:21:31] actively specialize in this. [00:21:33] But ultimately what we saw working in the voluntary carbon space was if you have [00:21:40] private companies doing it, [00:21:42] it's a very fragile market because the moment the trust gets eroded in some sort of [00:21:46] a private entity you have market collapse right if you have a government managing [00:21:51] the trust layer or you know i could trust that this was produced on this hour and [00:21:55] this was consumed on this hour if that's managed by a government generally the [00:21:59] trust [00:22:01] problem is solved by the government having to act in a very trustworthy manner [00:22:05] otherwise they have like much worse consequences for themselves that generally [00:22:10] private companies doing these kind of things don't experience yeah we're currently [00:22:14] in this kind of phase where as stener mentioned there are multiple countries [00:22:17] looking at piloting some kind of solutions there isn't like a necessarily a [00:22:21] standard just yet there's more [00:22:23] a couple of experiments of how can government registries be retrofitted or upgraded [00:22:29] to support hourly guarantees of origin but ultimately the issue comes down to just [00:22:34] how much more data how much more infrastructure you need to manage this kind of a [00:22:40] thing compared to the monthly issuance option which is the standard right now where [00:22:46] every at the end of every month you essentially get the guarantees of origin for [00:22:50] the electricity you produce that month that's it [00:22:52] Like that's the whole complexity for them right now. [00:22:54] It moves out. [00:22:55] It gets consumed. [00:22:55] Who cares? [00:22:56] If you get on an hourly basis, [00:22:58] now you need to be like, [00:22:59] okay, [00:23:00] you know, [00:23:01] every hour gets printed out as a separate certificate. [00:23:04] Somebody needs to send it. [00:23:05] Somebody needs to consume it. [00:23:06] We need to have negotiations on what exactly is a... [00:23:10] guarantee of origin worth if it was produced three in the morning by a three in the [00:23:15] morning by some sort of a wind farm when you know there was no sun and we didn't [00:23:21] really need heating right so like essentially the supply and demand curves are [00:23:25] gonna get very similar possibly to the electricity market and that doesn't at the [00:23:32] current prices seem like a [00:23:34] really good way to go. [00:23:35] It's a lot of complexity, [00:23:36] but we need to figure out how do we actually solve that in a manner that's going to [00:23:41] make sense for everybody. [00:23:42] I also think that it's really good that these private companies and tech companies [00:23:45] are doing this experimentation because, [00:23:47] so I mentioned in the beginning, [00:23:49] like both me and Dal's background is in environmental asset space. [00:23:53] We've seen carbon credits, we've seen the good sides, the bad sides and so on. [00:23:57] But one thing that we definitely have seen is that the private companies have sort [00:24:01] of done the experiments and led the way and set the standards and figured out all [00:24:06] the quirks. [00:24:07] And the nations that are currently adopting these carbon frameworks are basically [00:24:12] all inspired by what these non-profits or carbon companies have been doing. [00:24:18] Hopefully they'll also take the learnings of what they've been doing wrong. [00:24:22] We'll see. [00:24:24] But the power markets are way easier than carbon markets in almost every sense [00:24:29] possible to be when it comes to the green part, [00:24:33] the guarantee of origin part. [00:24:34] And I think it will be very easy to take all of these learnings and essentially [00:24:39] adopt them in a regulatory framework. [00:24:42] That was going to be my next question actually is, [00:24:45] obviously, [00:24:46] it's not the case of policy reacting to innovation or innovation reacting to policy. [00:24:51] It's like a dance between the two, right? [00:24:54] They're working in tandem with obviously a lot of the controversies that have, [00:24:58] and obviously the benefits and impressive outcomes from the carbon markets that [00:25:02] we've seen. [00:25:03] Do you think there's direct learning opportunities and do you think that they're being taken on board? [00:25:08] Yeah. [00:25:09] Yeah, absolutely. [00:25:09] Like one of the example is, for example, the Japanese carbon markets. [00:25:13] So if you look at the Japanese carbon markets, [00:25:15] it's been like almost exactly copied from the voluntary carbon markets and then [00:25:20] just put some more regulatory stringent requirements on top of it, [00:25:25] which is good because like [00:25:26] one of the things carbon markets definitely need is oversight. [00:25:30] I think it's been made abundantly clear by now by many different experiments we've seen over there. [00:25:36] And in the guarantees of a rich market, you see the same. [00:25:40] We have also approached and talked with a few [00:25:43] of the TSOs and asked if they're interested in experimenting with hourly based geos together with us. [00:25:49] And they've always been very interested and they appreciate the private sector [00:25:53] showing its head as well and taking the initiative on this front. [00:25:57] The thing that the carbon market generally struggles with is defining what real is. [00:26:03] Essentially, let's say you plant a forest and we give you carbon credits for it, right? [00:26:07] There's a lot of math and assumptions that go into figuring out, okay, what's one ton of CO2 equivalent? [00:26:14] And when should I give it to you? [00:26:16] And what exactly are the properties that we agree on that, yeah, this is now real? [00:26:21] Like what needs to go into that? [00:26:23] While in the renewable energy world, [00:26:25] ultimately what you just need, [00:26:27] assuming there's essentially government monitoring of what's going in and out, [00:26:30] you just need a meter that tells you how much electricity is going out of this [00:26:36] production site. [00:26:37] And that's all we need, right? [00:26:38] Ultimately, that's your ground truth. [00:26:41] That's your evidence that the electricity that's getting put on the grid is green. [00:26:45] Because we measured the thing putting electricity onto the grid, the electrons were functionally counted. [00:26:52] And we know that, hey, this amount is now on the grid. [00:26:55] Everything's good. [00:26:56] In the carbon world, you don't really have that. [00:26:58] And that's actually where a lot of the complexity comes from, where a lot of the problems come from. [00:27:05] I think the most complicated area for renewable energy ends up being this subset called biomass. [00:27:12] So essentially there are these kind of co-generation plants and just electricity [00:27:18] generation plants that essentially burn some sort of biomass to get electricity and [00:27:24] or heat. [00:27:24] So that's kind of a bit more complicated because while we can just look at the wind [00:27:29] blowing and go like, [00:27:30] okay, [00:27:31] this wind turbine clearly produced wind electricity from wind and it went onto the [00:27:35] grid or with solar energy, [00:27:38] we can just go like, [00:27:39] Hey, [00:27:39] the sun is shining. [00:27:41] It hit the photovoltaic panel. [00:27:44] We got electrons. [00:27:45] They moved onto the grid. [00:27:47] Everything solved. [00:27:48] Like as long as that's, you know, figured out it's good. [00:27:51] But when we get biomass, [00:27:53] Generally in biomass, [00:27:54] you see a lot more complexity because we need to understand what exactly are you burning? [00:27:58] Like what went into it? [00:28:00] Is it truly renewable? [00:28:01] Like what makes sense in that context? [00:28:03] So this is like an ongoing discussion in renewable energy space. [00:28:06] And I think that's the closest thing we have to like a carbon-ish problem. [00:28:12] Because it's a bit more nuanced, [00:28:14] the conversation of where exactly is like the real energy, [00:28:18] what exactly qualifies and how is this monitored? [00:28:21] Because clearly we can't just look at the electrons and we can't just look at the wind and the sun. [00:28:25] We have to consider, hey, you like logistically got a bunch of like woody biomass into this turbine. [00:28:31] Where did that come from? [00:28:33] Does that make sense to say that it's renewable? [00:28:35] Should you get guarantees of origin for that? [00:28:37] That's like a nature thing that every government currently has like a much more [00:28:41] complex procedure for to figure out if they should get guarantees of origin. [00:28:46] I don't know if you actually knew, [00:28:47] but guarantees of origin were under greenwashing fire as well before the regulatory [00:28:53] frameworks came in prior to 2019 or 18. [00:28:57] And there were some major scandals and a lot of them actually rolled around exactly [00:29:02] what I'll just describe. [00:29:04] Yeah. [00:29:05] And that's ultimately why biomass facilities need, like, they need to fill out a form. [00:29:10] There needs to be occasional audits. [00:29:12] Somebody needs to look at it. [00:29:13] They need to check the logistics and make sure what you're claiming makes sense. [00:29:18] And there's a lot more procedure there. [00:29:20] While for wind turbines, we can essentially go like, there doesn't seem to be anomalies. [00:29:24] You're just producing wind energy. [00:29:26] What we're observing makes sense. [00:29:28] And that's essentially all we need. [00:29:31] So when there's more capacity for sort of doubt or human error, does that also get reflected in pricing? [00:29:37] So where does Biogas rank in terms of price? [00:29:41] Biomass. [00:29:42] Biogas is its own certificate. [00:29:45] So biogas kind of exists as a parallel market to the renewable energy market. [00:29:50] It's its own kind of world. [00:29:51] My next question was going to be, [00:29:52] how does the increasing trend towards energy storage play into this, [00:29:57] right? [00:29:57] Do they count as production devices? [00:29:59] Does energy discharged from storage, is that eligible for GOES? [00:30:04] Do you think it should be? [00:30:06] What's happening there? [00:30:07] Storage is kind of this hot topic when it comes to how that should be managed in [00:30:11] terms of guarantees of origin and there isn't a coherent narrative on that actually [00:30:17] just yet because storage has largely been this thing that's been developed and has [00:30:22] evolved a lot in the past couple of years. [00:30:24] Many of these protocols about guarantees of origin were written a couple of years [00:30:28] ago and they just haven't like fully caught up. [00:30:32] Just yet. [00:30:32] There are many examples of how storage is handled and generally the answer is they [00:30:38] don't participate in the guarantees of origin system right now. [00:30:41] Essentially anything that you put into your storage device and put out of the storage device [00:30:47] That's just essentially whatever is on the grid. [00:30:50] There is no way to take like a guarantee of origin, produce one month and spit it out in the next month. [00:30:55] Sadly, that's not a thing. [00:30:56] I think it would create a lot of value, especially in the hourly market. [00:31:00] Once we get there, [00:31:01] if we had something like this, [00:31:03] because then you could essentially move solar energy into the night, [00:31:06] which would be very cool. [00:31:08] We don't necessarily have that complexity in the system just yet. [00:31:13] And generally, [00:31:14] storage devices do not actively participate in either like generating or storing [00:31:19] guarantees of origin. [00:31:21] It would cause like, [00:31:22] especially this persuasion will cause a lot of like interesting arbitrage [00:31:26] opportunities and like make battery and storage investments a lot more attractive actually, [00:31:32] right? [00:31:32] Because you can suddenly cut paid for on top of [00:31:36] taking the power arbitrage, you also can optimize it together with the currently of origin. [00:31:42] But it really needs more automated systems, which we're working on. [00:31:46] It would be very cool for storage to get more integrated into how everything comes together right now. [00:31:52] But essentially, it would be very cool if storage was more tightly integrated into counties of origin. [00:31:58] Currently, it's not really. [00:32:00] It's very peripheral to it. [00:32:03] It just kind of exists on the site. [00:32:05] But if we're going to move into this hourly model, [00:32:07] it's going to create a lot of new interesting opportunities. [00:32:11] And we're super excited about that. [00:32:13] The opportunity to move a solar energy into 5 a.m. [00:32:17] is pretty cool. [00:32:18] so what are the current state of the markets i guess from the the people who are [00:32:22] listening who are interested in the financials and the market movement to this and [00:32:26] i guess we did name this so there are market discussions so we should take a final [00:32:31] moment to just reflect on the current state of the market [00:32:34] Oh, [00:32:34] the markets have been disappointing for a lot of people this year, [00:32:38] especially since like last summer, [00:32:40] they were some peak deals happened at like 10 euros per megawatt hour. [00:32:45] And this summer they were one euro. [00:32:47] And now if you look at like 2024, it's like less than 50 cents. [00:32:51] had a massive drop. [00:32:52] But what has been very interesting and has changed is the forwards. [00:32:56] So historically, [00:32:57] if you do like a back testing and look at like if you lock up your forwards versus [00:33:02] if you had just sold a spot all the time, [00:33:04] you can actually see that you will have made less money in forwards. [00:33:08] But when the drop happened, this flip [00:33:11] And for last year or so, [00:33:14] you've actually had really good forward deals where you can get like up to two or [00:33:19] three times better results by locking yourself in the forwards. [00:33:23] Yeah, the market seems to be a bit starting to rebound, but there's a lot of oversupply from 2024. [00:33:31] And we still have this big layer at Italian government who kind of crashed the [00:33:36] market initially because they just kept on failing the auctions. [00:33:40] They failed their auction again in September. [00:33:42] So that was like, oh man. [00:33:44] And so we actually onboarded a lot of our producers to take the forward [00:33:50] opportunities and worked out like automated systems, [00:33:53] how to make sure that you always get the best deals in forward as well. [00:33:56] Not in risky bets when to sell, [00:33:59] but actually like market average and like spreading the risk out throughout the time. [00:34:04] That's what we really propagate in general. [00:34:06] It's very hard to see how the markets move. [00:34:08] It's super volatile. [00:34:09] Like, you know, you see 10x movements. [00:34:11] It's like crypto, you know. [00:34:13] So it's a very, very volatile market. [00:34:18] And world power markets in general have been super volatile in Europe, right, for the last few years. [00:34:24] So in that situation, serious companies with big taxes, you want to have certainty. [00:34:29] So it's really about how do I manage this risk? [00:34:31] How do I make sure this income is spread out throughout time instead of like trying [00:34:36] to bet on buying and selling at the right time? [00:34:40] So that's what we really specialize on as well. [00:34:44] and i guess to talk about like the oversupply and why are we in an oversupply [00:34:47] situation the interesting thing to know about the guarantees of origin market is [00:34:51] the biggest exporter is norway so they export a lot of guarantees origin into the [00:34:57] rest of the european market and that's essentially because they have a huge amount [00:35:00] of hydro [00:35:01] And there hasn't historically been this drive to actually use and claim all of this hydro within Norway. [00:35:09] So they end up kind of selling it out into other countries and other countries [00:35:13] essentially get flooded by hydro, [00:35:16] electricity, [00:35:17] guaranteed version. [00:35:18] There's been a couple of very good years when it comes to rain. [00:35:22] Currently, [00:35:22] the aquifers are in the best state they've been in for a while, [00:35:27] meaning they have very good levels of energy stored up to get released at whatever [00:35:34] is the most offered. [00:35:35] And they've been generating a lot of electricity that just essentially gets [00:35:41] translated into more and more depressed guarantees of origin prices. [00:35:44] There essentially was a drought a while ago that caused the huge price hikes and [00:35:49] everything seems highly correlated right now with the Norwegian electricity production. [00:35:55] This hopefully will get changed since there are more reasons to consume guarantees [00:36:01] of origin coming in over time. [00:36:03] Norway will participate in at least some of them and that will likely reduce the [00:36:08] amount of exporting happening from Norway, [00:36:10] likely boosting the prices by just, [00:36:13] you know, [00:36:14] cutting down on the supply entering the market. [00:36:16] Um, so yeah, we should, we can maybe wrap it there. [00:36:19] It was a really good discussion. [00:36:20] We touched on the complexities of the market in general, [00:36:23] and then, [00:36:24] you know, [00:36:24] final concluding thoughts about, [00:36:26] um, [00:36:26] you know, [00:36:27] Norway and, [00:36:27] and the Italian government as well. [00:36:29] Uh, yeah. [00:36:29] Thanks for that guys. [00:36:30] And thanks Denver now and, uh, yeah, catch us in the next episode. [00:36:34] Perfect. [00:36:35] Bye. [00:36:36] Bye.

Soldera Markets #1 | GO Ecosystem Overview

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Soldera

December 19, 2024

soldera-markets-1-go-ecosystem-overview

Soldera

August 5, 2025

August 9, 2025

Join Stenver Jerkku for an in-depth look at how renewable energy producers can optimize their GO sales strategy in challenging market conditions.

This episode covers:

→ Current market analysis and price trends 📊

→ The dramatic price drop from €8-10/MWh to €0.40-0.50/MWh

→ Why forward contracts are now outperforming spot sales→ How Norwegian reservoir levels impact prices

→ The ongoing effects of Italian auctions Producer strategiesWe discuss:→ Why holding GOs may not be the best strategy

→ How volume aggregation improves pricing→ The benefits of automated trading systems→ Balancing spot and forward sales

→ Why producers shouldn't ignore 5% potential revenueDon't forget to like, comment, and subscribe to stay updated on all things GO!🎧

‍

Available on any of your favourite podcast or video platforms: linktr.ee/solderahq

Transcript of the episode's discussion between Stenver Jerkku and Oliver Bonallack [00:00:03] Hey everyone, and welcome to another episode of Soldera Market Discussions. [00:00:07] I'm here with Stenvo. [00:00:08] Say hi, Stenvo. [00:00:10] Hey, how are you doing, Gulliver? [00:00:11] And yeah, [00:00:12] today we thought we would just go over how producers make the most profit from [00:00:16] guaranteed origin sales, [00:00:18] but more specifically how they do so in the current market conditions. [00:00:22] So yeah, let's kick things right off. [00:00:23] Stenvo, how do you see the current market for producers in 2024? [00:00:27] And do you think it's going to get better in future? [00:00:30] I mean, it's been tough, right? [00:00:32] Like to take a step back last year, [00:00:35] the geo prices were somewhere around 8 euros per megawatt hour, [00:00:39] even up to 10 at some point. [00:00:41] And then as we got through the summer, suddenly the prices started dropping sharply. [00:00:47] By winter, they were 5 euros, 4 euros per megawatt hour. [00:00:51] And by spring, they were 1 or 2 euros per megawatt hour. [00:00:57] And a lot of things happened there and a lot of people were very confused. [00:01:02] How did this happen? [00:01:03] We saw a lot of people living in denial when we were telling them what the market was like. [00:01:08] They didn't believe us and they were holding on to their guarantees of origin, [00:01:13] not wanting to sell them. [00:01:15] And we were telling them that, hey, [00:01:18] You can see the market like there's a fundamental reason why that happened, right? [00:01:23] The Norway reservoirs are very full. [00:01:26] There was a lot of rain. [00:01:28] There's a lot of humidity and precipitation out there. [00:01:31] So the market is flooded with renewable energy and that naturally pulls down the crisis. [00:01:38] And the whole thing actually, funnily enough, started with the Italian auction. [00:01:44] So the Italian government has been doing these auctions and they set the price [00:01:51] floor for their auction. [00:01:53] They hope that that gets them better results. [00:01:56] Well, what happened in reality was that the price floor just made the entire auction fade. [00:02:02] multiple times month after month because the price was dropping further. [00:02:07] And each time it failed, [00:02:08] it had massive negative impact on the prices, [00:02:10] which caused further downward pressures. [00:02:13] And I don't remember the exact numbers, [00:02:15] but I've heard traders run the calculation how much money [00:02:21] Italian taxpayers had to pay because of these practices, actually. [00:02:25] It was a lot of money because eventually they sold all these geos off, [00:02:30] but at the massive discount versus if they had just trusted the market to do its [00:02:35] thing. [00:02:35] In the summer, 2024 was around one euro per megawatt hour, give or take. [00:02:41] And by now it's around 40 to 50 cents, right? [00:02:44] So you've seen this massive downward trend. [00:02:48] 2024 also had an overabundance of like precipitation and reservoirs in Norway are full. [00:02:54] Plus there's been a lot of renewable energy construction out there. [00:02:58] Plus Italy again failed its September auction this year. [00:03:03] So like it's definitely been in like a very negative direction. [00:03:08] However, [00:03:09] interestingly enough, [00:03:11] for the first time, [00:03:12] if you look at all the way back to the prices of guarantees of origin, [00:03:17] historically, [00:03:18] the forwards and spot have been trading in pretty much the same area. [00:03:23] And if you even do a backtracking calculation, [00:03:27] like what would have happened if I would have always used forwards instead of using [00:03:31] spot, [00:03:32] you can see that historically, [00:03:33] you would have lost money on forwards. [00:03:35] And just... [00:03:37] Every month selling in spot, [00:03:39] kind of like dollar cost average sales, [00:03:41] if you will, [00:03:42] like just letting somebody else carry the price risk and trust the market, [00:03:46] you will have made more money. [00:03:47] It's like the index fund investing all over again, right? [00:03:50] Just go with the market. [00:03:52] When last summer, [00:03:53] when the prices started dropping, [00:03:55] something happened and suddenly the forwards became a lot more valuable than spot. [00:04:01] In fact, like two or three times more valuable. [00:04:04] So ever since then, it's actually been very beneficial to lock in your forward prices as well. [00:04:10] That's a bit about history. [00:04:12] Now, when we look forward, does it get better? [00:04:17] It absolutely will. [00:04:18] There's a lot of signs pointing to that. [00:04:20] We've done a lot of analysis ourselves. [00:04:24] We bought information from other third parties who have run the future predictions. [00:04:30] SDX, [00:04:30] which is one of the biggest trading firms out there, [00:04:33] the biggest guarantee of origin trading firm out there, [00:04:36] they in Iceland, [00:04:37] Reykjavik, [00:04:39] gave a very bold estimation that in a few years, [00:04:42] we may have even 10 euros per megawatt hour again, [00:04:45] or even above in the best case scenarios. [00:04:48] And a lot of it essentially comes down to all this transparency reporting that the [00:04:54] European Union is putting on companies, [00:04:56] the fact that renewable energy is just becoming more and more popular, [00:05:00] more people want to use it. [00:05:03] Just quickly for those out there who might not know all of the intricacies of [00:05:07] selling goes, [00:05:08] what's the difference between selling spot and selling futures just in simple [00:05:12] terms? [00:05:13] In simple terms, [00:05:14] selling spot means that every month, [00:05:17] let's say you have a solar installation, [00:05:20] let's say 10 megawatts, [00:05:22] and every month you generate some amount of guarantees of origin. [00:05:26] Let's say you generate 100 megawatt hours or something on some month, [00:05:30] then you could either just sell them all away every month as you generate, [00:05:36] as you go, [00:05:36] that selling spot, [00:05:38] or you could lock in the future price [00:05:41] So you lock in the forward price in next year. [00:05:46] As you generate the next year production, you already have sold it away. [00:05:50] It's the same as in farming. [00:05:52] You can do futures for like grain and all the other commodities. [00:05:57] You just lock in the price and when you finally deliver them, [00:06:00] then you get the money that you promised and you deliver the volumes that you [00:06:05] promised for that as well. [00:06:07] So it's pretty simple. [00:06:10] And if geos that are produced expire within 12 months, [00:06:13] if you're selling future, [00:06:14] you're not selling the current geos that you have in your possession. [00:06:17] You're selling the ones that are going to produce at a future period. [00:06:20] Exactly, exactly. [00:06:21] You sell the future ones, not the current ones that you already generated. [00:06:25] The ones that have been generated, those should all go to spot sale, basically. [00:06:30] Sure. [00:06:30] So you could be selling spot and futures at the same time as a producer. [00:06:34] In fact, that's what we recommend most of our producers to do. [00:06:37] So in Soldera, for example, we're all about trusting the market. [00:06:43] And instead of trying to trade and hit the extremes with trading, you may get very lucky. [00:06:50] Maybe you hold on and the prices explode and you get the best deal. [00:06:54] But the opposite can happen as well. [00:06:56] We've seen producers this year lose like more than 60% of their revenue from [00:07:01] guarantees of origin simply because they try to be smart and do trading while not [00:07:06] actually having a specialized trading team that tries to figure all of this stuff [00:07:12] out. [00:07:13] So our recommendation for producers is stability. [00:07:17] At the end of today's renewable energy production, [00:07:21] you want to have as much stability and predictable cash flows as possible. [00:07:25] So we recommend doing partial forward edging, [00:07:29] let's say like 30% or 60%, [00:07:31] really depending on how much stability or how much you want to live for potential [00:07:35] upside. [00:07:36] And then the rest selling to spot as you produce them. [00:07:41] And it's really about like in Soldera, we do it all for you. [00:07:45] So every month, [00:07:47] all of our producers, [00:07:48] we currently have like 1,300 renewable energy production points across EU. [00:07:55] They all generate guarantees of origin. [00:07:57] We aggregate them together. [00:07:59] By aggregating together, we get volumes and volumes get you the best deals on the market. [00:08:05] That's really how it works. [00:08:06] The market is very simple on that front since it's all OTC. [00:08:11] It's like all done. [00:08:13] All the deals require a lot of manual work and so on. [00:08:17] Then the best way to get the best deals is to just have more volumes. [00:08:21] So by aggregating all the people together, all the producers, [00:08:24] getting those volumes, [00:08:26] and then just following a schedule, [00:08:28] selling every single month, [00:08:29] you can really get the best deals on the market. [00:08:33] And we do the same for forwards. [00:08:35] Instead of just locking in all your forwards at a single point, [00:08:39] let's say you want to hedge like 40% of your portfolio. [00:08:42] That's the amount you want to put to forward sale. [00:08:46] Every quarter, let's say January comes now, [00:08:50] Then you hedge 10% of your 2026 quarterly, each quarter delivery. [00:08:56] So over the year. [00:08:58] Now comes April, the next quarter, you hedge another 10%. [00:09:02] Again, quarterly hedging over 2026. [00:09:04] So over the 26, you also deliver it throughout time. [00:09:10] And our system automatically, [00:09:12] you know, [00:09:12] does the prediction, [00:09:13] how much you produce, [00:09:14] depending on smart algorithms. [00:09:17] And then we help you allocate this portfolio and everything is done automatically [00:09:23] using our advanced intelligent tooling. [00:09:26] Hmm. [00:09:27] And when it comes to futures, [00:09:29] I'm interested, [00:09:30] are the buyers confident that they're sort of making the right decision? [00:09:34] I know it's kind of a difficult question. [00:09:36] I mean, how strong an indicator are the sort of future steals that you lock in? [00:09:41] Like historically backdating those, have they been accurate at predicting the price movement? [00:09:45] They're very volatile. [00:09:47] The geo market is very volatile and it's very hard to accurately predict where the [00:09:53] market goes because it's affected a lot by rainfall and weather and these things [00:09:59] which are somewhat still unpredictable for us at this point, [00:10:04] especially over the long term of the entire year. [00:10:07] And this is also why we don't recommend hedging way 100%. [00:10:13] So let's say you hedge away 100% and then it turns out we're going to have a very dry season. [00:10:19] And over that dry season, the prices will skyrocket by the end of the summer or something. [00:10:25] And then you're just completely missing out on that one. [00:10:28] We've seen offers made to producers in some cases where the buyer says, [00:10:34] we'll lock in the next 10 years forward. [00:10:37] I mean, yeah, you can do it. [00:10:38] You have very predictable cash flows, [00:10:40] but you could also lose massive amounts of money over those 10 years because nobody [00:10:45] knows where the market is 10 years in 10 years. [00:10:49] But we strongly believe that the market is going to be a lot more bigger and in a [00:10:56] better place than it is right now. [00:10:58] All the signs are pointing towards it. [00:11:00] All the regulations that are coming out do require using renewable energy, [00:11:05] government subsidies, [00:11:06] all the ESG, [00:11:08] the corporate transparency. [00:11:09] In Estonia, [00:11:10] for example, [00:11:11] if you buy an electric car, [00:11:12] you get government subsidy, [00:11:14] but only if you use renewable energy going forward. [00:11:17] So these things really will drive the demand in the future and locking in for 10 [00:11:22] years is while it causes maximum stability, [00:11:26] maximum stability also means no potential obstacle. [00:11:30] So you spent a lot of time sort of analyzing the regulatory environment, [00:11:34] building the tech in accordance to that, [00:11:37] really, [00:11:37] really getting stuck into markets and thinking about where they're going to be [00:11:42] going in future. [00:11:43] But what's the sentiment amongst producers? [00:11:45] Do they think it's going to go up? [00:11:46] Do they really have an understanding of price movement? [00:11:49] Do you feel like when you're approaching them and you're talking to them, [00:11:52] they just think, [00:11:52] oh, [00:11:53] you know, [00:11:53] geos aren't worth it right now. [00:11:55] They're too cheap. [00:11:56] Yeah. [00:11:56] What do they think? [00:11:57] Well, [00:11:57] first is that the thinking of how much they're valued is completely from one [00:12:03] spectrum edge all the way to other. [00:12:06] So like we've seen some producers believe that by 2030, [00:12:10] we won't have the guarantee of origin market because we'll be 100% renewable. [00:12:14] I'm kind of skeptical of that claim, but that's what some producers truly believe. [00:12:20] And then there's the other spectrum who sees that this is only the beginning. [00:12:25] But what we see in the middle and what a large part of producers actually, [00:12:30] where they're at is that, [00:12:32] and they're very honest about it, [00:12:33] and it's completely understandable why, [00:12:35] is that they frankly just say that they don't know. [00:12:37] They don't understand it. [00:12:38] The market is not actually very transparent if you don't specialize on it. [00:12:43] You can generate transparency for yourself in this market pretty easily. [00:12:48] There's data service providers. [00:12:51] There's now public auction platforms, which are great, like Montel Marketplace and Apex Spot. [00:12:56] And these auction platforms have created a lot of transparency. [00:13:01] And there's more and more talk about geos. [00:13:04] But the reality is that... [00:13:07] Most people in this market currently feel like struggling to find information. [00:13:14] And it's also for most producer guarantees operation are like number 10 priority [00:13:20] because it's like 5% of their extra revenue maximum. [00:13:25] And they have like million other priorities to maximize their new constructions and [00:13:29] electricity power and so on. [00:13:31] So geos are like not at the top of the priority list. [00:13:36] And at the same time, they need to make decisions. [00:13:39] Do we sell now or do we not sell now? [00:13:41] And that's very hard if you don't have this information. [00:13:45] And it's not for most producers worth it to really try to get that information. [00:13:50] It's just too expensive for them compared to how much they're going to get back from it. [00:13:55] And that's why we believe the automatic tools are also the best for them. [00:13:59] Just rely on good market strategies that aggregates everybody together, [00:14:03] that uses smart algorithms to do it for them. [00:14:06] And that's why a lot of people have really trusted us as well. [00:14:08] And it's been one of the main reasons why we've been growing like 50% month to [00:14:13] month in such a short time. [00:14:16] Yeah, it's exciting how well you guys are doing. [00:14:19] I'm really interested about aggregation and how specifically aggregation gets better deals. [00:14:25] I mean, [00:14:25] I understand that buyers want to get more GOs in one go, [00:14:30] but what's that difference look like? [00:14:32] Is it difference between somebody who's producing GOs not being able to sell [00:14:36] whatsoever or just getting a better price? [00:14:38] It's the, [00:14:39] you know, [00:14:39] from the buyer's perspective, [00:14:41] a lot of the buyers over here on this market, [00:14:44] they're calling and searching for sellers like a big chunk of their day. [00:14:50] And if they find the seller, [00:14:51] then they need to make sure the seller has done KYCs, [00:14:55] which is a big process because in many countries, [00:14:59] guarantees of origins are securities like in Germany. [00:15:01] then they need to make sure that there's a contract signed. [00:15:05] If it's a forward deal, [00:15:06] they need to make sure that they're like a credit responsible party, [00:15:10] that they can actually deliver what they promised. [00:15:12] So there's like a lot of admin work involved in every single deal. [00:15:18] Now, [00:15:19] if you're a small producer relatively, [00:15:22] let's say you generate like one gigawatt a year, [00:15:31] it's very hard to make money on those trades. [00:15:35] So because like all of the effort you put into it, [00:15:38] the labor is going to basically eat away all your margins because usually they [00:15:43] don't even, [00:15:43] you know, [00:15:44] the buyers, [00:15:44] they need to talk with their back office, [00:15:46] with their compliance team and so on. [00:15:48] So what naturally starts happening is that one, they don't even bother with the small producer. [00:15:54] They're just going to say that's too small volume. [00:15:56] I don't care. [00:15:57] Or they're going to just offer them lower price to make up for all that. [00:16:00] Yeah. [00:16:01] But if you aggregate all the production together, [00:16:05] go behind a single counterparty, [00:16:07] then everything changes, [00:16:09] right? [00:16:09] Suddenly behind us, [00:16:11] there's thousands of production points, [00:16:14] but for the buyer, [00:16:15] we're a single entity. [00:16:16] So it's kind of like this virtual renewable energy power plant where they can just source. [00:16:22] And that helps them a lot. [00:16:25] And that just gets you the better deals. [00:16:27] And they can get the big chunk at once and make sure it gets to the right places. [00:16:33] It's pretty simple. [00:16:34] And do you let them know exactly what that aggregation actually comprises? [00:16:40] As in, I guess... [00:16:41] They want to be purchasing a specific type sometimes, [00:16:44] or do you have to aggregate only wind or only solar or just put it all together? [00:16:48] We really break it down, [00:16:50] like the technology, [00:16:52] wind, [00:16:52] solar, [00:16:52] hydro, [00:16:53] the COD, [00:16:54] like when did the plant become operational, [00:16:58] the generation month by month, [00:17:01] when did it become generated. [00:17:03] Sometimes some producers set minimum price thresholds, which we need to hit. [00:17:09] In practice, [00:17:09] what's happened is if it's too out of weight, [00:17:13] then they just won't sell and it just goes to the next month. [00:17:17] and so on so like we we really break it down to whatever the buyer needs and they [00:17:23] can either try to buy in part of it or all of it but our goal is simple we just [00:17:28] sell to the highest bidder and we use like algorithmic approach to how we do those [00:17:33] sales instead of letting human emotions into it because that's when things can get [00:17:38] bad as top markets have really well shown in the past [00:17:41] Let's look at the role of automation now. [00:17:43] I'm interested how much, [00:17:46] well, [00:17:46] obviously there's a time saving, [00:17:47] but based on the average sort of, [00:17:50] I always want to say like salaries, [00:17:51] because you've got somebody sitting down and entering that, [00:17:53] how much are they going to be actually saving, [00:17:56] right? [00:17:57] Yeah, well, there's two parts of it. [00:17:59] One is how much they're going to be saving and another is how much they're going to [00:18:02] be earning more. [00:18:04] Right. [00:18:04] So that's the two parts, essentially. [00:18:07] And it's significant, [00:18:08] like especially because one thing that's very hard to measure is like, [00:18:12] what was your strategy without us versus what it has been with us? [00:18:18] And compare, we've done some analysis on that in the past. [00:18:23] And because like we've had producers, [00:18:26] like I mentioned in the beginning, [00:18:27] who have said like, [00:18:28] I don't want to join it because I want to hold on and wait until it gets back to [00:18:32] like, [00:18:32] you know, [00:18:32] last year prices. [00:18:34] And then a few months ago, [00:18:36] most of them, [00:18:37] like almost all of them that we talk have eventually joined us. [00:18:41] And when we run the numbers, [00:18:42] like what hold have they earned then, [00:18:44] they had joined us immediately versus what they actually earned. [00:18:48] It's like up to three times difference. [00:18:50] We could have made them three times more revenue than they would have themselves. [00:18:55] That's a very huge increase in their bottom line that they were missing out. [00:19:01] So for us, maximizing the... [00:19:05] revenue flow from guarantees of origin is our number one priority. [00:19:08] We put a lot of effort into analyzing that, into building out our network. [00:19:12] In our last tender, [00:19:15] we had more participants than the French government's guarantee of origin tender. [00:19:20] So you can really see that we have quite a nice network out there of buyers. [00:19:26] So yeah, that's the thing. [00:19:29] Now, [00:19:29] when it comes to savings, [00:19:31] if we discount just maximizing the revenue, [00:19:33] when we only focus on the savings, [00:19:36] it depends a lot from country to country. [00:19:38] And it also depends on the size of your business. [00:19:41] So when you're a tiny producer, [00:19:45] in some countries, [00:19:46] you need to put a lot of effort into monthly issues, [00:19:50] for example. [00:19:51] So you really need to like every month read your information from metering point, [00:19:59] enter those data in your TSO, [00:20:02] confirm it through mobile phone and two-factor authentication or something. [00:20:07] And that can take quite a lot of time. [00:20:12] In the worst case, when you delete the company, we know they have like specialized... [00:20:16] People who only just do issuance reporting every month. [00:20:20] That's literally their whole job. [00:20:22] They just do it. [00:20:23] It's very time consuming, very annoying for them. [00:20:27] And it's also very demotivating for the workers because it's not very exciting just [00:20:33] copying numbers from one place to another. [00:20:35] And we automate all of that away. [00:20:38] That just replaces, like that lets these people do something more productive, right? [00:20:44] But in some countries, the issuance is basically automatic. [00:20:47] So you don't see like every month, [00:20:48] they just see more guarantees or for agents come to their account. [00:20:52] But then there's the sales side. [00:20:54] Like when they start doing sales, [00:20:56] they always need to go through KYCs for the buyers, [00:20:59] like almost always, [00:21:01] unless the buyer is like a friend or something. [00:21:03] When they go through the KYCs, that's additional compliance or overhead. [00:21:07] If they want to get good deal, then they really need to go out there and start sourcing. [00:21:11] buyers so on the saving side depending on the size of your business it could be [00:21:18] quite you know maybe few days a year or it could be like literally full time [00:21:25] people's positions essentially interesting [00:21:30] Talk to me more about how Soldera, do you approach buyers or do buyers approach you? [00:21:36] I mean, it's kind of like your business model is that you had all of that yourself. [00:21:40] Would you ever consider going to some sort of more public facing model? [00:21:43] Is that even possible? [00:21:44] For example, [00:21:44] operating some sort of marketplace or I mean, [00:21:47] you said you had more participants than a sovereign auction. [00:21:50] Would it be possible to run your own auctions? [00:21:52] Do you already do that? [00:21:53] Yeah. [00:21:53] How does that work? [00:21:54] Yeah, [00:21:55] so most of our producers that we have come to us, [00:21:58] including internationally, [00:21:59] like we've had producers come to us from like across different European countries. [00:22:04] We even had now come from India and US, [00:22:06] like globally producers come to us and they're like, [00:22:08] hey, [00:22:09] please bring this solution for us as well. [00:22:11] So we've been very active in expansion and getting to more and more countries. [00:22:16] And it's one of our biggest focuses, rapidly integrating with every local registry. [00:22:22] Even if they don't have an API, we still integrate. [00:22:25] We really, really specialize on that and do it very fast. [00:22:29] But we do have business developers as well who do talk with the big guys, [00:22:34] utilities and so on, [00:22:36] because they usually require more attention, [00:22:39] more control. [00:22:39] They have some special requirements and we're very flexible in making sure that [00:22:44] All their needs are fulfilled as well. [00:22:46] And this comes to your question about the marketplace. [00:22:51] We currently don't see ourselves being a marketplace player. [00:22:55] We really want to focus fully on helping the producers. [00:22:58] That said, when we do talk about big utility scale producers, they obviously want more control. [00:23:05] like trading tests from like a biggest utility in like Norway or Finland and so on. [00:23:12] They're not just going to hand their portfolio to us and say, you know, do whatever you want. [00:23:16] So we sort of offer them this hybrid approach where they can opt in either [00:23:21] partially or completely into one of our trading vehicles. [00:23:25] We have multiple different ones on our platform and they can even, [00:23:28] you know, [00:23:29] allocate parts of their portfolios into [00:23:31] multiple ones, then they can see the results, they can assess it, they can compare it. [00:23:35] And if they like it, [00:23:37] then they can just increase the amount of portfolio they flow into this trading [00:23:42] vehicle. [00:23:43] And it's always very transparent, [00:23:45] very much focused on making sure the producers get exactly what they need, [00:23:49] that their compliance needs are fulfilled. [00:23:51] Like one producer told me that... [00:23:54] My biggest problem is that I need to, [00:23:57] according to my shareholder agreements, [00:23:59] get the best offers on the markets. [00:24:01] But I also have really high compliance requirements, DSG and so on. [00:24:06] So every time I go to sales, I need to put a lot of effort into this KYC and stuff. [00:24:11] And it's a lot of work for us. [00:24:12] And we were like, well, now you can just use one of our trading vehicles. [00:24:17] We handle all the KYCs in the background. [00:24:19] We're only a single counterparty for you. [00:24:21] And we give you full transparency that this was really the best deal on the market. [00:24:27] And yeah, so talk about that transparency. [00:24:30] You have to compare with other data sources because he says he has to go and tell [00:24:34] his shareholders that he got the best deal. [00:24:36] You give him a way to prove that, right? [00:24:37] Or dev a way to prove that. [00:24:38] We really want to bring more transparency in this market. [00:24:42] We want to make sure a guarantee for each market succeeds. [00:24:45] And it will succeed if there's a lot of trust around it, [00:24:48] if people see exactly what's going on, [00:24:49] and they know that the renewable energy producers are getting the best deals on the [00:24:53] market. [00:24:53] So for us, it's all about transparency. [00:24:56] The producers see exactly how many people we had in tenders. [00:24:59] They see the price ranges. [00:25:01] They don't see who exactly were the offers and buyers because sometimes the buyers [00:25:06] actually don't allow that for their own clients' reasons. [00:25:09] But that's fine. [00:25:11] That's not what people usually need. [00:25:13] They see exactly all the information they need for their compliance purposes and [00:25:18] bring the transparency. [00:25:19] They see the market trends. [00:25:21] They see what's going on. [00:25:22] And the way we work is very well regulated by the contracts we sign with them. [00:25:28] Do you ever get people who just really do not understand your offering? [00:25:32] You explain that you bundle, [00:25:33] you explain that you aggregate, [00:25:34] you explain that that helps them get better pricing. [00:25:37] Do the whole bitch, everything, they just don't understand it. [00:25:40] And at that point, what do you do? [00:25:42] Do you just walk away or do you keep trying? [00:25:43] Yeah, I'm curious. [00:25:45] I mean, look, we're not for everybody. [00:25:47] There's people who want to do their own auctions or tenders and want to do it themselves. [00:25:52] Some people actually get excited about trying to sell their guarantees of origin. [00:25:56] And it's sort of like their hobby. [00:25:58] So even though they understand it all, they still don't join us. [00:26:02] Some people I've seen literally try to treat us as traders. [00:26:07] Every time they come to us and are like, what price are you going to give it to us? [00:26:10] And I'm going to be like... [00:26:11] I don't know. [00:26:12] The market will show us eventually. [00:26:14] And then they're like, but you're buying and selling. [00:26:17] No, we're not buying. [00:26:18] We're brokering and aggregating. [00:26:20] So it's completely different. [00:26:22] And eventually, some of them understand what we do and join. [00:26:27] Some of them don't. [00:26:28] And that's fine. [00:26:29] We can't service everybody. [00:26:31] That's fine. [00:26:32] We do the best for the people that just are value aligned with us and see the [00:26:37] benefit we bring to us. [00:26:38] essentially people who want to make sure they have as little back office work as [00:26:42] possible and want to get the maximum results from the sales let's let's uh let's [00:26:46] think about wrapping here because we're getting close to time but i'm curious about [00:26:51] the current state of the market let's let's end on that you think you're the sort [00:26:55] the stall there stance is that markets are going to improve but either way it [00:26:59] doesn't really matter so much to producers who are getting in addition to their [00:27:04] existing revenue right so if it's [00:27:05] If you're not making any money on goals, [00:27:07] you might as well start because it's just in addition to what you're currently [00:27:11] earning. [00:27:12] But either way, [00:27:12] it's looking good in future and it's kind of a little bit in a slow period right [00:27:16] now. [00:27:17] We're very bullish in the future and the markets sort of work on cycles, right? [00:27:22] So right now it's a downward cycle, but it's already actually showed improvements this month. [00:27:27] So usually the December is a bit busier month because everybody's want to wrap up [00:27:31] their books and make sure they have everything covered. [00:27:34] So all the issue departments wake up and so on. [00:27:36] The producers who are not burning money on geos, [00:27:39] I mean, [00:27:39] they're losing out on up to 5% revenue. [00:27:42] That's massive. [00:27:43] And you won't get them on backtrack. [00:27:46] You may as well start getting them right away because 5% extra revenue on renewable [00:27:51] energy is huge. [00:27:54] Even if right now it's smaller than 5%, [00:27:59] in terms of profits, [00:28:00] it's huge because it's a low margin business, [00:28:02] right? [00:28:02] And so that really helps them. [00:28:06] And once they start factoring in on that, [00:28:08] suddenly their balance sheets and financial plans become a lot better. [00:28:12] And since a lot of renewable producers... [00:28:15] A big part of their job is fundraising to build new installations, right? [00:28:20] Making sure you have a good strategy in the entire geo management is essential to [00:28:28] put the best booth forward when doing this fundraising. [00:28:32] And using Soldera as a service to essentially manage this full stack, [00:28:38] we've heard it really helps it, [00:28:40] provides a really compelling narrative and story for investors, [00:28:43] plus the results speak for themselves as well. [00:28:46] I've got a product idea for you guys. [00:28:47] You should add a little like Soldera wrapped, [00:28:50] definitely not inspired from Spotify at the end of the year. [00:28:52] So producers can see exactly how much extra they earned because of the geo sales [00:28:56] through Soldera. [00:28:57] And that can be a standalone slide in whatever deck or business plan that they have [00:29:01] to show to their investors when they're fundraising. [00:29:04] I love it. [00:29:05] I love it. [00:29:05] Why don't you put it together? [00:29:06] Let's do it. [00:29:07] Let's do it. [00:29:08] All right. [00:29:09] Well, yeah, cheers. [00:29:11] That was a really good combo. [00:29:12] We'll try and do this weekly, but whenever we get around to it for the next one. [00:29:15] So yeah, thank you very much. [00:29:17] Thank you. [00:29:17] It was a pleasure and looking forward for the next one. [00:29:20] Cheers. [00:29:20] All right. [00:29:21] Cheers. [00:29:21] Bye.

Soldera Markets #2 | How to Make the Most Profit From GO Sales

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January 1, 2025

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August 5, 2025

August 7, 2025

🌍 Soldera Market Discussions: Understanding RE100's Credible Claims Guidelines

Join Al, Ollie & Stenver for a detailed exploration of RE100's framework for credible renewable energy claims.

📹This episode covers:

→ What makes a renewable energy claim credible under RE100 standards 📊
→ The six key criteria for valid claims
→ Geographic market boundaries and their implications
→ How vintage limitations affect renewable energy certification
→ The importance of attribute aggregation

⚡Key topics we discuss:

→ Why countries like Poland remain outside the AIB system
→ The Costa Rica paradox of 99% renewable grid
→ How market boundaries affect liquidity
→ The special requirements for hydro and biomass certification
→ The 15-year age limit rule and its exceptions

💡Notable insights include:

→ Why grid connection alone isn't enough for cross-border trades
→ How the UK's post-Brexit isolation affects the market
→ The challenges of matching consumption periods
→ Why tracking matters even in nearly 100% renewable markets
→ The importance of preventing attribute unbundling

Fascinated by renewables, renewable assets and renewable market frameworks? Subscribe to stay informed on pressing developments!

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit podcast.soldera.org

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.

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

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January 27, 2025

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August 5, 2025

August 7, 2025

As Q1 kicks into gear, we share our perspectives on the dynamics most likely to shape the European Guarantees of Origin (GO) market.

This Episode Covers:

* How record-high Nordic hydro reservoirs are creating potential market oversupply conditions 💧

* Why the new CSRD reporting requirements will impact companies with over 500 employees 📋

* What makes the March 30th disclosure deadline crucial for Q1 market movements ⏰

* How German elections could influence Europe's largest GO importing market 🇪🇺

* What forward trading patterns reveal about long-term price confidence 📈

Understanding Market Dynamics:

* Despite current oversupply, why supply levels remain lower than early 2024 levels 📉

* How mandatory corporate sustainability audits are reshaping EU company practices 🏢

* Why local sourcing requirements are becoming essential, particularly for German subsidies 🗺️

* How RED3 directive makes it easier for small-scale renewable producers to participate 🌱

* What new industry support programs mean for energy-intensive sectors across Europe ⚡

Stay tuned for our quarterly market updates to keep your finger on the pulse of the GO market!

#GuaranteesOfOrigin #RenewableEnergy #EnergyMarkets #Sustainability

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit podcast.soldera.org

Transcript of the episode's discussion between Oliver Bonallack and Al William Tammsaar [00:00:03] Hey guys, and welcome to a special episode of Sodera Markets. [00:00:07] Today we're recording a state of the go markets. [00:00:09] It's an outlook for 2025, Q1 specifically. [00:00:13] So this will be a little bit of an overview, [00:00:15] what we think is going to happen, [00:00:17] what we think are the most exciting developments and trends that deserve to be [00:00:20] looked out for. [00:00:21] And yeah, we think it's going to be good. [00:00:23] So, you know, here with Al, but why don't we dive straight in? [00:00:26] What are you most excited for this year? [00:00:28] So most excited, especially in Q1, I am about the upcoming reporting requirements. [00:00:35] So we'll talk about CSRD later in the episode. [00:00:40] But before that, [00:00:41] I also want to talk about the overarching topic of supply and demand because [00:00:48] obviously as a free market mechanism, [00:00:50] it's very important to understand how both of these things work out because that [00:00:54] has a significant impact on the price. [00:00:56] When it comes to supply, [00:00:57] In terms of the international guarantees of origin market or, [00:01:01] well, [00:01:01] within the European market, [00:01:03] the biggest exporter is Norway. [00:01:05] In terms of demands, biggest importer is Germany. [00:01:09] So what happens in both of those places is extremely important for the entirety of the market. [00:01:14] And right now, [00:01:15] we're kind of in the state where last year we saw, [00:01:19] in addition to the year before that already being very strong in terms of [00:01:24] hydroelectricity production, [00:01:26] that has continued over into 2024. [00:01:30] And now we're kind of sitting in a state where the guarantees of our engine market [00:01:35] is somewhat oversupplied. [00:01:37] And in Norway, [00:01:39] the reservoir levels, [00:01:41] which is essentially stored up energy that they could use to create even more at [00:01:46] all time, [00:01:47] that is at relatively high, [00:01:51] unusually high levels right now. [00:01:53] So we're sitting in a situation where the market has a lot of supply available. [00:01:58] There's an expectation that supply is going to come online. [00:02:02] And that's really depressed the prices. [00:02:04] But what I'm really excited about in quarter one specifically is the fact that [00:02:11] thanks to European regulations, [00:02:13] we are expecting to see more corporations start reporting on their renewable energy consumption. [00:02:19] specifically larger ones, [00:02:21] because there's new regulation that says, [00:02:24] hey, [00:02:24] if you have over 500 employees and you're in a European company, [00:02:28] similar to how you get your finances audited once a year, [00:02:32] you need to get your sustainability report audited once a year. [00:02:37] So you don't have to do anything specifically. [00:02:39] We're not making you do anything, but you do have to disclose what's happening. [00:02:44] This is something called the Corporate Sustainability Reporting Directive or the CSRD. [00:02:50] So our expectation is that we're going to see some sort of impact for that. [00:02:55] And we're hoping that's going to balance out the relative oversupply in the market. [00:02:58] Now, [00:02:59] this other thing that's worth mentioning is that while some people in the market [00:03:04] feel that the market is somehow even more oversupplied than it was in 2024, [00:03:09] based on the analysis we've seen so far, [00:03:12] that does not feel like it is the case. [00:03:15] We are likely sitting at lower levels of oversupply than we were at the start of 2024, [00:03:20] which is somewhat positive, [00:03:22] especially considering the fact that we're expecting more demand to come online [00:03:26] this year. [00:03:26] A question about the capacity of Norwegian reservoirs and oversupply in general. [00:03:32] Is it kind of predictable when that supply is going to hit the market, [00:03:35] being a sort of stored energy source, [00:03:38] so to speak? [00:03:39] Or is it possible that those reservoirs won't be released in a fashion that will [00:03:45] completely flood the market with geos, [00:03:46] or is it almost a guaranteed? [00:03:47] It's complicated. [00:03:48] So what you have to keep in mind is that when you're producing electricity, [00:03:54] you're not necessarily doing it for the GOs, [00:03:56] and that's not the thing that's actually informing your decision. [00:03:59] Generally, [00:04:00] what ends up informing your decision is electricity supply and demand on the [00:04:04] physical grid. [00:04:05] And that essentially means that if the energy prices go too high, [00:04:09] you are just more likely to capture that opportunity and sell into the market [00:04:13] because that's the market essentially telling you, [00:04:15] hey, [00:04:15] there's not enough electricity on the grid right now, [00:04:18] right? [00:04:19] So if electricity prices are high, [00:04:22] then you would expect more renewable energy to get created, [00:04:25] especially in this way, [00:04:26] which does lead to more supply in the market. [00:04:28] In terms of predicting that, sadly, I don't have that kind of crystal ball. [00:04:32] It might be an exceptionally wet year. [00:04:34] I feel like it's going to be, [00:04:35] but if it is, [00:04:37] those reservoir levels are likely to stay where they are. [00:04:40] If it's an exceptionally dry year, [00:04:41] we might even end up with the reservoir level significantly lower than we saw last year. [00:04:46] So it's all ultimately going to come down to how the market behaves, [00:04:51] what is the electricity market doing, [00:04:53] and especially what is the general water cycle looking like, [00:04:56] especially when it comes to Norway. [00:04:58] So many factors to include. [00:05:00] Have you sort of thought about electricity markets more broadly when conducting a [00:05:03] Q1 sort of outlook, [00:05:06] or do you specifically sort of limit it to sort of policy demand and stuff like [00:05:11] maybe upcoming auctions and stuff like that as well? [00:05:14] When we're analyzing the markets in Soldera and trying to get a good outlook on [00:05:18] what we expect to happen currently, [00:05:21] we do not include a lot of context outside of the guarantees of origin market itself. [00:05:26] Mostly because eventually you get to a point where you're modeling the entire [00:05:31] economy and how it behaves. [00:05:32] And is that like a reasonable endpoint you want to end up in? [00:05:36] And is that going to inform your decisions better or worse? [00:05:39] In my opinion, keeping it simple gives you 80% of the insight that you're going to have. [00:05:45] And we do have to keep in mind that a lot of the inputs in some sense are random. [00:05:49] They aren't deterministic. [00:05:51] So there is this distribution of things that could happen over the next months, [00:05:56] over the next year. [00:05:57] Getting too caught up in the details probably isn't that helpful for getting to [00:06:03] reasonable results. [00:06:04] So in the short term, [00:06:06] the two biggest supply conditions you see are hydro reserves and upcoming auctions. [00:06:11] Yeah. [00:06:12] So auctions are a good indicator of how the market's behaving. [00:06:15] Well, at Soldera, we do do quite a lot of selling ourselves. [00:06:19] But there are also these big public government auctions. [00:06:22] There's one coming up again in France soon. [00:06:25] And these are very helpful price indicators because it kind of gets you a very [00:06:32] specific snapshot in a point in time of Java markets behaving this way. [00:06:36] We do expect more supply to come into government auctions this year than last year. [00:06:42] That's just this kind of natural process. [00:06:45] That doesn't necessarily mean anything bad or good. [00:06:49] It's just a fantastic source of information. [00:06:51] And we're already seeing sort of auctions happening of late 2024 volumes, correct? [00:06:57] Does that give any sort of insight into how the market's developing? [00:07:00] Or is it just sort of, you know, the final remnants of last year's market? [00:07:03] In my head, [00:07:04] I have written off like the ability of 2024 markets getting significantly better [00:07:09] than they are right now. [00:07:10] I'll be completely honest. [00:07:12] Mostly because 2024 was quite oversupplied. [00:07:15] The prices are pretty low and there is more supply expected to come onto the market [00:07:21] exactly through these auctions. [00:07:22] So my personal expectation is that we're going to see these price levels of like 20 [00:07:28] cents up to maybe 30 cents per megawatt hour. [00:07:32] But that's about the range we're going to continue seeing. [00:07:35] I don't have a lot of optimism that's going to change. [00:07:38] I think what we should focus on at this point is the 2025 market, how that's going to play out. [00:07:45] And very importantly, [00:07:47] are we going to end up at the end of this quarter in a situation where the [00:07:51] oversupply has gotten worse as a situation or has it somewhat resolved? [00:07:56] And there is a reason to expect that we can make pretty good informed deductions [00:08:02] based on what's going to be happening in the next couple of months, [00:08:06] mostly because of this thing called the disclosure deadline. [00:08:08] Disclosure deadlines are essentially, hey, you have this 2024 energy consumption. [00:08:16] And what is the specific date we're going to say, hey, you need to stop. [00:08:22] You can't buy geos on the market and use it for your 2024 energy consumption anymore. [00:08:28] So we have to have this lock-in moment of that's the state. [00:08:32] We're moving on to the next year. [00:08:33] We're going to think about the next year. [00:08:35] And where that need comes in to actually lock this in is something called the [00:08:39] residual energy mix. [00:08:41] And what that is, [00:08:43] is on a country by country level, [00:08:46] essentially a description of, [00:08:48] hey, [00:08:49] if you aren't using guarantees of origin, [00:08:50] if you aren't making any specific claims about the source of re-electricity, [00:08:55] This is what you got from the grid. [00:08:57] This is the carbon footprint. [00:08:59] These are the emissions. [00:09:00] These are the sources of all of the electricity on the grid that you consumed that year, [00:09:04] assuming you didn't make any claims about it, [00:09:06] right? [00:09:07] So it's essentially the leftovers of anything that didn't get used, [00:09:10] anything that didn't go into a specific claim. [00:09:13] And we need to lock that in at some point because otherwise this can keep shifting. [00:09:18] It can keep changing even later into the year. [00:09:21] And that gets really complicated to even think about what does that mean for a [00:09:26] company's or a country's emissions intensity? [00:09:31] What can we say about it? [00:09:32] Because if we keep revising it for multiple years in a row, it becomes quite chaotic. [00:09:37] So as companies look to secure their geo positions in the run up to the disclosure deadline, [00:09:42] that's when you expect the biggest sort of buy volumes to be occurring. [00:09:46] Historically, [00:09:46] quarter one is quite a trading intensive period of time, [00:09:50] mostly because we are trying to get rid of the previous year's guarantees of origin. [00:09:55] We're trying to find a buyer for all of the supply. [00:09:58] Buyers have a sort of deadline because after that, [00:10:01] they can't make any claims about renewable energy anymore when it comes to last year. [00:10:06] And that all comes together into being this last sprint before the market essentially locks in. [00:10:12] And why that is really important, [00:10:14] especially this year, [00:10:16] the disclosure deadline is the 30th of March. [00:10:18] So it's essentially the end of the quarter. [00:10:20] And what happens next quarter is the first audited sustainability reports for the [00:10:30] year 2024 have to be published by all of these large companies. [00:10:34] The corporate sustainability reports [00:10:36] reporting directive is going to come into force in the sense of, [00:10:41] hey, [00:10:41] now you actually have to put out the documents. [00:10:43] Companies that have over 500 employees are going to have to think about the [00:10:46] question of renewable energy use this quarter, [00:10:49] so they could actually be reporting it next quarter. [00:10:51] So how much of a difference are these incoming CSRD requirements in comparison to [00:10:56] sort of existing regulations? [00:10:58] Are we talking like complete overhaul here or just sort of like a basic amendment, [00:11:03] pushing people in the direction it goes or, [00:11:04] you know, [00:11:04] let's get into the actual nitty gritty of it. [00:11:06] What you have to understand about the CSRD is it doesn't prescribe, [00:11:11] it doesn't make you do anything. [00:11:13] It just makes you be very public and audited and verifiably accountable for your emissions, [00:11:20] for how you are having an impact as a company on the environment. [00:11:24] And it doesn't actually ask you to do anything, right? [00:11:28] It just asks you to report on the activities that you're doing. [00:11:33] So what that means is if you are a company and you want to have that halo effect, [00:11:39] you don't want to potentially endanger your company by looking like you just don't [00:11:44] care at all. [00:11:45] You have to do a couple of things to achieve that. [00:11:48] And part of this is, hey, where does your electricity come from? [00:11:52] Because if it's all coal, [00:11:54] that's going to have a major impact on you if you are in any way energy intensive industry. [00:12:00] Do you think the big companies over 500 employees, [00:12:04] optics are a big focus, [00:12:05] but does that apply to everybody or there's some people who literally won't care? [00:12:08] Or I mean, [00:12:09] what sort of distribution of companies in the European Union do you think actually [00:12:13] not controlled by, [00:12:14] but inspired to do the right thing and make sure that they have good optics in this scenario? [00:12:18] I think that's a really hard call to make right now. [00:12:21] And I think this year is going to be very informative for us because we're actually [00:12:26] going to end up with a somewhat definitive answer to that, [00:12:30] right? [00:12:30] That's very exciting. [00:12:32] Because historically, [00:12:32] we don't really have this kind of cohesive, [00:12:36] standardized way of thinking about things or reporting about these things. [00:12:41] So this year is really going to be the first time we actually get good insight into that. [00:12:46] I am hesitant to make a call before that. [00:12:49] But what the CSRD did definitely achieve is that it started this conversation in corporations. [00:12:56] Because if they have to do this, they have to talk about it. [00:12:59] They have to ask the corporation, hey, what are our priorities? [00:13:03] What are we thinking about here? [00:13:05] Because we're going to have to say that we're doing something or nothing. [00:13:08] But it's important that we have an answer for that. [00:13:10] Given that all of these things are kind of on the horizon and we're talking about [00:13:14] 2025 being a year that really illuminates this space, [00:13:18] I'm particularly interested in how forwards have responded to this, [00:13:21] right? [00:13:22] I mean, [00:13:22] what is the market sort of signaling in terms of how important CSRD is going to be [00:13:26] for the geo market? [00:13:27] So one of the things that we definitely have seen more and more across the last [00:13:32] year is that there's been this larger interest in locking in guarantees of origin [00:13:37] prices into the future. [00:13:39] So having some sort of certainty that this is the price we're going to have to pay [00:13:43] in 26, [00:13:44] 27, [00:13:44] that's significantly increased. [00:13:47] I think we especially saw that in the end of last quarter. [00:13:50] We saw this drastic increase in trading activity, [00:13:53] mostly because of the depressed prices, [00:13:55] right? [00:13:55] But we also saw, [00:13:56] I think it was around 70% of the market's entire volume was traded on a forward basis. [00:14:02] So looking into 25, looking into 26, looking into 27. [00:14:05] So a lot of that got already locked in ahead of time. [00:14:09] And now we're still observing that there's increased demand and interest in getting [00:14:15] certainty on future prices. [00:14:17] I think part of this is many buyers see the current state of the market as being [00:14:22] relatively anomalous in terms of the current guarantees of origin spot market being [00:14:27] quite low. [00:14:27] While the expectation has been that the prices get better and better, [00:14:32] But as there's been this sort of knee-jerk reaction, [00:14:36] I think we're also seeing the forward curve slightly come down. [00:14:40] And I think this does signal that there's still a lot of way to go in terms of [00:14:46] locking in that demand and getting those prices fixed for an even larger amount of [00:14:52] people or organizations. [00:14:53] It's interesting that you mentioned sort of organization source in there because [00:14:58] CSID is going to be rolled out in like a tiered way, [00:15:00] right? [00:15:00] As it looks here from 2026, [00:15:02] it's going to be even sort of larger criteria of companies that are acquired. [00:15:07] So going from 500 employees down to 250. [00:15:09] You're saying that the futures market isn't quite as excited about that as it, [00:15:14] you know, [00:15:14] it sounds great, [00:15:15] but it's, [00:15:16] you know, [00:15:16] we're still too unsure at this stage. [00:15:17] That is a way to describe it. [00:15:20] So, yeah, you're right. [00:15:22] In terms of 2025, [00:15:23] we're going to see companies with either 250 employees, [00:15:29] 40 million euro net turnover or a 20 million euro balance sheet total. [00:15:34] Those are in 2026 going to have to report about 2025. [00:15:37] Then there's even smaller companies getting added in upcoming 2028, we can say. [00:15:44] So the rest is going to be on a much longer timeline. [00:15:48] But in that specific range, we're going to see more and more companies have to join in. [00:15:53] And I don't think we're seeing most smaller companies really thinking about that just yet. [00:15:58] Yeah. [00:15:58] I mean, [00:15:59] if you were a business owner within that sort of category, [00:16:04] size range, [00:16:05] would you even know where to start thinking about this stuff from a perspective of DOs? [00:16:09] If you're not already purchasing them, [00:16:10] you're going to be approaching this market for the first time. [00:16:14] That should bring a whole new sort of category, you know, segment of demand, right? [00:16:19] In some sense, [00:16:20] but you have to also think about how most companies approach this kind of problem. [00:16:25] And they end up approaching it very similarly to how your UI might approach this problem. [00:16:31] So you have somebody that supplies electricity to you and generally they offer this [00:16:36] green electricity package, [00:16:38] right? [00:16:38] So green electricity packages are backed with geos. [00:16:42] You don't really need to think about that. [00:16:44] It's just something that's tacked onto your electricity bill and that's it. [00:16:49] What happens in terms of market operations in the background, [00:16:52] that's a lot more complicated than I think most people or organizations really have [00:16:58] to think about. [00:16:59] But it does end up getting reported and resolved when we get into this reporting phase. [00:17:05] Moving on to sort of more policy, [00:17:07] it seems like it's not just CSRD that's going to be driving demands. [00:17:12] There's also hydrogen inclusion within RED3, correct? [00:17:18] There are very different opinions on how fast hydrogen is going to pick up in the [00:17:24] European markets in general. [00:17:26] So for context, in the Renewable Energy Directive's newest iteration, [00:17:31] there's been this clause that, [00:17:32] hey, [00:17:33] if you want to have green hydrogen, [00:17:36] here are our conditions. [00:17:37] You have to use green electricity for it. [00:17:39] It has to be probably sourced. [00:17:41] It has to be relatively closely produced in time to the actual moment in time [00:17:45] you're using all of this electricity to create pure hydrogen. [00:17:49] That's essentially what the Renewable Energy Directive says. [00:17:52] That's what's been confirmed in the last quarter. [00:17:54] Are we seeing a major pickup of hydrogen production this year? [00:17:59] I'm not completely convinced on that. [00:18:01] I think we're in a relatively early stage market. [00:18:05] I think that's going to play out in the next couple of years. [00:18:07] I don't know if it's going to have necessarily a big impact this year. [00:18:11] Yeah, [00:18:11] I guess that's a factor that just depends on the growth of the hydrogen market, [00:18:16] which is self-dependent on so many different factors. [00:18:18] But it could be an exciting catalyst if there are any big breakthroughs or [00:18:22] developments in hydrogen next year or this year even. [00:18:25] Yeah, exactly. [00:18:26] If the technology becomes a lot better, a lot more efficient... [00:18:30] What ultimately is the promise of hydrogen is that when the electricity market's [00:18:36] prices are very low, [00:18:37] this can be a way to store that energy, [00:18:40] right? [00:18:41] So you take electricity off of the grid, [00:18:43] you use that to produce hydrogen, [00:18:45] and then that hydrogen later can be released back into the market in the form of [00:18:50] electricity again, [00:18:51] right? [00:18:51] Yeah. [00:18:52] So it can function as a sort of battery if the markets are volatile enough, [00:18:57] especially because of renewable energy production, [00:18:59] where you see very low prices at some points in time and you see very high prices [00:19:04] because there's just no renewable energy production happening. [00:19:08] You know, there is this question of what happens in those dark winter nights with no wind. [00:19:14] And well, [00:19:15] that's essentially the time where you're going to have very high prices in a very [00:19:19] renewable energy dependent market, [00:19:21] right? [00:19:21] So you need to figure out the storage and you need to have ways to actually take [00:19:26] advantage of the fact that you're going to know, [00:19:29] hey, [00:19:29] this point in time, [00:19:31] there are going to be very high prices. [00:19:33] How do we move electricity over to actually take advantage of that? [00:19:36] And another factor that you've included here is local sourcing. [00:19:40] Do you think that's going to play a bigger role in 2025 than it has in the past? [00:19:45] Or do you think it's still kind of a niche interest for people who are more [00:19:48] informed as to what makes a, [00:19:50] you know, [00:19:51] renewable energy claim more credible? [00:19:52] I think we're seeing these kind of requirements evolve over time. [00:19:56] I think the best example of that is in Germany. [00:20:00] Essentially, for certain subsidies, you have to use renewable energy. [00:20:04] 80% of that renewable energy has to be sourced from the closer local area around [00:20:10] Germany and including Germany. [00:20:12] Those kind of requirements, [00:20:13] as governments start thinking about these things, [00:20:15] those are going to create these kind of local premiums. [00:20:20] So, [00:20:20] hey, [00:20:21] to get the subsidy, [00:20:22] no, [00:20:22] you need to use renewable energy from Estonia or, [00:20:24] you know, [00:20:25] you need to use renewable energy in the country that you're actually in. [00:20:28] Can happen. [00:20:29] We'll see. [00:20:30] I think there's an argument to be made, [00:20:32] especially in addition to temporal matching of, [00:20:35] you know, [00:20:36] your consumption and the production should be closer in time. [00:20:40] Those are two trends that we are seeing people be quite interested in, [00:20:44] especially large corporations. [00:20:47] So in Denmark, [00:20:48] for example, [00:20:49] we are seeing Google and Better Energy collaboration on temporal matching renewable [00:20:56] energy over there. [00:20:57] And specifically, [00:20:58] this all ties into the new renewable energy directive additions, [00:21:02] which also require or ask governments to start looking into what do hourly geos [00:21:08] look like on this kind of higher resolution data of it was produced here and [00:21:14] consumed here in a relatively close time period. [00:21:18] But yeah, experiments are happening in terms of hourly matching. [00:21:22] There are some emerging requirements in terms of matching, [00:21:26] closer matching the actual area the energy is being consumed in. [00:21:31] And these are all developments that I don't expect to have a major impact on 2025. [00:21:37] But it is going to be something on the radar of we're going to see how this evolves [00:21:42] and moves into 26 and 27. [00:21:44] So with Red 3, [00:21:46] there's also a sort of push towards making it easier for domestic permeable [00:21:51] installations such as rooftop solar. [00:21:54] Again, I guess that depends on how large that market continues to be. [00:21:58] Do you see that significantly impacting Geos? [00:22:01] I actually don't have a good feeling on... [00:22:04] how that's specifically going to impact the geomarket as a whole. [00:22:08] But I definitely do see how that's going to affect Soldera specifically, [00:22:12] or our ability to enroll customers. [00:22:15] Because one of the things that we've seen in a couple of countries is that they [00:22:18] make it extremely hard for rooftop solar type of producers to actually benefit from [00:22:23] the system. [00:22:24] In Estonia, [00:22:24] we're very blessed to have pretty good systems around this that make it very [00:22:31] streamlined for small producers. [00:22:33] But I have seen in a couple of countries, [00:22:36] for example, [00:22:37] Finland, [00:22:38] where while it is physically possible to enroll yourself into getting guarantees of origin, [00:22:45] it is possible, [00:22:46] but it does require a couple hundred euro audit to actually achieve. [00:22:52] And when you just start putting those things together, it stops making sense, right? [00:22:57] So there's this unreasonable barrier to entry compared to any benefit you're [00:23:02] expecting to get from it. [00:23:04] And that's what you see in Breadfree in terms of phrasing. [00:23:09] They're essentially saying, [00:23:10] hey, [00:23:11] if you're under 50 kilowatts and you're a producer of renewable energy, [00:23:16] it should be possible for you to benefit from these kind of systems in a more simplified, [00:23:22] streamlined manner. [00:23:24] And we're going to see regulations get updated in various countries to actually achieve this. [00:23:30] So that is something at Soldera that we're really excited about happening in the [00:23:36] upcoming months. [00:23:37] And hopefully by the end of the year, [00:23:39] we will have multiple countries that have actually changed their policies, [00:23:42] especially when it comes to smaller producers. [00:23:44] So I guess onboarding smaller producers is going to be a sort of a fresh priority for 2025. [00:23:50] Do you think, I mean, this is a kind of a loaded question. [00:23:54] Does Soldera have enough sort of momentum and capacity to change the domestic geo supply, [00:24:02] you know, [00:24:02] on the European scene? [00:24:03] Probably not within 2025, I'll give you that. [00:24:05] But, you know, in the long term, what do you think? [00:24:07] Well, [00:24:08] in Estonia, [00:24:08] where we launched at the start of last year, [00:24:12] I think you can see our contribution actually to the supply charts when they come [00:24:16] out this year. [00:24:17] And that does end up being our ability to enroll various sizes of renewable energy [00:24:24] producers into getting guarantees of origin. [00:24:27] We go the extra mile to make sure that it's as simple for you as possible, [00:24:32] that it's streamlined, [00:24:33] that you don't have to do much. [00:24:35] We want to take the paperwork out of the question. [00:24:37] We want to make it [00:24:40] relatively minimal effort for you so you could get everything done in under an hour [00:24:44] and then you can just step away and everything's fine. [00:24:47] I think there is a major need for this and the smaller and smaller you get the more [00:24:54] real the need is because otherwise you just won't participate. [00:24:57] I do think we have already had an impact in the countries that we're operating and [00:25:02] I think as we expand we're going to see this impact magnify. [00:25:05] I'm curious now about sort of national programs within various European countries, [00:25:10] besides those that are enhancing access to renewables for the domestic market. [00:25:16] Is there anything that's sort of looking at the more energy intensive industries [00:25:19] either an assistance or a firmer push towards renewable production? [00:25:24] There are a couple of examples of this on the market. [00:25:27] Italy has been looking at this quite specifically. [00:25:30] They released this policy that essentially says, [00:25:32] hey, [00:25:33] if you're a really energy-intensive industry, [00:25:36] we're actually going to subsidize your electricity, [00:25:38] but that's going to require you to start building or repowering renewable energy [00:25:44] plants or contribute in other ways into... [00:25:47] solving this question of how do energy intensive industries actually get the [00:25:51] electricity that they need. [00:25:53] I find that to be super interesting. [00:25:55] I'm unsure how that's again going to affect the market in the short term. [00:26:01] But in terms of how that's going to affect the market in the long term, [00:26:05] I'm very excited to see how these national programs can affect supply and demand [00:26:09] and how they can make participating in this renewable energy market a lot more [00:26:14] attractive and interesting. [00:26:16] Another key area that seems to be popping up a lot is the German elections, right? [00:26:20] As Germany is the biggest importer of geos in the European market. [00:26:23] Curious what you think and how you've incorporated that into your outlook. [00:26:27] So it is something we had to look at, [00:26:30] obviously, [00:26:30] because of them being the biggest importer of guarantees of origin on the market. [00:26:35] Their policy... [00:26:36] Very important. [00:26:37] When it comes to the upcoming elections, [00:26:39] under the assumption that the AFD party doesn't end up forming a coalition, [00:26:45] which based on everything we've seen so far seems highly unlikely, [00:26:48] the other configurations of how a government's going to end up getting formed with [00:26:54] the CDU and SPD participating, [00:26:57] they generally all have a very supportive perspective when it comes to renewable [00:27:02] energy and when it comes to free market frameworks. [00:27:06] So we're expecting the German elections to not have a major impact on the [00:27:12] guarantees of origin market as they are right now. [00:27:15] And there might be an upset, [00:27:18] but even in that upset scenario of somehow the AFD coming into power, [00:27:23] thanks to the European regulations placing already quite significant requirements [00:27:30] on how things have to [00:27:33] have to be done we don't expect any short-term impacts from that really being that [00:27:41] measurable but you know in in a long-term kind of fashion if the AFD came into [00:27:48] power I think I would say a lot about where the European Union in general is headed [00:27:53] and I I'm not quite sure I'd be a fan of the outcomes over there [00:27:57] Yeah, [00:27:57] I don't think you have to be particularly political in any direction to sort of [00:28:02] agree that that would be quite damaging for the overall sort of frameworks of the EU. [00:28:09] And it would set a precedent, [00:28:10] especially given recent political developments globally about renewable energy. [00:28:15] So I'd say from a renewable perspective, [00:28:18] it's not that we're hoping for one particular outcome for any political sense, [00:28:21] but we're just hoping that the market retains its sort of integrity, [00:28:24] right? [00:28:25] If we do end up in this world where Europe start doubling or tripling its coal usage, [00:28:31] I think that would be a long-term problem. [00:28:34] Definitely wouldn't be a great thing that happening. [00:28:37] Outside of essentially this scenario where the AFD comes into power, this won't happen, however. [00:28:43] So there is a small likelihood that it would. [00:28:47] Anything that we've seen so far doesn't really point in that direction. [00:28:50] Coal, [00:28:51] I mean, [00:28:51] I read the recent EMBA report, [00:28:53] they specified that solar's just overtaken, [00:28:57] it was a gross output of coal in any one particular global region, [00:29:01] this being the EU. [00:29:02] And wind is also trending to do the same for 2025. [00:29:05] So I think it's good, but not if this happens, right? [00:29:08] Best we could do is just hang in there and just see what happens. [00:29:12] So I guess on that note, [00:29:13] we've kind of looked at all of the major variables that could play a role in 2025, [00:29:17] you know, [00:29:18] not giving a speculative opinion either way. [00:29:22] Yeah, so I think that that wraps up our Q1 market outlook. [00:29:25] I guess we'll be making these a new feature, which I think is a nice thing. [00:29:30] Yeah, we'll keep you updated on a quarterly basis. [00:29:33] But essentially, [00:29:34] to summarize what we're expecting to see this quarter in particular, [00:29:38] we are entering into the market with quite a lot of supply. [00:29:41] We want to see that get reduced. [00:29:43] There is quite a high likelihood of that getting reduced due to the corporate [00:29:48] reporting requirements that we're going to see really get acted on at the start of [00:29:54] this quarter. [00:29:55] How that plays out in this quarter is going to be a big decider on how the rest of [00:29:59] the year is going to play out. [00:30:00] So something to keep in mind. [00:30:02] How are the sustainability reports going to end up looking? [00:30:07] What's the rain in Norway? [00:30:09] And how do the German elections play out? [00:30:12] I think those are the three major questions that are going to decide the general [00:30:16] direction and vibe of this year. [00:30:17] Thanks for listening, everybody. [00:30:18] And yeah, stay tuned for more geo-related content.

Soldera's Q1 GO Outlook | State of the GO Market | Soldera Markets #4

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Market Outlook

February 10, 2025

solderas-q1-go-outlook-state-of-the-go-market-soldera-markets-4

Soldera

August 5, 2025

August 7, 2025

Soldera Markets is delighted to host Taavi Veskimägi, former CEO of Estonia's TSO Elering, to take an in-depth look at the Baltic energy transition.This Episode Covers:

→ Estonia's journey from oil shale dependency to renewable energy leadership
→ The recent 2025 Baltic grid desynchronization from Russia
→ How Guarantees of Origin (GOs) drive market-based renewable adoption
→ The critical role of energy independence in national security
→ Green hydrogen's future in the Baltic energy mix

Key Insights:

→ Estonia's early adoption of digital solutions for energy trading
→ The impact of EU carbon prices on traditional energy sources
→ Balancing market competitiveness with sustainability goals
→ Why interconnectors are crucial for price stability
→ The challenges and opportunities in frequency market development

Special Focus on European Energy Security:
→ How Estonia prepared for grid resilience a decade ahead of Western Europe
→ The importance of maintaining a unified European energy market
→ Balancing regulation with innovation in clean tech

#EnergyTransition #CleanEnergy #GridResilience #RenewableEnergy #Estonia #Baltics

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit podcast.soldera.org

Transcript of the episode's discussion between Oliver Bonallack, Stenver Jerkku, and Taavi Veskimägi [00:00:03] Hey everyone, welcome to another episode of Soldera Markets. [00:00:07] Today we're joined by Tavi Beskimagi. [00:00:09] He is an ex-Estonian MP. [00:00:11] He's also ex-Estonian Ministry of Finance. [00:00:14] But most interestingly and relevant to energy, [00:00:16] he was the CEO of Estonia's primary TSO called Ellering. [00:00:20] And he was also a member of the board of ENSOE, [00:00:24] which is like, [00:00:24] correct me if I'm wrong, [00:00:25] but it fosters cooperation amongst the different TSOs in the European Union. [00:00:30] Tavi, [00:00:31] we're super excited to have you on the show and to learn everything we can about geos, [00:00:36] the history of geos, [00:00:37] where you see the market now and how it relates to broader energy trends in Europe [00:00:42] and Estonia. [00:00:43] So Tavi, welcome and feel free to correct me if I got any part of that introduction wrong. [00:00:47] In case anybody doesn't know, so TSO is transmission system operator. [00:00:51] It's the guys that control the grid. [00:00:53] When S-Link 1 was severed a few weeks ago by the Russian ship, [00:00:58] then TSO were the guys that, [00:01:01] you know, [00:01:02] went to panic and started fixing it fast. [00:01:04] Thank you very much for having me. [00:01:05] So, [00:01:05] yeah, [00:01:06] I mean, [00:01:07] my initial question is, [00:01:09] it sounds like a huge amount of responsibility running the TSO for an entire nation. [00:01:14] On top of that, [00:01:15] I thought that you were instrumental in actually activating geos as a tool inside Estonia. [00:01:21] So can you talk us a little bit through the history of geos and what that was like [00:01:25] trying to get them implemented? [00:01:27] Yeah, happy to do that. [00:01:28] Once again, thank you very much for having me. [00:01:30] If I'm going back when we started with the NGO introduction here in Estonia, [00:01:36] the basic idea was very much to bring more renewables to the market based on a more [00:01:43] market-driven approach. [00:01:45] Because before that, [00:01:47] we also supported here in Estonia renewables very much based on different grants [00:01:53] and peaking tariffs. [00:01:56] But the general concept behind to really incentivize and then more granularly [00:02:03] incentivize for renewable production and introduce the geos that basically exactly [00:02:11] match this demand supply real time. [00:02:14] And I'm very happy that [00:02:16] The general market right now is moving that direction, [00:02:20] give more precise locational signals and more precise time signals for the [00:02:26] renewable producers, [00:02:28] make new investments, [00:02:30] really ramp up their production capacity. [00:02:32] that I've always seen, [00:02:34] because I'm very much a market-minded guy myself, [00:02:36] basically when we liberalized Estonian power market already back at 11, [00:02:40] much before many others, [00:02:42] always been very much this kind of market view. [00:02:45] And I very much see the GEOs exactly this kind of complementary tool for the power [00:02:51] market encourage more renewable producers market-wise come online. [00:02:57] Sure. [00:02:57] And in terms of the landscape of geos at the time, [00:03:01] was Estonia one of the first or what did that look like? [00:03:05] Were other countries implementing geos? [00:03:08] I'm actually not too well versed on the history of geos. [00:03:11] So if you could share any insights there, that would be great. [00:03:13] Definitely. [00:03:14] We've been one of the first DSOs who start to introduce the geos in the Estonian power market. [00:03:23] Definitely not the first one. [00:03:24] Nordics started much earlier and the association of the issue in Polis were also. [00:03:29] Ellering is the member being established much before that. [00:03:35] But anyway, I think at least in the region, we've been definitely this kind of first move. [00:03:44] And exactly based on the logic that I described beforehand. [00:03:49] And I see that it also worked out like we really expected at that time. [00:03:55] That if you look at the Estonian renewable production portfolio, then definitely... [00:04:03] Most of 2024, [00:04:05] the largest share of damp and produced energy already came from the renewable sources, [00:04:10] from wind and solar. [00:04:12] And I still believe that also GEUS has played quite a significant role to achieve this startup. [00:04:18] I'd also like to add that I think Elering, [00:04:20] you know, [00:04:21] it really brought this innovation mindset to Elering and it still has the same edge, [00:04:26] right? [00:04:26] The hourly based guarantees of reaching, which is the next step for guarantees of reaching. [00:04:32] Currently, [00:04:33] guarantees of reaching, [00:04:34] you know, [00:04:34] they're based on month and then can be used throughout the years. [00:04:38] but the regulators want to move to hourly-based guarantees of origin. [00:04:42] And Elering is one of the five, [00:04:45] now actually I think six countries, [00:04:47] but they were one of the first that come into the group to start driving the [00:04:51] hourly-based guarantees of origin. [00:04:53] And Elering has their own registry built and they're really trying to stay ahead of [00:04:59] the game over there and being like the innovators and pilots to help us push this [00:05:05] market to the next stage. [00:05:08] And I think it's very much, [00:05:10] we should look at a wider context than if we 2011 liberalized the market and [00:05:16] basically introduced the central data hub together with remote readers for all [00:05:21] Estonian electricity consumers. [00:05:24] And in that respect, [00:05:25] we're definitely in one of the first countries who introduced this kind of central, [00:05:31] exactly national-wise data hub, [00:05:34] which really allows very [00:05:36] easy and fast change of your balance provider and retail electricity seller. [00:05:44] I think we also basically looked this CEO introduction basically as a part of this [00:05:50] wider package, [00:05:51] how to incentivize, [00:05:53] how to basically also [00:05:55] give the consumers more power on the power market really because for me also she [00:06:02] owes not only the tracking tool but also the basically consumer empowerment tool [00:06:08] that consumers really know that which kind of electricity they consume from which [00:06:14] sources that there are no this kind of green washes that we know that all basically [00:06:20] electricity, [00:06:21] very much labeled, [00:06:23] and I think that's also very much important for the consumer disability point of view. [00:06:28] And just looking here, it says that Ellering became an independent TSO in 2009. [00:06:34] Is that roughly the time when you came on board? [00:06:36] Could you speak a little bit to the difference? [00:06:38] A bit later, [00:06:38] definitely, [00:06:39] a bit later, [00:06:39] because as I described this granularity exactly, [00:06:44] that when European third energy packet being... [00:06:48] passed and forced. [00:06:53] We started in 2009 and I believe their commission which unbundled Ellery from that [00:06:59] time main Estonian Vertically Integrated Incumbent, [00:07:02] SDNFC. [00:07:03] First we established this kind of independent [00:07:06] the system operator, [00:07:09] and we did a way that basically both the system operation part and transmission part, [00:07:15] basically we owned and owned the high-voltage transmission grid with [00:07:20] interconnectors with other countries, [00:07:22] as Stenwer described. [00:07:24] For instance, [00:07:25] these SD cables with Finland, [00:07:28] that this was basically the first step to establish this kind of independent [00:07:32] Pali, who really lead all this market transformation. [00:07:36] The second, [00:07:37] we built the central data hub to really allow the market liberalization process [00:07:44] that consumers can very easily switch their energy and producer, [00:07:49] not because where we are coming from. [00:07:51] We are coming from the past, and I think all you are coming from [00:07:54] From that stage where the large, [00:07:58] mostly state-owned energy governments basically owned most of the market share as well. [00:08:04] Right now, we are basically a very liberal market. [00:08:09] And exactly, I think, if you have also touched this... [00:08:13] geopart and then definitely there are different producers with different value [00:08:18] propositions to their customers and then some of them exactly also highlight this [00:08:23] kind of clean content very low co2 footprint of their production portfolio what [00:08:29] they provide to the consumers and i think this is a really really important one [00:08:35] that we have different products, [00:08:36] different value propositions on the market, [00:08:39] on the electricity market for the final customers and basically the data hub. [00:08:44] And after that, all which is related with the guarantees of regions as well. [00:08:49] And right now, of course, this is not maybe the topic for today's discussion, but not exactly. [00:08:56] February 2025, we make next very big leap. [00:09:00] We basically desynchronize all Baltic power systems. [00:09:03] It means also like the Lithuania from the Russian power system. [00:09:09] And of course, there are many other ingredients that what comes with that. [00:09:14] But I think this has been this kind of awesome transition from 2008 basically up to [00:09:21] next February 2025 when we desynchronize the Baltic power grid from the Russian [00:09:27] power system. [00:09:28] And I think this also consists of those kind of measures that we need to enhance [00:09:34] the renewable production here in Estonia. [00:09:38] This is a huge milestone for the Baltics. [00:09:42] I remember when I was a kid in school, in high school, that was like more than 15 years ago. [00:09:47] Then my parents and teachers and everybody were talking how we need to become [00:09:51] energy independent and not be reliant on Russia. [00:09:54] And it's quite exciting to see that happen now, right? [00:09:57] So it's becoming a reality. [00:10:00] And it's a huge move because there's been a lot of work. [00:10:03] done to achieve that, [00:10:04] you know, [00:10:05] connecting with all the Sweden and Finland and all these nations and making sure [00:10:10] that the cables are there and we can like buy the electricity from all over Europe. [00:10:14] By the way, [00:10:14] I think it also has been very good for consumers because all those interconnectors [00:10:20] also basically able to control quite a long time, [00:10:24] very efficiently energy prices here in the Baltics, [00:10:27] not because those cables has been quite sufficient for transitional [00:10:32] flows between countries up to the moment where we noticed very high price peak for [00:10:40] the emission trading allowances and of course and I think it basically [00:10:48] This is what we should look together, [00:10:49] the one hand the guarantees of reaching and the other hand the basically emission [00:10:54] trading scheme allowances for the power producers when those prices really went up. [00:11:00] Of course, in the past, most of the electricity produced here in Germany. [00:11:05] in Estonia came from the oil shale and of course very efficiently these high [00:11:12] allowance prices shut down electricity production from the oil shale sources and of [00:11:20] course it immediately caused the situation that those interconnectors what we built [00:11:27] not sufficient basically even bring more green energy from the Nordics where the [00:11:32] generation very much based on the [00:11:35] hydro and wind and a bit nuclear as well. [00:11:38] And currently we have a split between different price areas. [00:11:41] But anyway, I think it's basically a decade or so. [00:11:45] We and Estonian consumers enjoy the very low, [00:11:49] mostly renewable powered electricity supply banks for those interconnections. [00:11:57] What do you think that the desynchronization with Russia will do with the prices [00:12:04] and volatility on the energy markets in Estonia? [00:12:07] Are the cables right now enough to cover the gaps or do we need to build more of them? [00:12:14] Where do you see this point? [00:12:16] I think this is really important to distinguish that we operate synchronously with [00:12:23] a Russian power grid, [00:12:26] but we never, [00:12:27] time of last two decades, [00:12:29] bought any energy from Russia. [00:12:31] The frequency is the same, but no energy trading already at least last two decades or so. [00:12:39] It means that there are no impact for a day ahead price. [00:12:44] Where these impacts come from, [00:12:46] that definitely the Russian system operator mainly has regulated the frequency. [00:12:53] Right now, we have to start to control frequency by our own. [00:12:59] It means that we need more reserves, [00:13:01] especially frequent containment reserves and frequency restrictions. [00:13:05] restoration reserves, the automatic frequency restoration reserves. [00:13:10] And of course, [00:13:11] those units are a costly one, [00:13:12] especially if we do not have so much conventional power generation left anymore. [00:13:18] We have a more basically solar-based power system. [00:13:22] And if you do not have those conventional generators, [00:13:25] which really can give you the frequent containment reserve and automatic frequency [00:13:31] restoration reserve, [00:13:32] you basically have to [00:13:34] buy it and most probably those reserves are coming from the gas fire power plants [00:13:40] and as we know that gas fire power plants are quite expensive one it means that [00:13:46] main add-on cost coming from the frequency regulation [00:13:52] And this is right now, [00:13:53] I think the Australian government made the right decision that it's not right now [00:13:59] goes on the shoulders of the consumers, [00:14:02] but Ellering is going to cover this based on the income, [00:14:08] what they have earned based on the bottlenecks between different price areas, [00:14:13] this is some kind of... [00:14:15] which is in Europe in place that the system operators earn money to reinforce the [00:14:23] greed if there are bottlenecks, [00:14:26] this kind of bottleneck fee, [00:14:28] if there are bottlenecks between different price areas. [00:14:31] And right now, [00:14:31] the Australian government really incentivizes LRE to use this money to cover extra [00:14:38] costs coming from the desynchronization due to more frequent reserve demand. [00:14:45] And that's the start of the frequency market that's coming, right? [00:14:49] Yeah, that's right. [00:14:50] That's definitely right. [00:14:51] And this is definitely something also interesting that how renewables and basically [00:14:57] renewables-based storage capacity is going to participate in different markets, [00:15:05] new markets, [00:15:06] which just get introduced. [00:15:08] for manual restoration reserves, automatic restoration reserves. [00:15:13] Let's see that this is definitely very much a new, very interesting market. [00:15:17] What we see right now get off the ground here in the Baltics. [00:15:21] That's amazing. [00:15:22] Just out of my own interest, [00:15:23] is the frequency market also somehow connected to the rest of the Nordics? [00:15:29] And how are the prices and frequency, how are they connected basically? [00:15:34] And how do they impact each other? [00:15:35] Not directly, [00:15:36] because we interconnected with the Nordics based on the direct current subsea cables. [00:15:44] There are not the same frequency area in the Nordics. [00:15:48] There are different frequency area, [00:15:51] and we get the part of the continental Europe frequency area that we can exchange [00:15:57] the frequency reserves with the continental Europe transmission system operators. [00:16:03] But I think this is the main difference compared to the Russian power system and [00:16:09] Central Europe power system. [00:16:10] The Russian system, [00:16:11] it was a centrally controlled system, [00:16:14] as most of the stuff in former Soviet Union. [00:16:17] It was centrally controlled by Moscow, [00:16:20] but the continental Europe power system, [00:16:23] basically every single transmission system operator inside the same synchronous area, [00:16:29] basically... [00:16:31] as to control frequency and participate in frequency control inside the control area. [00:16:39] This is the nature of the difference between those two and definitely the [00:16:45] responsibility of the system operator here in Estonia, [00:16:50] same luck in Lithuania, [00:16:51] is much, [00:16:52] much larger to keep lights on as it was in the past. [00:16:57] I'm curious, [00:16:57] it sounds like to me, [00:16:59] you know, [00:16:59] Estonia for a long time has been thinking about questions of grid resiliency. [00:17:04] You know, [00:17:04] you have a long and contentious history with a very challenging, [00:17:08] difficult, [00:17:09] expansionary neighbor. [00:17:11] So surely renewables have been part of the conversation for a very long time. [00:17:15] And it feels to me like the rest of Europe only really kind of recently has the [00:17:19] discussion of energy sovereignty and grid resiliency come into play. [00:17:24] Like they've had the luxury of not having to think about it for a long time, right? [00:17:28] So in that sense, was Estonia ahead of the curve? [00:17:30] Yeah, somehow. [00:17:32] We always know that basically if you look at the history of last 1000 years, [00:17:37] then you always know that you must be well prepared, [00:17:41] that you never know what comes next. [00:17:45] And definitely this kind of greed and system resilience and independence. [00:17:50] has been the top priority for us and we also talk with Denver that Denver very well [00:17:57] knows that this kind of risk assessment is in my blood that I always basically look [00:18:04] all through lenses of the risk assessment and do not [00:18:09] To get risk really mitigated and not keep them too high. [00:18:14] Exactly. [00:18:15] I think we have done this risk mitigation exercises last decade or so. [00:18:20] Definitely. [00:18:21] And to get rid of them and definitely this desynchronization of exactly one of the [00:18:26] risk mitigation measures. [00:18:28] Not somehow being in place where in Ukraine. [00:18:32] Wars when full-scale invasion, Putin war started against the Ukraine. [00:18:38] And I've been happy to help Ukraine also part of the NCE port that time when we [00:18:44] synchronized very fast manner Ukraine with the continental Europe power system. [00:18:49] basically do it in advance. [00:18:52] Of course, [00:18:53] we hope that this kind of situation will never be here in the Baltics, [00:18:56] but I think the best way to really build a deterrence to be ready for such [00:19:02] situations and definitely the energy resilience, [00:19:05] energy security is a very large part of that and definitely renewables to play [00:19:11] As a local energy source, [00:19:13] because we have, [00:19:14] as I described, [00:19:15] historically, [00:19:17] Estonia produced most of its energy from the oil shell. [00:19:22] This is quite the same as brown coal, [00:19:25] quite the same type of primary energy source, [00:19:28] very polluting. [00:19:29] Of course, we do not like to use it. [00:19:31] And basically, the alternatives are renewables, solar, wind, and also the hydrogen. [00:19:38] Of course, basically produced by green electricity. [00:19:43] But I think the green hydrogen is definitely a large opportunity for Estonia [00:19:50] because this is really fuel, [00:19:53] what you can store. [00:19:54] And this is really local fuel. [00:19:56] The electricity, what you generate for the green hydrogen production is generated in Estonia. [00:20:03] And of course, water also, what we have. [00:20:05] This is also something what we should use even more here in Estonia to build more [00:20:12] this kind of hydrogen. [00:20:13] economy and other derivacs around the hydrogen, ammonium, methanol, etc. [00:20:21] I guess speaking of energy future, green hydrogen is a very hot topic, right? [00:20:26] Because it's considered one of the storage solutions. [00:20:29] There recently came news that a lot of the green hydrogen projects were canceled. [00:20:34] Was that overblown or was that what's the state there right now? [00:20:39] And where do you see this going? [00:20:40] Yeah, I think that's correct. [00:20:42] Many, many projects, large-scale projects are really canceled all around Europe. [00:20:47] And definitely, [00:20:48] I think this brings us to a very important discussion point right now, [00:20:54] and it's related to the customer and customer demand. [00:20:57] that which kind of and how strong is the end customer demand for the green energy, [00:21:03] whichever type it is, [00:21:06] from green electricity up to the green hydrogen, [00:21:09] that this is really very much an important point, [00:21:13] especially after Trump is back in the office. [00:21:18] If the US really withdraw from the Paris Climate Accord, very much. [00:21:25] Looking further, more production from shale oil and gas resources in states. [00:21:34] And if Europe also speaks more about the competitiveness, I don't know. [00:21:38] You had a chance to look at the underlying speaks in Davos last week. [00:21:44] But she also very... [00:21:47] much pointed out the competitiveness and not so much the green deal anymore as we [00:21:52] see this kind of rhetoric switch really between Wanderlei and two commissions, [00:21:57] previous and the current one, [00:22:00] that this is something what we should really very closely [00:22:04] follow what is the pace for the green transition right now basically and I think [00:22:09] that's the right one to basically bring more European competitiveness on the plate [00:22:15] because otherwise if we really stagnate it and we lose our competitiveness there [00:22:23] are huge consequences for elections what we see because inflation and [00:22:29] unsatisfaction among the population is basically a very key driver [00:22:33] Right now, it means that we even have to look more at this kind of price market fit. [00:22:41] In that respect, [00:22:41] that whatever we do around the clean sources, [00:22:46] that there is really this kind of price market fit as well. [00:22:52] And I think for the onshore wind, this is definitely already there, that we know that [00:22:57] The onshore wind is right now, [00:23:00] based on the marginal price, [00:23:02] the lowest, [00:23:03] basically the power source. [00:23:05] And this is, I think, where the market goes to. [00:23:10] I think in the Baltics, [00:23:11] because we are not very much inhabitants in the region, [00:23:14] that there are huge room for onshore wind as well. [00:23:17] And I think this is [00:23:18] what we should harvest first. [00:23:20] There is no point to go offshore before we not utilize all onshore opportunity. [00:23:26] There are also challenges, [00:23:28] not in my backyard type of challenges still, [00:23:31] but I think we should really overcome for the cause of the wider public good. [00:23:37] For us, [00:23:37] this is a very interesting topic because this is a question of where do the [00:23:42] guarantees of origin prices go, [00:23:44] right? [00:23:44] If the renewable demand is stopping or reducing, [00:23:49] then that can have big consequences on the guarantees of origin prices as well. [00:23:55] There was a webinar done by Weight Analytics, [00:23:58] which is a firm that specializes in guarantees of origin prices and forecasts. [00:24:07] painted a bullish outlook for the market. [00:24:10] There's a couple of things. [00:24:11] First, [00:24:12] a lot of the solar investments have reduced in Europe last year, [00:24:17] while at the same time on the demand side, [00:24:20] the cancellations have actually increased year on year. [00:24:23] And even last year, they increased. [00:24:26] And at the same time, [00:24:27] now that the corporate sustainability reporting standards came out, [00:24:32] they're expected to drive a lot more demand towards renewable energy, [00:24:37] as a lot of corporates are looking to use renewable energy. [00:24:42] Lots of government subsidies and ESG requirements and investor pressure. [00:24:47] Still, the private market wants you to use renewable energy in many places. [00:24:53] So the cancellations and demand is expected to increase. [00:24:57] But one big thing in that formula, [00:25:00] which was not discussed by Wade this year, [00:25:02] was green hydrogen. [00:25:04] Because in the past, [00:25:05] green hydrogen was advertised a lot as one of the big drivers of future guarantee [00:25:10] operation demand. [00:25:12] But I guess now there's questions like how much will there actually be built green hydrogen? [00:25:18] And it's an exciting topic. [00:25:20] Yeah, exactly. [00:25:21] That this is green hydrogen as green ammonium, green methanol. [00:25:26] They are commodities and very much priced by Rotterdam. [00:25:31] Port price, for instance, that there are really these kinds of strong prices [00:25:36] price points and the market are really there. [00:25:41] I think more question concerning the input prices, [00:25:47] because if you like to produce, [00:25:49] for instance, [00:25:49] the green ammonium, [00:25:51] basically 70% of green ammonium price based on the electricity price. [00:25:57] And I think this is [00:26:00] exactly the issue that what is the price of electricity and the most or the largest [00:26:05] issue that that we have especially in this region and i think it's relevant for all [00:26:11] europe that we have a quite a lot of electricity very cheap price available based [00:26:18] on the solar and wind profiles but we know that in our region [00:26:24] Solar covers, I think, 11% of all hours. [00:26:28] Wind, maybe 35, 37, depends. [00:26:34] But if you like to run the large hydrogen production plant, [00:26:40] for instance, [00:26:40] you need the green baseload product, [00:26:43] basically, [00:26:44] for all... [00:26:45] 8,760 hours per annum. [00:26:48] And this is exactly this kind of weak point that you couldn't basically ramp up, [00:26:54] ramp down your hydrogen production based on only the solar wind profile. [00:26:59] You need a baseload, but this baseload is not available. [00:27:02] Basically, [00:27:03] those hours where sun's not shining and wind not blowing, [00:27:07] there are basically very high prices. [00:27:10] And basically no one able to provide this green power purchase agreements to really [00:27:17] those guys like to fix their electricity price because they are so price sensitive. [00:27:23] And we say that we see many, [00:27:26] many hours, [00:27:27] very low prices in the region, [00:27:29] but same times there are still too many hours. [00:27:33] with too high price to produce market-based hydrogen or ammonium or methanol. [00:27:41] Basically, I think for the future, but also I mentioned for electricity, exactly that kind of [00:27:48] price the market fit maybe is more important if we talk about less green deal and [00:27:57] more European competitiveness and this is more under the political agenda that I [00:28:04] think this is maybe this kind of state of play at least from my point of view right [00:28:09] now concerning the green hydrogen. [00:28:12] But I really, [00:28:13] I think you really touched a very important point and this is also all this which [00:28:18] related to regulation and which kind of taxonomy I place in Europe. [00:28:23] And I think that's right now very much important. [00:28:26] If I look... [00:28:28] those different initiatives somehow echoing what's coming from stage and also based [00:28:33] on this competitiveness agenda that to basically also reduce the red tape for [00:28:39] European businesses especially for European SMEs and right now I think this is a [00:28:44] very delicate balancing act [00:28:47] To one hand, [00:28:48] really reduce the red tape for reporting for industry, [00:28:53] for SMEs, [00:28:55] but at the same time, [00:28:56] keep these sustainability codes. [00:28:58] And basically, [00:28:59] exactly as we started the discussion, [00:29:01] that CEOs are a really great instrument to really disclose of the source of their [00:29:07] energy production and basically inform the customer. [00:29:11] that we basically also keep this kind of full disclosure environment, [00:29:15] at the same time basically reducing the red tape for European businesses. [00:29:20] I think this is something which is still growing even in the agenda of the European Commission, [00:29:29] the European Parliament, [00:29:30] the Council. [00:29:31] This is what we should follow very closely right now. [00:29:34] Agreed. [00:29:35] And Europe should actually demand this outside Europe as well for everything that's [00:29:43] brought in to Europe to make sure that all the imported goods are following the [00:29:48] same rules and same standards. [00:29:51] Otherwise, [00:29:52] it will create uncompetitive environment internally and make the outside [00:29:56] environment competitive. [00:29:57] Border carbon adjustment, which is in place, but I think not properly implemented. [00:30:05] I agree very much that we should build level playing field for European businesses. [00:30:10] But same time, [00:30:12] of course, [00:30:12] we understand that if we basically add on different tariffs, [00:30:18] it means the higher price of different goods and products, [00:30:22] and it might cause even more inflation. [00:30:25] What we see... [00:30:26] right now in Europe and this is the same time also basically reduce the consumption [00:30:33] power of European consumers that this is pretty complex stuff what is on the table [00:30:39] right now that how to really keep this sustainable agenda really alive and get the [00:30:45] green deal and decarbonization done because this is [00:30:49] Definitely important for the long run, not for only Europe, but for globally. [00:30:54] And at the same time, [00:30:56] not to lose competitiveness and we adapt to not lose European citizens back up [00:31:04] European agenda for decarbonizing the whole economy. [00:31:08] Agreed. [00:31:09] Agreed. [00:31:10] I'm curious, [00:31:11] specifically when it comes to EU regulation, [00:31:13] you know, [00:31:14] there's a lot of heat online that the only thing Europe leads in is regulation. [00:31:19] In your opinion, [00:31:20] in stuff like, [00:31:21] say, [00:31:21] energy, [00:31:21] for example, [00:31:23] how much of that is actually just the challenge of standardization, [00:31:26] right? [00:31:27] I mean, Europe's a huge continent. [00:31:29] Some people are going to consider new standards that they have to adhere to as red tape, [00:31:34] whereas others are just going to see it as a way forward to get everybody on the [00:31:37] same page, [00:31:37] right? [00:31:38] So that's my question is, how much of it is standardization? [00:31:41] How much of it is standard overregulation? [00:31:43] I think a couple of times already mentioned time of this conversation that I'm very [00:31:47] much a market-minded person and not so much maybe the regulations are driven. [00:31:52] That definitely, [00:31:54] if I look right now, [00:31:56] the business Europe made 68 proposals for the new commission how to reduce the rate [00:32:03] date for European businesses. [00:32:05] Definitely, if you look even this kind of list of different proposals that you even... [00:32:12] Maybe beforehand not recognized which kind of regulations there are already in place. [00:32:18] Definitely, I think we have over-regulated our life. [00:32:23] I'm definitely on that side that we do not need more regulation. [00:32:27] We need less regulations also here in Europe. [00:32:31] Fully agreed on that one as well. [00:32:33] And when I found out about the AI Act that's coming up, I was honestly in shock. [00:32:39] I mean, [00:32:40] it's like you don't even have companies to regulate and you're putting a regulation [00:32:44] in place. [00:32:45] And it's way too early to do that. [00:32:49] Some regulation is always necessary, right? [00:32:52] But I'm also a firm believer that Europe should liberalize the markets a lot more. [00:32:57] And originally it was a trade union, right? [00:33:00] And that's a massive bonus for the entire market. [00:33:04] But yeah, [00:33:05] we need to make sure as Europe that we keep our internal environment competitive [00:33:10] and won't just push all the industries outside of Europe because it's just easier [00:33:14] to do business there. [00:33:15] standardization also always inhibits innovation. [00:33:20] So you need to re-improve for innovation as well, not just overly standardized. [00:33:24] And I think there are also, on another hand, and where I also see concerns that especially [00:33:32] after the COVID, [00:33:35] after the Russian invasion, [00:33:38] to keep this internal market really consistent and together. [00:33:42] Because I've been the firm believer when we started what I described as the [00:33:50] Estonian market liberalization process, [00:33:53] I've never done this just as an Estonian market. [00:33:58] I think I've repeatedly also received a lot of critics about that at home. [00:34:04] I never built the Estonian power market as a separate isolated island. [00:34:12] Definitely, [00:34:13] I've always been the key believer that in Europe we have a common grid, [00:34:18] one grid from Gibraltar to the North Cup, [00:34:21] and we have a common market from Gibraltar to the North Cup. [00:34:25] This is something which really gives the best prices for all consumers all over [00:34:32] Europe and gives also the best energy resilience as we try now to talk about [00:34:40] talk a lot about the European defense capabilities exactly, [00:34:46] the energy security is a very important part of that. [00:34:51] And we never can build sufficient just country by country. [00:34:55] I think exactly the same applies for the energy. [00:34:59] I really hope that we can keep this Europe energy market project together, [00:35:05] that not this kind of protectionist movement, [00:35:09] what we see [00:35:10] here and there that basically we do it just for our own that is very much a short [00:35:16] focus actions that this is something what we get rid of and definitely I very much [00:35:22] like to support European Commission but really to act bold and keep internal energy [00:35:28] market all together without this kind of exemptions here and there even cut more [00:35:35] those exemptions away [00:35:36] We're stronger together. [00:35:37] We're stronger together. [00:35:39] Exactly. [00:35:40] Never alone. [00:35:41] Tavi, I've noticed we're coming up on time, so I just have maybe one or two more questions. [00:35:46] Yeah, please. [00:35:47] I also noticed that you are a partner at a clean tech venture firm focusing on [00:35:52] Northern Europe called 2C Ventures. [00:35:54] Yes. [00:35:54] This might be a little bit of a controversial question. [00:35:56] Do you think that, [00:35:57] let's say, [00:35:58] somebody who was building a company in the geo space, [00:36:01] do you think that's a venture sort of scale opportunity in 2025? [00:36:06] Which space, please repeat, I don't catch. [00:36:08] So if you're building software, [00:36:10] you know, [00:36:10] maybe to manage geos, [00:36:12] do you think that's a venture-backable company or not? [00:36:15] Yeah, definitely. [00:36:17] I think Soldera is a really good case here. [00:36:20] I think Denver and his team are really doing great. [00:36:25] I definitely see the trap. [00:36:27] huge opportunity to optimize and use also the AI tools to make geo-trading over the [00:36:35] borders much easier for both for traders or for producers and then for consumers. [00:36:43] Definitely. [00:36:43] I see there are [00:36:44] huge opportunity and then maybe even beyond the euro also basically the global wise [00:36:50] to even do more this kind of guarantees of origin type of not definitely not under [00:36:56] european regulation but but all which relates labeling of the renewable energy [00:37:02] sourcing and really keep the confidence of the consumers that they know that which [00:37:07] kind of energy from which sources they are really consumed yeah definitely i see [00:37:12] this great [00:37:14] opportunity and especially if we talk about further automatization and use of AI for that. [00:37:21] Appreciate that. [00:37:22] Thank you. [00:37:22] And speaking of Europe or outside Europe, [00:37:26] we are in the process of going currently to Sweden, [00:37:29] UK, [00:37:30] US, [00:37:31] India, [00:37:31] and we're very interested in Latin America as well. [00:37:34] So if you're anywhere in Europe or those other countries I mentioned, [00:37:38] and especially if you have a renewable energy park or plant, [00:37:43] solar, [00:37:43] wind installations, [00:37:44] even hydro, [00:37:45] it doesn't matter. [00:37:46] We'd love to talk and reach out to us and we'll help you. [00:37:50] gas and green hydrogen and all, this might be also, I think, a huge interest of you. [00:37:56] Yes, yes, it actually is. [00:37:58] But I can't put out too many messages at the same time. [00:38:00] All right. [00:38:01] Well, I think that's a natural stop. [00:38:03] So thank you so much. [00:38:04] It was a great conversation. [00:38:05] I learned a lot, personally. [00:38:06] Me too. [00:38:07] Have a nice day.

Soldera Markets #5 | Taavi Veskimägi, Former Elering CEO, on Energy & Security

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Expert Interview

February 19, 2025

soldera-markets-5-taavi-veskimgi-former-elering-ceo-on-energy-security

Soldera

August 5, 2025

August 7, 2025

Soldera Markets is delighted to host Tony Tiyou, CEO of Renewables in Africa, to explore the growing African renewable energy landscape.

This Episode Covers:

→ The evolving African renewable energy certificates (RECs) market
→ Growth patterns showing doubling volumes year-on-year
→ How only 17 of 54 African countries currently participate in I-REC systems
→ Pricing differences between African markets ($1-5/MWh) versus other regions
→ The challenges of grid integration for large-scale renewable projects

Key Insights:

→ African I-REC volumes reaching 3.5 million MWh in 2024
→ The untapped potential in distributed energy resources
→ How African renewables have lower default rates than comparable U.S. investments
→ The critical need for international capital in project development
→ Why solar makes economic sense beyond environmental benefits

Special Focus on African Energy Development:
→ The economic impact of unreliable power on businesses
→ How solar adoption is growing rapidly without government subsidies
→ The push for local manufacturing of renewable components
→ Regional integration through AfCFTA and pan-African energy initiatives
→ The continent's vast solar potential (currently just 2% of global capacity)

#RenewableEnergy #AfricanEnergy #CleanEnergy #SolarPower #IRecs #EnergyAccess #AfricanDevelopment

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit podcast.soldera.org

Transcript of the episode's discussion between Oliver Bonallack, Tony Tiyou, and Stenver Jerkku [00:00:03] Hey everyone, today we're joined by Tony Tiu. [00:00:06] He is the founder and CEO of Renewables in Africa, [00:00:09] which is a media brand and also a consultancy focused on accelerating clean energy [00:00:14] in Africa. [00:00:14] Hope that's a good description, Tony. [00:00:17] Yeah, over to you to give a little bit of an introduction about yourself and your background. [00:00:21] And then hopefully we can do a deep dive into the African renewable market and [00:00:25] specifically the REC and IREC market in Africa as well. [00:00:29] Well, [00:00:29] the first thing I would say that maybe I want to hire you because you get the [00:00:32] introduction right. [00:00:35] No, that's absolutely perfect. [00:00:36] So yes, I'm Tony T. He was the founder of a company called Renewables in Africa. [00:00:41] And like Oliver rightly said, so we are a virtual media platform. [00:00:45] We're raising awareness about Renewables Energy in the country of Africa, but also beyond. [00:00:50] And also involving to sustainability where we very much present in carbon markets, [00:00:56] supporting clients. [00:00:58] to tap into this market and then helping them to issue and trade both the IREX, [00:01:03] the carbon credits, [00:01:04] but also supporting company to decarbonize. [00:01:07] So, and it's a pleasure for me to be talking to you guys today. [00:01:11] So, [00:01:12] yeah, [00:01:12] I guess my first question to you is what is the current status of the African rec [00:01:17] market and ecosystem in general? [00:01:19] How do you see it and how has it evolved over time? [00:01:22] I mean, that's an excellent question. [00:01:24] And that's probably one of the reasons why two, [00:01:27] three years ago, [00:01:27] we decided that we wanted to step into this market because we could see that it's a [00:01:32] growing market with everything that's happening around the world, [00:01:34] including the current climate, [00:01:36] where I know there's some uncertainties coming from. [00:01:38] and North American colleagues. [00:01:40] The market is still growing, [00:01:41] but we could see that the continent wasn't really tapping too much into that, [00:01:45] right? [00:01:45] So that's what we made because as a company looking to do awareness for renewable energy, [00:01:51] sustainability, [00:01:52] we wanted to raise awareness to that as well because we see that as an excellent [00:01:56] opportunity for [00:01:57] developers to uh tap into additional revenue stream and some sort of financing as [00:02:03] well and it's a relatively new market why because typically the clean energy market [00:02:08] in africa in terms of volume liquidity it's a lot smaller compared to other regions [00:02:13] but it's also a lot smaller because not a lot of people know about the opportunity [00:02:18] right because if you're talking about specifically the iraq so [00:02:22] I think I can really trace exchanges, you know, from about five years ago, 2020. [00:02:28] I'm sure there was some before, [00:02:30] but from 2020 up until now, [00:02:32] definitely there has been some progress. [00:02:35] And more specifically over the last two to three years. [00:02:38] So what I have seen is actually the volume is doubling in year on year. [00:02:43] So definitely see that there is a great interest there from people. [00:02:45] And people could see that because they could see that, [00:02:47] hey, [00:02:47] listen, [00:02:48] so not only I have built these assets that's generating renewable power, [00:02:53] but I don't even need to do anything else, [00:02:54] you know, [00:02:55] to be able to tap into the reg just by virtue of having these power generation. [00:02:59] So you can tap into the market, providing you can register your device. [00:03:03] And if you can work with some people like myself as a consultant that can make it happen, [00:03:08] that could help. [00:03:09] How much is the volumes already like year on year? [00:03:12] I think those are like really interesting numbers. [00:03:15] Very because I think compared to maybe Europe, it could be still very, very small. [00:03:19] But in 2024, [00:03:19] for example, [00:03:20] more or less, [00:03:22] I think we can talk about between three, [00:03:24] three and a half million IRECs that have been actually sold across the continent. [00:03:29] And the year before, it was half of that. [00:03:32] And the year before was half of that. [00:03:34] So that's why I say that approximately, right? [00:03:37] So that's why I say. [00:03:38] So over the last three years, [00:03:39] so we've gone for something like about 800K in terms of volume, [00:03:43] you know, [00:03:44] to 3.5. [00:03:45] That's IREX, right? [00:03:46] So I'm not talking about the actual term. [00:03:48] I'm talking about the number of IREX that have been sold. [00:03:50] So that's 800 gigawatts? [00:03:53] Yes, yes. [00:03:54] Yeah, 800 gigawatts. [00:03:55] You're correct, yeah. [00:03:56] 800 gigawatts. [00:03:57] Exactly. [00:03:58] And we've gone now to then... [00:04:00] Well, if it's double two years in a row, then roughly two terawatt hours. [00:04:04] Yeah. [00:04:04] 3000 gigatowers, if not terawatt hours. [00:04:09] Yeah, that's what we've seen. [00:04:10] And this is because more people getting away of this market, [00:04:15] more people participating and it's growing. [00:04:19] there's still a lot of room for progress, definitely. [00:04:22] Do you know what's the total renewable production capacity as well? [00:04:28] How much of that renewable production is residual? [00:04:31] How much is tracked with Direx, basically? [00:04:34] Okay, so I've not looked at that more specifically, but what I can tell you, for example... [00:04:39] in terms of solar market in africa we've done about in general right so there has [00:04:44] been i think four gigawatts of solar that has been produced across the uh the [00:04:50] content that's only for solar and for wind you can easily add another one or two [00:04:56] gigawatt uh that way there now obviously you can look at the corresponding energy [00:05:01] produced in [00:05:02] gigabyte hours that that would be and then you compare that as well with what is on [00:05:07] IREC so but because what you also need to know it's uh for IREC in in the continent [00:05:13] there's only 16 17 countries which signed up for IREC skin as you know it depends [00:05:19] on the country who signed up right so not all the continent is [00:05:22] represented. [00:05:23] That's what I'm saying. [00:05:24] There's clearly scope. [00:05:25] And every year, there are no countries that are joining the scheme. [00:05:29] So that's why you can also see a natural progression, a natural expansion of the year. [00:05:34] And the continent of Africa, we're talking about 54 countries. [00:05:37] So if you take into account some regions that are still disputed between countries. [00:05:42] So [00:05:44] 17 out of you know 54 as you could see there's definitely a lot of scope there so [00:05:49] that's why i'm confident that this market that will be growing absolutely it seems [00:05:53] to be doing great do you have like any indication on the because i was actually [00:05:57] looking around we in soldera we like you purchase proprietary price information and [00:06:04] volume information you know to kind of [00:06:06] get the idea how these markets and everything looks like. [00:06:10] And I was very surprised. [00:06:12] I didn't see any of the African continent prices at all. [00:06:16] To be honest, pricing is very difficult. [00:06:20] In fact, to get any information for African high rates is very difficult, to be honest. [00:06:26] You pretty much need to approach various companies or desk participants who are in [00:06:32] the market and have a one-on-one conversation with them to sort of pull things [00:06:37] together to get a little bit of a flavor how the market is looking like. [00:06:41] So you won't see a lot of that. [00:06:43] In terms of the pricing, same thing. [00:06:45] But what I can tell you, [00:06:47] roughly speaking, [00:06:47] like I said, [00:06:48] don't quote me for that, [00:06:49] but that's just average that I've seen. [00:06:51] So pricing, they will vary significantly. [00:06:54] between $1 and $5, correct. [00:06:57] And also it would depend on the region, the country. [00:07:01] That's right. [00:07:02] I think India currently, for example, has 0.5 roughly. [00:07:07] So that's double of India right now, basically. [00:07:10] Because you know as well, so those who wreck, as you know, so it's year on year, right? [00:07:14] So depending on the vintage. [00:07:17] So if you're not using it, you're kind of losing it. [00:07:19] And it's a typical commodity market, you know. [00:07:22] If there's a lot of supply, not a lot of demand, obviously pricing is dropping. [00:07:25] And I know particularly in India, [00:07:27] you have places like India, [00:07:29] Turkey, [00:07:29] Brazil, [00:07:30] they have a lot of supply. [00:07:31] Sometimes they struggle a little bit with the price. [00:07:34] So it's got to be a little bit adjusted, yeah. [00:07:36] In the continent, we don't have that just yet. [00:07:40] So we still have an issue with supply because I regularly get people reaching out [00:07:45] to me and say, [00:07:46] hey, [00:07:46] do you have this quantity for me, [00:07:48] this X amount of gigawatt hours that you can sell to us? [00:07:51] Because we see other issues in terms of supply. [00:07:54] I'm interested on national rec schemes also present because sometimes in Europe, [00:07:59] you have like, [00:08:00] they'll have like a local REC system that's separate from the sort of European system. [00:08:04] I imagine in Africa, [00:08:05] you might have something similar where you have an internal REC system within a [00:08:09] nation and also IREC as well. [00:08:11] Yeah, could you tell us a little bit about that? [00:08:13] You'd be surprised. [00:08:14] As I say, so the whole IRC system, carbon credit, is still relatively new. [00:08:20] So for most of the people in the country of Africa. [00:08:24] So you don't have many national IRC skin wrecks. [00:08:28] You do have some for sure, but not many. [00:08:30] I know places like South Africa, [00:08:32] yes, [00:08:33] they have it because obviously it's the most industrialized country on the continent. [00:08:37] They have something national. [00:08:40] And Egypt as well, [00:08:42] which is the other buoyant markets in the continent, [00:08:44] they have a lot more established markets, [00:08:46] right? [00:08:47] However, [00:08:47] I would say compared to those international schemes like IREX, [00:08:52] so the national scheme here sometimes lack some level of standardization and also [00:08:59] international recognition. [00:09:01] And that can sometimes limit the attractiveness. [00:09:04] So that's why you would see in those countries, [00:09:07] so producers would prefer IREC for the broader market access and standardized [00:09:13] verification processes. [00:09:14] You mentioned a very interesting term. [00:09:16] You said IREC carbon credit. [00:09:18] I noticed that this was referred like that by an Indian colleague as well that I discussed with. [00:09:25] In my head, they're like completely separate things, right? [00:09:28] One, you need to... [00:09:29] basically do with the IREC registry what is it ICX I guess in India and I don't [00:09:35] know if in Africa it's a similar organization and then carbon credits are you know [00:09:39] done by Verra for example or some other NGO now there's new ones popping up so do [00:09:46] you guys sort of bundle them together or handle them separately or are carbon [00:09:51] credits even relevant that [00:09:53] Let's be honest, they're kind of getting destroyed out there. [00:09:56] Yeah. [00:09:58] No, they do. [00:09:59] They do. [00:09:59] They do also for a very practical reason. [00:10:02] The fact that, unless I'm wrong, but carbon credit is still... [00:10:07] global as opposed to localized like Rex Ruby. [00:10:11] And remember, I mentioned only 17 countries tap into IREX at the moment. [00:10:15] So that means in many countries where you have great projects, [00:10:19] but unfortunately they can't do that, [00:10:21] which for me is a shame. [00:10:23] The other option for them is to tap into carbon credit. [00:10:25] And also the other challenge there, [00:10:27] which is not a challenge, [00:10:28] it's the way they're structured, [00:10:31] as you know. [00:10:31] So carbon credit, because [00:10:33] you have a lot more criteria that come into play. [00:10:36] So you can sometimes achieve better pricing compared to IREC, [00:10:39] even if obviously the process to acquire carbon credit is slightly a lot more [00:10:43] longer than that. [00:10:45] So that to say that for us, we definitely will treat them separately. [00:10:52] And we make those developers or asset owners know that you have to choose which one [00:10:58] you want to go for each of the assets. [00:11:02] Obviously, you can mix and match. [00:11:04] Say that, okay, part of my portfolio, I want to open that to IREX. [00:11:08] The other one, I'm going to open that to carbon credit. [00:11:10] You're free to decide. [00:11:12] But obviously, you got to choose, as you know. [00:11:14] So it's all about... [00:11:15] avoiding double accounting for the CO2. [00:11:18] So you got to choose. [00:11:20] So which one you want to go for? [00:11:21] We educate them on that, but also advise them on how they could choose it. [00:11:29] And then they make their own decisions. [00:11:31] I was talking with one reducer in Global South, [00:11:35] and he's told me that for the future, [00:11:37] he registered direct. [00:11:39] And for the past five years, he registered carbon credits. [00:11:44] But then I asked him, all right, have you been able to sell those carbon credits? [00:11:48] And he was like, [00:11:50] It's tough. [00:11:53] But IREX seem to be a lot more in demand and a lot more trusted basically out there [00:11:59] for good reason. [00:12:00] It's a very simple instrument. [00:12:02] Yeah, it's a very simple instrument. [00:12:03] It's fast, lots of money in the pockets. [00:12:07] Obviously, providing you have a buyer and a seller relatively quickly. [00:12:12] But you mentioned something that I want to sort of jump on, and you're absolutely right. [00:12:15] The challenge for many of those guys as well, [00:12:17] it's not just to have the... [00:12:19] Because the title, [00:12:20] the instrument, [00:12:21] the title is a financial title, [00:12:23] but it's worth nothing if you can't sell it. [00:12:26] So having access to buyers is critical. [00:12:30] So that's why, obviously, I commend people like yourself, the platform that you build. [00:12:34] For us as well, [00:12:34] we've created a platform called AfroCab Lite, [00:12:37] where we purely and simply trading those assets. [00:12:41] So we actually launched in that as well. [00:12:42] So clearly, there's a potential for scope there if you are willing to explore that. [00:12:48] But it's something that we recognize. [00:12:50] So... [00:12:51] You need to have access to international buyers. [00:12:54] And most of the time, [00:12:54] those guys, [00:12:55] the people that own those assets, [00:12:58] they're sometimes small producer or small asset owner. [00:13:00] They don't have access to the huge market, right? [00:13:04] So that's why helping them get it done, that's fine. [00:13:07] Because it costs money to get carbon credits. [00:13:11] And it costs some money to have the IRAs, obviously. [00:13:14] So if you're not able to trade and recoup that, you may lose serious amount of money there. [00:13:19] So, yeah. [00:13:19] So that's why it's important to take that into consideration. [00:13:22] I agree. [00:13:23] I'm interested in the different issuers in the different countries, [00:13:27] because you rightly pointed out that not every country in Africa has an issuer for IREX. [00:13:33] It seems to me like it's kind of dominated between two being the IREX central issuer, [00:13:39] which is the GCC. [00:13:40] But also I keep seeing energy peace partners popping up. [00:13:44] I don't know if you've encountered them. [00:13:45] And I think that kind of speaks a little bit to the angle of IREX being a tool for [00:13:50] community development as well. [00:13:52] And I wondered if that had an impact on pricing, [00:13:55] especially when international buyers might be looking to kind of do more good with [00:13:59] their purchases as opposed to simply just offsetting their carbon. [00:14:03] Yeah, I think there's two pieces in your question, but let me handle it properly. [00:14:08] So you're right. [00:14:09] The issuers, they're not many. [00:14:12] The two that you mentioned, GCC, everybody knows GCC for sure. [00:14:16] And in fact, [00:14:16] GCC will stand for the issuer in many countries because what happens sometimes is [00:14:22] they have designated an organization to be able to issue that. [00:14:26] I'll give an example. [00:14:27] For example, in Kenya, it's called EPRA, right? [00:14:30] but epra is not yet ready although they have accepted yeah but they're not ready [00:14:35] yet to be able to issue that so gcc still handle handle it so and you will see many [00:14:40] kind of situation like that in africa so the couple of like i say for places like [00:14:45] egypt south africa okay you find some other people or maybe those gather you mentor [00:14:50] you can find them but they're not many they're actually limited [00:14:53] So does it have an impact on pricing the limited amount of issuer? [00:14:57] To be honest, I've not done specific studies on that. [00:14:59] So I'll be a little bit presumptuous from my side to say yes or no. [00:15:03] I would like to think that there could be some correlation. [00:15:06] But one thing that definitely will have some impact on the pricing is what you see its impact. [00:15:12] that could have embedded. [00:15:13] Because obviously, [00:15:14] if you're doing a project that is an impact, [00:15:16] a whole community, [00:15:17] so that may be a lot more valuable than something that is just sparring one business, [00:15:24] even if that's already good on its own. [00:15:26] But yeah, those are what you call additionalities, right? [00:15:29] But it has even more impact in the GRX. [00:15:32] I'm sure you heard about GRX, right? [00:15:33] We say distributed renewable energy, [00:15:36] which is where they're taking that a little bit more into consideration. [00:15:40] And this for me, and that scheme for me is particularly interesting. [00:15:44] So because in Africa, [00:15:46] compared to the rest of the world, [00:15:50] there are not that many huge projects, [00:15:54] huge power plants. [00:15:55] I'll give you an example. [00:15:57] You're just going to find a handful of projects that are 100 megawatts across Africa. [00:16:03] What we call big projects, it's anything between 10 megawatts to 50. [00:16:07] Those are big projects. [00:16:10] Whereas in Europe, in America, those are very small. [00:16:14] But what you have, you have a lot of small projects sometimes distributed, right? [00:16:19] And that's why these guys were frustrated as well because they couldn't tap too much into IRA. [00:16:25] Not that IRA will prevent them from signing up, [00:16:29] but it's because you know that if they don't generate... [00:16:32] enough volume buyers won't be interested so that's why guys ideas for example [00:16:37] finding a way to bundle them bring them together and create maybe a new category is [00:16:42] helping them to tap into the market and that's for me clearly as well as especially [00:16:46] for the continent of africa that's a way as well for me to dynamize the market and [00:16:51] maybe open up to uh some new players find a way to aggregate those more players so [00:16:56] that they can also take part of it but there's some initiative in that sense [00:16:59] I mean, this is exactly what happened with us as well in Europe, right? [00:17:03] We basically got into this market because we noticed that in Europe, [00:17:08] 30% of the producers were residual, [00:17:10] which means they were not selling. [00:17:12] It's simply money they leave on the floor, right? [00:17:14] They're not picking it up like [00:17:16] Like there's literally, [00:17:17] you know, [00:17:17] they every day it's kind of like they walk on the street and every day there's a [00:17:22] hundred dollar euro there and they're not like bending down to pick it up. [00:17:25] Then we were like thinking, [00:17:26] OK, [00:17:26] but what if somebody else would pick it up for them and give it to them? [00:17:30] That's what we're doing, right? [00:17:33] We basically use the technology to handle all the paperwork and compliance. [00:17:37] Then we aggregate them all together. [00:17:39] Then we sell. [00:17:40] Then we handle all the invoicing, the payments. [00:17:42] Everything is done for them. [00:17:44] They don't need to do absolutely anything themselves. [00:17:47] It's 99% automated. [00:17:49] Well, after we've done the sign up, it's 100%. [00:17:51] And that's it, right? [00:17:54] Suddenly all these people have market access that previously just couldn't be bothered to do it. [00:17:59] I'm very interested in looking into, can we repeat the same thing in Africa as well? [00:18:04] Excellent. [00:18:04] I think you're definitely going to find an open ear with me. [00:18:08] From what I've seen, what you guys doing looks quite interesting. [00:18:11] So you mentioned that there's only a few projects in Africa. [00:18:14] I think you said that there were a handful that have over 100 megawatts. [00:18:18] Does that reflect a broader problem in the international ambition when it comes to [00:18:24] funding big projects in Africa? [00:18:25] In a sense, if I have to rephrase it, why are they only... [00:18:28] Fuel Project 100 megawatt, yeah? [00:18:30] That's why you want to... Okay, yeah, very simple answer. [00:18:33] So it's that you also need to know that the grid... [00:18:39] In Africa, it's a lot smaller. [00:18:41] Obviously, [00:18:42] you heard about the fact that there's still a lot of countries that don't have full electrification. [00:18:46] In fact, only few countries have full electrification, we could say. [00:18:50] So the majority of countries, that's not the case. [00:18:53] So the grid is a lot smaller. [00:18:55] So when I'm talking about that, what does that mean? [00:18:57] It means that when you bring a 100 megawatt project, you still have to connect that to the grid. [00:19:02] And that's the problem. [00:19:03] If you go, [00:19:04] for example, [00:19:04] to a country that, [00:19:05] I don't know, [00:19:06] Chad, [00:19:07] Central Africa, [00:19:08] where you have the whole grid, [00:19:10] which is what? [00:19:11] Something like not even one gigawatt or sort of 800 megawatts. [00:19:15] So when you come and plug in 100 megawatts, [00:19:18] you can imagine already in terms of integration, [00:19:21] all the challenges that you're going to see. [00:19:24] So that's why you will see sometimes project that could be, [00:19:28] yeah, [00:19:28] 100 megawatts, [00:19:29] 200 megawatts that they want to develop, [00:19:30] but they do that in phases because [00:19:33] They can't be able to, they can't integrate. [00:19:35] I'll give you also another example. [00:19:36] You have a, [00:19:38] which is the biggest, [00:19:38] see the biggest wind projects in Africa, [00:19:41] which is Lake 2, [00:19:42] Canada, [00:19:42] that's in Kenya. [00:19:43] That's 310 megawatts. [00:19:45] It took them about three years to connect that to the grid. [00:19:50] Because it's quite significant, right? [00:19:52] So, yeah. [00:19:53] So that's the technical challenge. [00:19:55] Seems to be a common challenge everywhere right now, like in renewables. [00:19:59] The grid is just not there. [00:20:01] Yeah, you got to upgrade the grid for sure to absorb it. [00:20:06] And obviously, [00:20:08] I must admit, [00:20:09] greed in many of our countries, [00:20:11] they're not that effective, [00:20:13] you know, [00:20:13] so they're losing a lot of, [00:20:14] there's a lot of losses there happening, [00:20:16] all kind of issues that you can think about. [00:20:18] Financing as well, [00:20:19] you mentioned absolutely it's a problem to make sure that you, [00:20:22] because as you know, [00:20:24] so renewable is great, [00:20:26] but it's also fair to recognize that it's capital intensive, [00:20:28] at least initially. [00:20:30] And you need to find that money and that money. [00:20:31] And in the continent of Africa, we don't have a lot of capital markets, right? [00:20:35] So South Africa has it. [00:20:38] Egypt to Morocco has it. [00:20:40] But most of the time, those money come from GFI, which is European finance institutions, right? [00:20:44] So whereas in Europe, in America, that's private market. [00:20:47] You don't need to go and bother the state, the government to come and they can do that. [00:20:52] This guy can handle it without any problem. [00:20:54] For us, we don't have enough big guys that can do that. [00:20:56] Most of the money comes from abroad and a big part of it comes from GFI. [00:21:00] And why do big private guys don't come to Africa? [00:21:03] Because a lot of them still see that as a very risky place, you know, for the wrong reason. [00:21:07] Because if they look at that property, [00:21:09] they will see that it's actually the amount of default that you see in Africa. [00:21:13] You'll be surprised to know that it's as small as the U.S. [00:21:16] But people just don't know that. [00:21:17] But the perception will actually twist the picture. [00:21:20] So basically, that's this technical aspect, financial aspect, and also regulatory. [00:21:25] Because to get as well a large project like that, [00:21:29] you need to have as well the government that sort of create the regulatory [00:21:33] framework for you. [00:21:34] And a lot of the government were reluctant until very recently. [00:21:37] Why were they reluctant? [00:21:38] Because, obviously, they're greasing themselves with oil and gas project, isn't it, right? [00:21:44] So you don't want to change it. [00:21:45] So, yeah, all that politics that gets into place. [00:21:48] And, yeah, that comes into the mix. [00:21:51] And the last part is just capacity building. [00:21:54] So you also needed to have a local labor force that's able to do it. [00:21:58] Again, like I said, not many countries can do that. [00:22:00] South Africa can do it. [00:22:01] Egypt can do it. [00:22:02] Kenya could do it. [00:22:03] Yeah, [00:22:04] but if you go, [00:22:05] for example, [00:22:06] in a project, [00:22:07] I don't know, [00:22:07] Burkina Faso, [00:22:08] I promise you most of the guys that you have to bring that come from abroad because [00:22:11] you don't have a local supply chain who can actually handle it. [00:22:14] So there are different kind of challenges like that. [00:22:16] You mentioned that the default rate is lower than the US. [00:22:20] That's crazy. [00:22:21] Can you expand on that one? [00:22:24] Definitely. [00:22:24] So those are data that you can go and check, even from World Bank, you will see. [00:22:28] Okay, when you look at that, it can be surprising. [00:22:31] But if you look closely, not that much. [00:22:33] Because for a project to actually get to financial close in Africa, [00:22:38] you know, [00:22:39] it takes such a long time. [00:22:40] You have so many people looking at that from every angle. [00:22:43] And those are actually... [00:22:46] people that come from the international markets. [00:22:48] So they apply. [00:22:49] But this level of standard is pretty high. [00:22:52] That's what I'm saying. [00:22:53] So that means for that project, 100 megawatts, that's $100 million, right? [00:22:57] So I just make it simple, right? [00:22:58] So I know it's cheaper these days, but let's say $100 million. [00:23:02] So for $100 million to happen, you can be sure that whoever has signed up that check [00:23:08] has gone through all the checks possible to make sure that, [00:23:11] and also put in place all the type of guarantees. [00:23:14] Because we know already the off-takers in Africa, [00:23:17] so a lot of them, [00:23:18] like I say, [00:23:19] struggle financially. [00:23:20] So you need a certain number of guarantees for the deal to go through. [00:23:24] So that's what I'm saying. [00:23:25] That is actually very solid. [00:23:27] That's what I say. [00:23:28] When I'm talking about GFI, [00:23:29] I'm talking about guys like in France, [00:23:32] Propaco or KW, [00:23:36] these kind of guys. [00:23:37] BII, just in the UK here. [00:23:39] I know they changed the name there. [00:23:40] I forgot the whole name that they had. [00:23:43] I'm just going to say these are guys, IFC, those are very solid guys. [00:23:47] That's what I'm saying. [00:23:48] For a project to cross financial close and to move into construction, you can be sure that. [00:23:55] And usually even the EPC, those are international standards. [00:23:59] you know, the top guys that will go and build those things. [00:24:02] So you could be sure that people handling that. [00:24:06] So there's a lot of guarantees at every place. [00:24:09] That's why I say most of the big infrastructure project is very low, the default rate. [00:24:13] What I hear is also that Africa probably hasn't reached a point where solar is [00:24:18] cannibalizing itself, [00:24:19] right? [00:24:21] in europe like a lot of investments have been pulled back from renewables because [00:24:26] the marginal benefit starts getting so small it's just not worth it anymore but in [00:24:32] africa is that the case or or it's like completely the opposite and you can make a [00:24:37] lot of money there but no i think definitely you can make a lot you can you can you [00:24:41] can you can make another money because [00:24:44] Just for you to have, let's say, getting rid of the currency fluctuation. [00:24:50] So the volatility of pricing due to oil and gas. [00:24:55] And also availability. [00:24:57] Because a lot of the local economies in Africa are actually hurt by the fact that [00:25:04] they don't have access to power. [00:25:06] If you imagine, for example, you're running your factory. [00:25:09] Yeah. [00:25:10] And maybe 10 and 20% of the time you're having downtime, [00:25:13] not because your equipment not working, [00:25:15] just because you don't have power. [00:25:18] So that means you have an order. [00:25:21] You can't actually deliver that order, [00:25:23] not because there isn't any, [00:25:25] you don't have the labor force. [00:25:26] No, just like we didn't have power. [00:25:28] Or maybe because... So the demand is bigger than the supply even right now. [00:25:32] Absolutely. [00:25:32] Absolutely. [00:25:33] And also, every serious business company in Africa needs to have always a lot of genset. [00:25:41] Just a generator running with them. [00:25:43] Because they can't afford, obviously, to go there all the time. [00:25:47] But look at the amount of money that they have. [00:25:49] So if they find a way to replace that by solar over time, [00:25:55] that's actually not only, [00:25:56] obviously, [00:25:56] they're getting stable power. [00:25:59] Most of the time now it's cheaper price, or at least on par most of the time. [00:26:03] And they can boost their productivity. [00:26:05] No, definitely solar in Africa, it definitely works. [00:26:09] That's not a problem. [00:26:10] It definitely works. [00:26:11] This reminds me of the Pakistani revolution, right? [00:26:15] Where without any government subsidies... [00:26:18] Pakistani now has solar as the biggest energy mix because it's the cheapest form of power. [00:26:25] There's a lot of sun and you can actually, [00:26:29] with very small amount of money, [00:26:30] start investing in solar panels already. [00:26:33] and people have built them all over Pakistan to their roofs, [00:26:37] and it's grown to be extremely popular and a massive success story, [00:26:43] actually. [00:26:43] It's brought power to most of the country, thanks to the solar revolution there. [00:26:48] And key point is zero government subsidies. [00:26:51] It's all naturally just pure free market moves. [00:26:54] It's a beautiful story. [00:26:56] I think it's really government around the world really let solar... [00:27:00] run its course. [00:27:01] I'm confident that the market would grow otherwise if it wasn't the case. [00:27:07] Trump would have killed the solar industry in the US the first time. [00:27:10] Obviously, he slowed that down, but he didn't kill it because the business case is there. [00:27:15] I know he's going to slow that down again this time around, [00:27:18] but he can't kill it because, [00:27:19] like I said, [00:27:20] the business case is there. [00:27:21] People will see the resources there. [00:27:22] You're absorbing that. [00:27:24] The costs are way low now, so it's a no-brainer. [00:27:27] Like I said, the environmental benefits... [00:27:30] why very important it's not even the primary decision factor and you know it's [00:27:36] economic the decision factor for most of the people just bringing it back to africa [00:27:41] we put out a post earlier this year essentially praising the growth of solar in in [00:27:46] nigeria after fuel subsidies were removed i think we were a little bit kind of deaf [00:27:51] to the the social impacts of what happened when the fuel subsidy was removed so [00:27:55] Is there a delicate balance to be struck between meeting the needs of a population [00:27:59] and just, [00:27:59] you know, [00:28:00] going all in on solar and removing subsidies for fuel? [00:28:03] Yes, I think this, I believe, always has to be a gradual process, right? [00:28:07] Because if you remove all of a sudden oil subsidies and you're also kidding a [00:28:15] certain part of the industry that relies on that, [00:28:17] and that can have very, [00:28:19] very, [00:28:19] very serious impact. [00:28:20] Remember, Africa is still a very young continent. [00:28:25] I'm talking about the age. [00:28:26] So the average, the median age is about, what, 19, 20. [00:28:30] So that means actually, [00:28:31] so all those business, [00:28:33] so people working there, [00:28:34] and obviously have about four to five children per family. [00:28:39] You can imagine the number of people that obviously that are impacted by this kind [00:28:44] of decision because it has an impact on the various families. [00:28:46] So it has to be a gradual process. [00:28:49] But ultimately, that's also the way to go if you don't want to skew the market. [00:28:54] Isn't it right? [00:28:55] First of all, I believe there should be a level of subsidy for everybody. [00:28:59] I know people complain about the fact that renewable solar gets in subsidy, [00:29:04] but I forget to say that it's actually the same for the last half century or whatever. [00:29:10] It's trillions that is going there. [00:29:13] So I believe that things should be balanced. [00:29:15] So ultimately, [00:29:16] obviously, [00:29:16] you want to make sure that it's properly balanced and create a playing field. [00:29:21] And when we have that, I know solar is going to definitely progressively make sense. [00:29:26] And in the content, [00:29:27] like I said, [00:29:28] yes, [00:29:28] I think I believe that solar really create a new kind of industry, [00:29:33] giving a lot of opportunities to people on the ground. [00:29:36] And you were talking about Nigeria. [00:29:38] Nigeria is speaking of big time. [00:29:41] I can tell you that [00:29:43] I don't have the exact figure, [00:29:45] but I believe from what I've heard from very good sources, [00:29:50] one of them, [00:29:50] I can't mention them, [00:29:51] but they're one of our clients. [00:29:52] I can't mention them. [00:29:53] It's one of the top solar manufacturers. [00:29:56] And they told me beyond closed door that Nigeria has achieved more than one gigawatt. [00:30:03] So that was last year. [00:30:05] And they started from a very low base. [00:30:08] And like I say, if Africa has done four gigawatt last year and Nigeria alone one gigawatt, [00:30:15] I know it's the biggest country in terms of the population, [00:30:19] but you could definitely see, [00:30:20] and you can imagine the number of people that would have been impacted by that. [00:30:27] But the funny thing is, [00:30:28] as we're talking about that, [00:30:29] I always like to remind people that no matter how much we talk about solar in Africa, [00:30:34] for me, [00:30:34] we haven't started yet. [00:30:36] We even haven't started yet. [00:30:38] You'll be surprised to hear me say that, but if you bring that in the grand scheme of things, [00:30:43] You know, the whole solar production in Africa, it's barely 2% of the global capacity. [00:30:52] With a country that holds more than 60% of the resource. [00:30:56] So that's what I'm saying. [00:30:57] We haven't even started. [00:30:59] What we see is minuscule. [00:31:01] When you have places like Germany, it's like 15 gigawatts. [00:31:04] So that's to give you an idea. [00:31:06] Yeah. [00:31:09] The smart thing would be to start manufacturing those panels straight in Africa, right? [00:31:14] You have a lot of countries, [00:31:15] a lot of, [00:31:16] more and more people now are asking for that because, [00:31:19] which is the general conversation in terms of raw material, [00:31:22] right? [00:31:22] Because as we talked about energy transition. [00:31:24] I wasn't joking, by the way. [00:31:25] No, no. [00:31:27] Yeah. [00:31:27] I'm just pushing in your direction to say that a lot of, [00:31:32] Government in Africa are actually requesting that. [00:31:35] But it's actually a broader conversation in terms of raw materials, [00:31:38] especially critical materials, [00:31:39] because the world can achieve what you call a just transition without key materials [00:31:46] that most of them have found in Africa as well. [00:31:50] Like, for example, lithium, cobalt, and all of that. [00:31:53] And many governments now, they are tired of just being... [00:31:57] seen as, let's say, a market and a dumping ground. [00:32:00] They want people now, okay, no problem. [00:32:02] You can trade, [00:32:03] you can get access to our resource, [00:32:05] but we want you as well to build infrastructure in here so that you can contribute [00:32:09] to training people locally. [00:32:11] So there's definitely a big push. [00:32:13] of getting a lot more manufacturing for the solar supply chain. [00:32:17] And another thing that boosted that was also COVID because with COVID, [00:32:21] in fact, [00:32:21] the rest of the world saw that with the full production being concentrated in China. [00:32:27] So look what happened, obviously, when China is gripped. [00:32:30] It's gripping the rest of the world. [00:32:32] That's why, for example, you know that... [00:32:34] There is this manifesto for manufacturing to come back to Europe and other places as well. [00:32:39] So, yeah. [00:32:40] And that's also a sound that we're also hearing in Africa. [00:32:44] Yeah. [00:32:45] So obviously it's going to take time, but yeah, people are pushing towards it. [00:32:48] Yes. [00:32:49] A lot of people in Africa now think in terms of region as opposed to just countries. [00:32:55] Because if you go, [00:32:56] for example, [00:32:56] to Africa, [00:32:57] I'm sure you heard about West Africa, [00:32:58] East Africa or Central Africa, [00:33:00] Southern Africa. [00:33:01] They realized that in the logic of this world, [00:33:04] you want to be talking in terms of, [00:33:06] obviously, [00:33:07] regions, [00:33:07] you know, [00:33:08] block. [00:33:09] Because if it's just one single country, you know, globalization, you're dead. [00:33:12] There's nothing that you can do. [00:33:15] And also in Africa, [00:33:16] I don't know if you heard about the AFCFTA, [00:33:19] which is the single markets, [00:33:22] sort of to replicate a little bit what the EU has done, [00:33:24] but obviously it's still a very early stage in Africa that it's been designed. [00:33:28] And you could see as well a lot of countries now in Africa now putting their [00:33:31] borders to other countries, [00:33:33] so obviously banishing countries. [00:33:36] visa rules. [00:33:37] And part of it is actually being fueled by this spirit of Pan-Africanism where [00:33:44] people say, [00:33:45] hey, [00:33:45] I think it's time for us to [00:33:47] Because I don't know if you know, but the inter-trade between Africans, it's a bit small. [00:33:53] It's very, [00:33:54] very low compared to... [00:33:55] Africa trade more with the rest of the world and with what it's doing in Africa. [00:34:02] I think it's less than 18% of the trade actually between Africans, [00:34:06] which is far lower than any other continent. [00:34:10] So definitely there is this movement where people say, [00:34:13] let's start working more together, [00:34:16] come together and maybe see, [00:34:17] pull our resources together. [00:34:19] And if we do that, [00:34:20] we are stronger, [00:34:21] you know, [00:34:22] compared to the rest of the world, [00:34:24] speaking from one voice. [00:34:25] So I believe, [00:34:26] Oliver, [00:34:27] to respond to your question, [00:34:28] I think, [00:34:29] yeah, [00:34:30] I think it's a movement and a spirit. [00:34:33] that is coming back and it will get things to move, to shape. [00:34:38] That sounds like a beautiful message to end this one. [00:34:41] Be stronger together and be stronger together. [00:34:46] Yeah, awesome. [00:34:47] Thank you so much, Tony. [00:34:48] Yeah, we really appreciate you sharing your insights. [00:34:51] Thank you very much for giving me the chance. [00:34:52] So I know we talked about many other things, but it was a beautiful conversation. [00:34:57] I appreciate that.

Soldera Markets #6 | Tony Tiyou, Renewables in Africa CEO, on African Renewable Ecosystems

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Expert Interview

March 4, 2025

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Soldera

August 5, 2025

August 9, 2025

Join us with Mary Polovtseva, GO expert and renewable policy analyst with Veyt, as we explore the evolving European Guarantees of Origin market.

Topics covered:

→ Policy vs market analysis roles in the GO space
→ Impact of geopolitics on EU energy transition
→ CSRD's influence on GO demand
→ EU's Omnibus package reducing CSRD scope by 80%
→ Norway's evolving position on GOs
→ Granularity debates (monthly vs hourly matching)
→ Clean Industrial Deal & public procurement
→ GOs as revenue for renewable producers
→ Implementation challenges across EU states
→ Green Claims Directive and eco-labels

Key insights:

→ EU decarbonization targets remain despite competing priorities
→ Companies adopting dual reporting for scope 2 emissions
→ Potential reduction from 50,000 to 10,000 CSRD companies
→ Only renewable hydrogen regulations currently push hourly granularity
→ Public procurement (40% of EU GDP) could drive GO demand
→ GOs can represent up to 7% of operational income for producers
→ National implementation varies widely across member states
→ Clean Industrial Deal merges decarbonization with competitiveness

#RenewableEnergy #Sustainability #EnergyPolicy

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit podcast.soldera.org

Transcript of the episode's discussion between Oliver Bonallack, Stenver Jerkku, and Mary Polovsteva [00:00:03] Hey everyone and welcome back to another episode of Sudara Markets. [00:00:06] Today we're joined by Mary Polovseva. [00:00:09] She is an expert on guarantees of origin and a renewable policy analyst with Veit. [00:00:13] Veit are a firm who focus on providing insights into environmental commodities but [00:00:17] also low carbon markets including renewable power, [00:00:20] fuels and carbon. [00:00:22] They keep an eye on market trends and policy developments, [00:00:24] which is why Mary is super informed about Guarantees of Origin. [00:00:28] This episode is jam-packed with information, and we really hope you guys enjoy. [00:00:31] Thank you, Mary. [00:00:32] And to give you a quick introduction about me, I'm Stenware, founder and CEO of Soldera. [00:00:39] help to automate the guarantees of reaching compliance management and sales for [00:00:44] renewable energy producers. [00:00:46] Yeah, we've been using WAIT for almost a half year now. [00:00:50] It's been very, very useful for us. [00:00:52] It helped us understand where the market is at daily, [00:00:56] give us an idea of the trends and how it's going to move. [00:00:59] So we really appreciate all the webinars you guys have been doing and everything like that. [00:01:03] And I can definitely recommend to all the listeners out there. [00:01:06] Thank you. [00:01:07] That's good to hear. [00:01:08] I'm immediately fascinated, [00:01:09] obviously, [00:01:10] given the fact that guarantees of origin are a market that are pretty much entirely [00:01:14] dependent on policy changes. [00:01:16] Policy analyst is itself a separate role from sort of the analyst who will look at [00:01:22] price movements. [00:01:22] So can you explain why those two things are separated just off the bat? [00:01:26] I would start by saying that I'm looking mostly on the European level regulatory developments. [00:01:32] And as you've seen recently, [00:01:33] there's a lot coming out out of Brussels and all these policies and regulations are [00:01:37] now having an increasing impact on the European guarantees of origin market. [00:01:42] So if you open any sustainability related document, [00:01:46] you will see that there are some provisions that are really important for the market. [00:01:50] And that's the reason why you need to have a person sitting down and digging into [00:01:54] those documents to read them, [00:01:56] to understand them and really translate what's going to happen to the market as a [00:02:01] result of those changes. [00:02:03] And if we're talking about a separate position of a market analyst, [00:02:06] they mostly follow what's happening in the auctions. [00:02:09] They follow [00:02:10] what's happening with data prices, where the movements are going. [00:02:14] So I would say this is the primary difference between these two roles. [00:02:19] So Mary, I think the policy is a very hot topic right now, guarantees of origin. [00:02:24] We've all seen how the market prices in guarantees of origin, [00:02:27] you know, [00:02:28] they sort of had their massive peak. [00:02:30] They went to like [00:02:32] 8 to 10 euros a few years ago, only actually two summers ago, right? [00:02:36] It wasn't even that long ago. [00:02:38] And then suddenly they just crashed because we had a lot of rain in Norway, [00:02:42] the reservoirs were full. [00:02:44] And in general, there's been a lot of renewable. [00:02:48] Then everybody was betting on, [00:02:49] of course, [00:02:50] that the corporate transparency reporting to CSRD comes out. [00:02:54] This will drive a lot of demand towards guarantees of origin. [00:02:58] Lately, of course, we've had pretty intense geopolitical situation in the world. [00:03:04] Yeah. [00:03:04] I'd love to like, no, what's your gut feeling on where do you see this going? [00:03:09] Like, [00:03:09] do you already hear voices in Brussels about like, [00:03:12] let's pull back some of the green commitments in order to go more into defense or [00:03:19] how do you see this play playing out? [00:03:21] I think that's honestly one of the top questions on the top of everybody's mind in this sector. [00:03:27] Yeah, [00:03:27] so I think you touched on a good amount of subjects here, [00:03:30] Stanford, [00:03:31] because definitely what we're seeing [00:03:33] is that what's happening on the geopolitical scene also has ripple effects for Europe. [00:03:38] And as you've correctly noted, now there's a different subject that entered the scene. [00:03:43] If before we only spoke of energy transition and decarbonization, I think now defense [00:03:49] as a topic on its own is becoming increasingly important and this is where the [00:03:54] subjects of decarbonisation and energy transition will have to fight for their [00:03:59] place to stay competing via defence but i don't think personally an interest [00:04:05] transition is going anywhere the commission very clearly confirmed that they want [00:04:10] to slash greenhouse gas emissions by 90 by 2040 [00:04:15] and they will be filing a separate proposal in order to achieve that. [00:04:18] So I think there's a very clear signal emanating from the Commission that they're [00:04:23] not abandoning their idea, [00:04:24] the project that they've been working on for the past five years, [00:04:27] the European Green Deal. [00:04:29] Yeah, [00:04:29] because you touched on so many things here, [00:04:30] so I just wanted to set the scene with that and then just maybe move on to the [00:04:35] corporate sustainability reporting directive, [00:04:38] which is CCRD that you have mentioned. [00:04:40] and a lot of people in the market really placed their bets on that because it [00:04:45] really carried the promise of bringing additional guarantees of origin demand onto [00:04:50] the market [00:04:52] by virtue of affecting 50 000 companies in the union so that was the scope of that [00:04:57] directive right and just to give you more details as to why it is important to the [00:05:01] market so if you look at the requirements of the ccrd the companies need to report [00:05:06] according to the european sustainability reporting standards and if you look at [00:05:11] those standards you will see that when disclosing your energy consumption and mix [00:05:16] companies need to use guarantees of origin [00:05:19] and or PPAs that is very clearly stated in the text. [00:05:24] And if you look at scope two greenhouse gas emission reporting, [00:05:27] the commission embraced dual reporting, [00:05:30] which is when we use market-based and location-based methods to report scope two emissions. [00:05:37] And I guess for listeners who don't know what the difference between the two is, [00:05:41] the location-based method is basically when you take emissions from your national grid. [00:05:46] And market-based is when you do active carbon intensity management. [00:05:51] So you choose to use GEOs or PPAs or a combination of these two instruments. [00:05:56] But you can also use residual mix, which does not require any investments on your end. [00:06:02] And third component of CCRD is that companies need to set scope to reduction targets. [00:06:10] And they can do that according to the market-based or location-based method. [00:06:14] So in a nutshell, this is the reason why it's so important for the market. [00:06:19] Really appreciate the thorough answer. [00:06:21] And I'll give a quick comment about the European position on the renewable [00:06:25] transition as well before we can get to the more technical aspects you mentioned, [00:06:30] which I think are very interesting on their own. [00:06:33] You know, if we think about it, the renewable energy transition is a lot about defense as well. [00:06:38] It's about independence, right? [00:06:40] Especially now that we see that on both sides of the globe, [00:06:43] there's a clear signal that you need to get sovereign. [00:06:46] Europe doesn't have massive amounts of gas and other reserves they can just tap into. [00:06:51] I mean, we have Norway, but we import a lot. [00:06:55] So obviously we need to... [00:06:57] make sure we have our energy security the renewable transition i think plays a [00:07:02] vital role actually in defense and energy security which are often actually the [00:07:07] same thing let's be honest so [00:07:09] I'm interested specifically in policy just because it feels like because the [00:07:14] landscape of policy is so broad, [00:07:17] I'm understanding that there are initiatives now to sort of consolidate a lot of it together, [00:07:21] whether that's via omnibus or in other methods. [00:07:25] So maybe it'd be good to see how this landscape is coming together. [00:07:29] Just the listeners who might be struggling to kind of see where everything is at [00:07:33] right now because there's so many different elements. [00:07:35] Sure. [00:07:36] So I should probably start by saying that there are many different legislations [00:07:40] that are contributing to increasing geo demand on the market. [00:07:44] But one of the most important ones is the corporate sustainability framework that [00:07:48] we have in the EU that consists of the corporate sustainability reporting directive, [00:07:53] the due diligence directive and the EU taxonomy. [00:07:56] And Ollie, you've mentioned the simplification of these rules, and you're absolutely correct. [00:08:02] The Commission recently unveiled its omnibus package or simplification package, [00:08:07] as it is also called. [00:08:09] Some would say that the Commission is practically killing its darlings because it [00:08:14] is drastically reducing the scope of the companies that would be affected. [00:08:18] So I've mentioned previously, if before 50,000 companies would be reporting under CSRD, [00:08:25] Now only 10,000 companies would do that. [00:08:27] So that's an 80% reduction and that's pretty big. [00:08:31] What's the chances of that going through right now? [00:08:33] Any indications? [00:08:35] Yeah, so... [00:08:37] really important to keep in mind that it's just a proposal at this stage and the [00:08:42] proposal has to go through the ordinary legislative procedure where both the [00:08:47] council and the parliament need to give their views on the directive so we'll see [00:08:51] what's going to happen because there's opposition from the centre as well as from [00:08:56] the leftist factions of the parliament whereas the right-wing parties are i would [00:09:03] say are very happy about the proposal [00:09:05] Because the European People Party, [00:09:08] the political family where Ursula von der Leyen stems from, [00:09:11] actually deposited a letter to the commission asking them to simplify the [00:09:17] sustainability reporting rules. [00:09:18] So that's what they got. [00:09:20] The corporate sustainability reporting standard is a large framework, right? [00:09:24] Geos is only a small part of it, right? [00:09:27] There's a lot of pushback on this reporting because it's administratively [00:09:31] burdensome and creates a lot of compliance issues. [00:09:34] While at the same time, [00:09:36] guarantees of origin, [00:09:37] for example, [00:09:37] are pretty simple to manage for most people. [00:09:41] And, you know, it's just public database and information that reports it. [00:09:45] Do you see that RGO is part of like a big part of the omnibus pushback or is there [00:09:50] something else or what is actually the subject of discussion over here that [00:09:55] companies want to like push back on? [00:09:57] So I think there are two things to talk about here. [00:10:00] What the Omnibus actually permits to do, [00:10:02] and we know of that, [00:10:04] which is to basically narrow the scope. [00:10:06] So we have other large companies that need to start reporting in 2026 for the [00:10:11] financial year 2025, [00:10:12] plus listed SMEs, [00:10:15] which need to start reporting between 2027 to 2029. [00:10:20] They would be out of scope. [00:10:21] So they would be out of the picture. [00:10:25] So then we know that [00:10:27] These entities will not, [00:10:29] probably will not be seeking to buy GEOS if the proposal comes through and gets [00:10:35] adopted as is. [00:10:37] On the other hand, [00:10:38] when you speak specifically to GEOS, [00:10:40] it's also important to mention that as part of the Omnibus package, [00:10:44] it says that the Commission is planning to revise the European Sustainability [00:10:48] Reporting Standards. [00:10:50] which carve out a specific role for geos. [00:10:54] And the commission was not very straightforward as to what it's going to do, [00:10:59] because all it said was that we're going to try to cut down the amount of data [00:11:04] points that companies need to report and to make it so that there's less [00:11:09] qualitative reporting and more quantitative reporting. [00:11:13] In my personal opinion, [00:11:15] that does not concern GEOS because if you look at the template that the commission provided, [00:11:20] it is quantitative. [00:11:21] You just need to plug in the numbers and that's it. [00:11:23] I don't think that GEOS will be affected. [00:11:25] But at the same time, [00:11:27] softening the blow, [00:11:28] the commission said that it will file a separate proposal to try and develop a [00:11:33] voluntary sustainability reporting standards for companies that would be excluded [00:11:38] from the scope of CCRD. [00:11:40] I think that being an entrepreneur myself makes a lot of sense because like these [00:11:45] qualitative reporting data points you mentioned, [00:11:49] like geos, [00:11:50] for example, [00:11:51] which are, [00:11:51] you know, [00:11:51] it's simply how much power you use, [00:11:53] how much of that is renewable. [00:11:55] It's simple math. [00:11:56] Like it's very easy to measure that, very easy to comply with them. [00:12:01] And it doesn't take a lot of effort. [00:12:02] Like in most companies, like you don't need a special person or anybody to work on that. [00:12:07] Trouble does come in the qualitative reporting where you usually need to hire a [00:12:11] bunch of consultants to tell you what does even all of that mean, [00:12:14] right? [00:12:15] To me, [00:12:15] from this very small amount of information does sound like we'll actually remove [00:12:21] majority of that burden that companies want to push back on. [00:12:24] Definitely. [00:12:25] And also think another good signal that we have is that we have a bunch of CCRD [00:12:30] compliant reports that are now becoming publicly available. [00:12:33] And I have reviewed close to 100 of them, so my eyes were bleeding. [00:12:39] But it allowed me to draw some useful insights. [00:12:42] So, [00:12:42] for instance, [00:12:44] if before companies, [00:12:45] when they used to do voluntary sustainability reporting, [00:12:48] such as to CDP, [00:12:50] the Climate Disclosure Project, [00:12:52] they could cherry pick whether to report their location based or market based scope [00:12:57] to emissions. [00:12:59] And now the commission put a stop to this by saying you absolutely need to use dual reporting. [00:13:04] All 100 reports that I have reviewed, they've actually heeded to that instruction. [00:13:09] They all report both market-based and location-based emissions, [00:13:13] which I think is beautiful and it really drives change on the market and makes it [00:13:18] more transparent. [00:13:19] That's good to hear. [00:13:20] And I guess then the big question is, what about Norway? [00:13:25] Yeah, [00:13:25] I wouldn't just point fingers at Norway because surprisingly, [00:13:30] I saw several German reports where they're using location-based scope to emissions [00:13:36] and they specifically advertise them. [00:13:39] So yeah, I think Norway is another subject for sure. [00:13:43] There's been a lot of resistance to guarantees of origin, [00:13:46] so much so that there were discussions of [00:13:49] Pulling out of the geosystem entirely last year, [00:13:52] around summer 2024, [00:13:53] the government finally shifted gears and said, [00:13:57] OK, [00:13:58] we're not going to do this because it brings a lot of money into our budget. [00:14:02] And in times and days like these, every single penny counts. [00:14:05] But instead, they're looking to introduce changes to the geosystem itself. [00:14:09] And we'll find out the details later this year. [00:14:12] That's good to hear because we often like when I go and speak with people who are [00:14:18] not in the market, [00:14:19] then that is a topic that does come up a lot. [00:14:22] And well that, [00:14:24] and I guess next topic I'd love to hear your opinion on is the fact that you can [00:14:28] use like solar in the winter. [00:14:30] Where do you see the policy moving in terms of like the granularity of the geos and the [00:14:36] Because I know what a lot of market participants that are existing incumbents think. [00:14:41] They prefer not to have change, right? [00:14:43] They prefer their status quo for very obvious reasons, because it's simple. [00:14:47] You know, you can easily run your business on it. [00:14:50] It kind of works. [00:14:51] But, [00:14:51] you know, [00:14:51] ultimately, [00:14:53] as with everything, [00:14:53] you know, [00:14:54] you start with Nokia, [00:14:55] but eventually you want to build an iPhone. [00:14:57] So how do you see this moving right now in the market? [00:15:00] And what's your thoughts on that? [00:15:02] So far, there's only one regulation on the market that pushes towards greater granularity. [00:15:07] And we are talking about from monthly temporarily matching to hourly after 2030. [00:15:15] And that regulation is the RFNBL Delegated Act, which governs renewable hydrogen production. [00:15:22] So this is the only regulation in the market that I can directly point a finger at [00:15:26] and say this is the only driving force behind granularity. [00:15:31] But I have not seen any other regulations that are encouraging this. [00:15:34] In the Renewable Energy Directive, [00:15:36] there's a clear provision to be able to issue sub-migawatt-hour geos, [00:15:40] so encouraging granularity. [00:15:42] smaller sized geos if you will but i think increasingly it will be member states [00:15:47] themselves driving this policy change and driving granular geos essentially so for [00:15:54] instance we have temporal matching requirements in france on monthly level in [00:16:00] switzerland it's going to be on quarterly level from 2027 and now in ireland a [00:16:03] little bit told me [00:16:07] They're also discussing granular geos for large electricity users. [00:16:12] And I will be releasing an analysis soon on that. [00:16:15] And is that only for like, [00:16:17] because, [00:16:17] you know, [00:16:17] right now, [00:16:18] essentially monthly that you can use over the year. [00:16:21] And then is the only other type of discussion, [00:16:24] the hourly based granularity or is there something between? [00:16:29] Because... [00:16:29] A lot of people I've noticed, [00:16:31] especially like traders and brokers, [00:16:34] have discussed that actually all we need is just like quarterly or half a year geos [00:16:39] or just yearly cutoffs. [00:16:40] So you can't use last year for the existing gear. [00:16:43] And, you know, you can sort of granularly roll out more granularity instead of jumping from... [00:16:48] Well, [00:16:49] let's be honest, [00:16:50] pretty crude solution to like extremely tight subject and like rather let industry [00:16:56] adapt new reality. [00:16:57] Do you see on the policy side any of this discussion as well? [00:17:01] I haven't seen any movements, not that I'm aware of. [00:17:03] But having said that, [00:17:04] there will be an upcoming revision of the Renewable Interdirective, [00:17:08] even though we have just revised it. [00:17:11] There will be another revision because the Commission is setting a new greenhouse [00:17:16] gas reduction target. [00:17:18] So that will necessarily trigger talks about, [00:17:22] OK, [00:17:22] what renewable share do we need to have in our electricity mix? [00:17:26] and that will cascade into affecting Article 19, which governs the guarantees of origin market. [00:17:34] So this is policy-wise, [00:17:35] but I would say in the voluntary space, [00:17:38] there's much more talk about hourly GOs [00:17:42] And in particular, [00:17:43] if we talk about the greenhouse gas protocol, [00:17:46] which is currently being revised, [00:17:49] this is one of the options that's being discussed and we'll see whether it gets implemented. [00:17:53] Personally, I don't think so because it depends on the readiness of the different registries. [00:17:59] And I don't think that most are ready to transition to greater granularity. [00:18:04] But then we have this industry leading players like Google, [00:18:07] for example, [00:18:08] who I think are already actively using hourly granularity, [00:18:12] if I'm not mistaken. [00:18:14] Have you heard anything about what they have been said on the policy front or how [00:18:19] things are moving? [00:18:20] I think it's important to keep in mind that Google and the likes of them in the IT space, [00:18:25] they're heavily invested in that because they are also the developers of TEKS, [00:18:31] the time, [00:18:32] I think it's timed energy attribute certificates, [00:18:35] that's the correct way the abbreviation works. [00:18:38] So they were the pioneers behind this concept and they want to sell it to the wider public. [00:18:44] So obviously they're pushing the commission into high granularity, [00:18:49] but I don't know how that's going to work out. [00:18:51] But there are definitely pilots around Europe that are working. [00:18:55] So just moving away from granularity, [00:18:57] I'm interested, [00:18:59] obviously, [00:19:00] you know, [00:19:00] you're covering so many different policy types and you're having to spot patterns [00:19:04] and signals across all of them. [00:19:07] To what extent do you think is pricing really factored into a lot of the decision [00:19:11] making at a level of [00:19:13] like the European Union. [00:19:14] Obviously, [00:19:15] it's a tool designed to incentivize, [00:19:18] you know, [00:19:18] increase production capacity in the continent. [00:19:20] But do you think boosting or preserving, [00:19:23] you know, [00:19:23] that incentive is actually really factored into decision making? [00:19:27] I think it is increasingly being factored in because the commission actually [00:19:31] ordered a report on the functioning of the geo market by the end of 2025, [00:19:35] if I remember correctly. [00:19:38] So that will give them an insight on what's happening on the guarantees of origin market. [00:19:42] And I think that will aid in their decision making too. [00:19:46] I've seen this. [00:19:46] Is this the open kind of call for input about the geo market? [00:19:50] I think it could be part of that. [00:19:51] Yes, [00:19:51] because there's been a recently launched survey by DGNR on the functioning of the [00:19:57] guarantees of origin market. [00:19:58] So I think they're collecting the public view on the functioning of the market and [00:20:03] then they will also be carrying out studies on their own. [00:20:06] to then present results to the commission. [00:20:08] Interesting. [00:20:09] One of the things I've noticed is that, [00:20:12] well, [00:20:12] we basically have two layers of implementation of the geo market. [00:20:15] We have the directives, [00:20:18] the red, [00:20:18] you know, [00:20:19] two and three and so on, [00:20:20] and plus everything you keep up to date with. [00:20:23] And then we have the local laws. [00:20:25] There seems to be actually like quite a... [00:20:29] long lag between implementation of every single thing that like the new versions of [00:20:34] directives have gone out. [00:20:36] Just to give an example. [00:20:37] So in Soldera, we started in Estonia. [00:20:39] The founding of Estonia, Soldera is actually quite interesting. [00:20:43] I mean, we had been in environmental assets markets for 10 years. [00:20:49] And then we wanted to move away from carbon credits, just decided to move away. [00:20:53] And we analyzed through every environmental asset. [00:20:56] And we really liked geos because they seemed highly regulated, [00:21:01] liquid, [00:21:01] legit, [00:21:02] no greenwashing issues. [00:21:03] It ticked all the boxes for us. [00:21:06] So then what we did is we called a few of our friends who have solar panels on the [00:21:12] fields or on the roofs. [00:21:14] We took a wine bottle. [00:21:15] We went to visit them. [00:21:16] We helped them to fill out all the paperwork. [00:21:19] Many of them had never done any geos. [00:21:21] We noticed 30% had never earned any income in geos. [00:21:25] If you look at AIP residual mix reports, [00:21:29] 30% of renewable energy is just uncounted and residual energy. [00:21:32] So that was like our catalyst. [00:21:34] And it was really cool. [00:21:35] We basically started with the idea, [00:21:36] how can we help the small to medium-sized producers get on board? [00:21:41] And we built a solution for them. [00:21:44] We bought our French geos, [00:21:45] we sold them, [00:21:46] and then we started scaling there and wrote our software. [00:21:48] And then what we noticed, very interestingly, [00:21:52] is that even though the red free directive says that the small players need to have [00:21:58] easier onboarding as options in Estonia like it's super simple for them and it is [00:22:04] easier than for big players as well but when you go to like Latvia then they need [00:22:09] to pay like 500 to 1000 euros audit costs [00:22:12] We started lobbying that, [00:22:14] and now they're in the process of changing that, [00:22:16] but it's taken like a year of work. [00:22:18] In Lithuania, [00:22:19] there's a thing called a prosumer scheme, [00:22:21] like micro-owners can't basically get the niche geos. [00:22:25] In Sweden, [00:22:26] there's 400 euro or something account fee, [00:22:29] or I don't remember the exact sum, [00:22:31] maybe it was, [00:22:31] I think it was less, [00:22:32] but... [00:22:33] But basically, again, it sort of pushes out all the small players. [00:22:37] In Finland, they need to buy a special device to their home. [00:22:41] Again, it pushes them out, which costs like 100 plus euros. [00:22:45] And so how do you see like, [00:22:46] because in every country we go to, [00:22:49] we do see some regulatory differences as well. [00:22:52] Not huge ones, but slight differences. [00:22:54] And then obviously there are countries that are adopting this a lot faster, [00:22:59] but then some are, [00:23:00] you know, [00:23:01] They haven't been able to keep up with the red free directive and now we maybe [00:23:05] already have a new directive coming out soon. [00:23:07] So how do you see this going? [00:23:09] Yeah, [00:23:09] I think definitely transposition and implementation on national level is a big [00:23:13] problem because in a sense, [00:23:15] the European Union is fragmented and it's largely up to the member states themselves. [00:23:20] how fast they will move these processes along. [00:23:23] So I think it's a very valid problem that you've pointed out. [00:23:27] And it just goes to show that the market is fragmented, [00:23:31] even though it's one single geo market at the same time, [00:23:34] it is fragmented because you have different national rules that are currently applied. [00:23:39] There could be changes to them as well. [00:23:41] Something else I saw pop up is the idea, [00:23:44] well, [00:23:44] I think it might have been in response to a lot of the heat that the EU is feeling [00:23:48] about being competitive on a global stage, [00:23:51] is the competitiveness compass. [00:23:53] I wonder how that relates to the geo markets. [00:23:55] Obviously, [00:23:55] it adopts a very sort of market centric and ideologically pro market approach to competitiveness. [00:24:03] Do you see that having direct a relationship to the geo markets and EACs or not? [00:24:10] Yeah, [00:24:10] so Competitiveness Compass is a communication that was specifically addressed to [00:24:15] the Council and the Parliament to, [00:24:18] in a way, [00:24:18] inform them of the work that's coming in the next five years. [00:24:22] And it had certain elements in it that are relevant to the guarantees of origin market, [00:24:27] and they in turn fed into the clean industrial deal that was presented previously. [00:24:32] this week or last week, if I remember correctly. [00:24:35] One of the measures that was announced is to introduce decarbonized public procurement, [00:24:40] which is really interesting because they're trying to tie made in Europe [00:24:45] requirements to carbon management as well. [00:24:49] So this is where we could see GOs play a greater role. [00:24:52] And considering that public tenders consider 40% of European GDP, [00:24:58] I would say that's a pretty big number. [00:25:01] So that could definitely move the geo market. [00:25:04] We just need to wait for the legislative proposal from the commission to get in on [00:25:09] the details of what that would entail. [00:25:11] Obviously, [00:25:12] you hear a lot about it, [00:25:14] but it's not something I've ever really dug into at a deep level. [00:25:18] So it'd be great if you could touch on that and how you think it has a relationship to geos. [00:25:22] Yeah, definitely. [00:25:23] There are lots of things happening, so I can imagine it's difficult to keep track of everything. [00:25:28] Yeah, [00:25:28] so the clean industrial deal is a strategy that replaces the European green deal [00:25:33] that we've had before. [00:25:34] And it was presented alongside with the omnibus package that we've discussed previously. [00:25:40] And it basically sets out the European Commission's vision for the European [00:25:45] development for the next five years, [00:25:47] but also beyond that as well. [00:25:49] It proposes certain measures that are meant to perform CPR on the European economy, [00:25:56] if you will, [00:25:57] because now the European Commission, [00:25:59] it wants to marry decarbonisation and competitiveness so that we in Europe have a [00:26:04] decarbonised market. [00:26:06] So that's one way of looking at the clean industrial deal. [00:26:09] And then within it, [00:26:10] it has many different suggestions how to lower the energy prices, [00:26:15] how to kickstart the European economy, [00:26:17] and how to ensure that we have continuous renewables expansion in the union. [00:26:22] Speaking of that, [00:26:23] like continuous renewables expansion, [00:26:25] guarantees of origin at their philosophical level are basically for two things, [00:26:30] right? [00:26:31] It's tracking where the energy came from, [00:26:33] which is very important for anybody that wants to buy renewable energy. [00:26:38] And it's the additionality, like to incentivize building more renewables, power plants. [00:26:43] So a lot to make sure that we do continue developing new plants and give a premium [00:26:49] for the renewable energy. [00:26:51] So then a natural question to follow up is like how much impact [00:26:56] has the renewable energy sector gotten from guarantees of origin? [00:27:01] How many investments has it driven? [00:27:03] I just saw a very Landers Virkjun post from Iceland. [00:27:07] They said that they earned 7% of their operational income came from guarantees of origin. [00:27:13] That's amazing. [00:27:14] incredibly surprising for me to be honest like it's way above what I expected [00:27:20] anybody to earn and like I can absolutely see how this would incentivize them to [00:27:27] build more and because you know that's a significant increase in revenue not to [00:27:32] mention in profitability it's a massive increase because you know these are [00:27:36] somewhat low margin businesses. [00:27:38] I believe in policy docs, this has to be one of the key points in discussions. [00:27:43] What have you noticed in the policies and how much is that topic of discussion actually? [00:27:49] I think I would start by saying to just have a little precision in here that [00:27:53] legally speaking, [00:27:54] geos have just one clearly defined role, [00:27:57] which is energy tracking. [00:27:59] Anything beyond that, so for instance, additional revenues to producers or carbon management, [00:28:05] These are all additional roles that have been put on GEOs. [00:28:08] These roles are not really recognized within the Renewable Entry Directive, [00:28:13] but they are recognized in other legislations. [00:28:16] So that's one thing just to be clear here. [00:28:18] And the second thing is in regards to the additional [00:28:22] revenue stream for producers that's definitely important especially when the price [00:28:27] of geos shot through the sky i think it was in 2022 2023 when we saw some [00:28:32] individual trades scratching the roof of eight to ten euros per megawatt hour [00:28:38] definitely we could then say that yes geos definitely have a big role to play for [00:28:44] renewable energy producers [00:28:46] And increasingly now, [00:28:47] when you look at project developers, [00:28:49] they do take geos into account for sure because they matter in their revenue stream. [00:28:54] Just how much? [00:28:55] I don't have the numbers. [00:28:57] I think you just have to ask around and it's good when market players like Lance [00:29:02] McKeown publish their data and share directly what role geos play in their revenue generation. [00:29:10] Have you seen any of this sort of analysis or discussion in this additional [00:29:15] legislative documents or it's too much of a not primary thing, [00:29:21] as you mentioned? [00:29:22] Not that I'm aware of. [00:29:24] I would say currently in the European Union, [00:29:27] PPAs are imparted, [00:29:28] are carved out a bigger role than GEOs. [00:29:31] If you look at different communications from the Commission, [00:29:35] they time and time again mention PPAs. [00:29:38] And that secures renewable energy build out while also guaranteeing stable prices [00:29:44] to off takers. [00:29:46] And I don't see that same role being. [00:29:49] put for geos that makes sense what about eco labels so that's an interesting topic [00:29:55] right we're we're basically getting eco labels to all of our producers like almost [00:30:00] all of them are applicable there's definitely especially voluntary market buyers [00:30:05] who are interested in that so has that ever reached like policy level as well or is [00:30:11] that like purely private market incentive [00:30:15] Yeah, actually, you're spot on. [00:30:17] It is the commission and they released one document that has relevance to the geo market, [00:30:22] but it has not been yet adopted. [00:30:25] So the name is the Green Claims Directive, [00:30:27] which aims to prevent greenwashing on the European market. [00:30:31] And one thing about the voluntary labels is that they mentioned that if you want to [00:30:37] make this kind of claim, [00:30:39] They need to comply with certain ISO standards. [00:30:42] And currently only two ecolabels comply. [00:30:45] I think it's Tove Rheinland. [00:30:47] And I don't remember the second one. [00:30:49] I think it was either nature made or swan label. [00:30:54] Don't quote me on that. [00:30:55] Tove Rheinland definitely falls and passes. [00:30:59] Well, we're going to have to follow up on that one. [00:31:01] That sounds very interesting. [00:31:02] Yeah. [00:31:03] yes definitely but you know we negotiations have yet to go through you know so we [00:31:10] don't really know what's going to be in the final what's going to be the final [00:31:13] content of that green claims directive because both the european council and the [00:31:18] parliament had diverging views they converged in one places and not in others so i [00:31:23] don't really know whether that provision that only iso certified ecolabels would be [00:31:29] admissible for making environmental claims will hold [00:31:32] Maybe that provision will be gone. [00:31:34] But in any case, [00:31:36] all ecolabels under the current design of the green claims directive will have to [00:31:41] go through checking and certification by specifically appointed national bodies to [00:31:47] make sure that there's no greenwashing. [00:31:49] So there will be more administrative processes involved. [00:31:53] But I do think that actually Red Plus or the Red Free Directive indirectly [00:32:00] mentioned ecolabels, [00:32:02] right? [00:32:02] Because it talked about how you can't break up geo attributes, right? [00:32:07] You can't like, [00:32:08] correct me if I'm wrong, [00:32:09] Oli, [00:32:09] but we had quite a lengthy discussion about that with Tal, [00:32:12] yeah, [00:32:13] attribute aggregation. [00:32:14] So it didn't like mention ecolabel by its word, [00:32:17] but essentially, [00:32:18] you know, [00:32:19] it's sort of already hinted that it's, [00:32:21] not only geo there could be other attributes but you can't break them up and sell [00:32:26] separately you have to keep them together in a single package basically which i [00:32:30] think makes a lot of sense otherwise let's be honest nobody will understand what's [00:32:35] going on because there's just too many terms flying around and you sort of gotta [00:32:40] keep it reasonable in people's head to to maintain strong trust in the system and [00:32:45] everything [00:32:46] definitely something i see popping up throughout every single question you've [00:32:50] answered is that it's not about reacting to legislation and policy once it's been [00:32:54] implemented it's about predicting it and monitoring the negotiations monitoring the [00:32:59] developments so you know for those who want to stay on top of like eu developments [00:33:04] and member state developments [00:33:05] do you have any like recommendations of like tools or dashboards or like what is [00:33:10] your process of making sure you don't miss anything because there's obviously so [00:33:13] much to keep track of like i'm kind of in awe that you managed to stay aware of [00:33:17] everything that's going on [00:33:19] Yeah, thank you. [00:33:20] I use a lot of tools. [00:33:21] So if you reach out privately, of course, I'll share that. [00:33:23] But it's a lot about having good contacts in Brussels, [00:33:27] but also across different member states to be aware what's happening, [00:33:31] because sometimes certain news don't even reach the market. [00:33:35] They're just word of mouth, so to say. [00:33:38] So you really need to make sure you have a good network of policymakers. [00:33:42] Obviously, you just got to use weight, you know, then you can get all the policy over with. [00:33:46] For sure. [00:33:47] Yeah. [00:33:47] I mean, [00:33:48] why hire your own policy analyst if you can have access to the platform where you [00:33:53] have access to our analysis at a fraction of the cost of a full-time policy analysis? [00:33:57] It's expensive. [00:33:57] Are there any key points we want to touch on before we just as like a final segment? [00:34:02] I don't know. [00:34:02] Maybe are there any topics that keep you awake at night as a founder? [00:34:07] You know, are there any topic that bother you in particular in relation to the geomarket? [00:34:13] Absolutely. [00:34:15] And I think actually we sort of begun with that topic to pass because like it is [00:34:20] very relevant and interesting to us like how the market price is going to move. [00:34:26] We're also interested in branching one thing within [00:34:29] touch on at all we only talked about renewable geos but there's also you know [00:34:34] biogas coming up and so on the big thing that really keeps us up in night is that [00:34:39] where is the market gonna go right if it goes back to like 10 cents like it was [00:34:44] just like [00:34:45] three or four years ago, [00:34:47] I think the market will become quite uninteresting for most market participants, [00:34:53] to be honest. [00:34:54] Or is it going to move somewhere else? [00:34:56] And we've been following, of course, the weight market webinars and predictions for a while. [00:35:02] We always love your insights and what you discuss over there as well. [00:35:06] It did actually, [00:35:06] one time it did make me consider like who are, [00:35:09] by the way, [00:35:10] like if you're allowed to say like, [00:35:12] it's biggest customer base. [00:35:13] Is it mostly on consumer side or is it producer or traders and brokers and so on? [00:35:20] It's all of these market players that you have just mentioned. [00:35:23] So basically it's everybody. [00:35:25] Pretty much. [00:35:26] Yes. [00:35:27] Yeah, definitely. [00:35:28] I think I'm curious when I was scoping out, obviously I've joined Soldera now. [00:35:33] So part of me was thinking, [00:35:34] well, [00:35:35] you know, [00:35:35] what would be the existential policy risk for a company like Soldera? [00:35:41] anybody who's attempting to do sort of aggregation in this space and I think I'd be [00:35:46] concerned that obviously Stemper mentioned earlier a lot of the barriers to entry [00:35:50] for smaller producers that the way that the E or the commission resolved that is by [00:35:56] implementing some sort of aggregation at the very core level to the geo market and [00:36:03] allowing producers themselves to sort of bundle and group together their assets. [00:36:09] So do you think that's something that could possibly happen or not? [00:36:12] Thing is, you never know. [00:36:13] But I'm just saying that the legislative uncertainty that the commission is [00:36:17] creating is not very good for the market, [00:36:20] for any businesses, [00:36:21] really. [00:36:22] So I think that would be the most fair assessment that the commission is the problem itself. [00:36:28] Like sure, [00:36:29] they try to do more with less, [00:36:33] but at the same time, [00:36:34] it creates ripple effects in the market and creates this legislative uncertainty [00:36:39] and the environment where it's really hard to make decisions. [00:36:42] And I think it's kind of like the double edged sword of building a government [00:36:45] technology company in any sense. [00:36:48] It's like so much of your work is streamlined by the existing kind of structures [00:36:53] that are there, [00:36:53] whether that's like distribution, [00:36:55] finding the people you're serving, [00:36:57] really isolating the problem. [00:36:58] But at the same time, [00:37:00] that legislative uncertainty means that it's the difference between day and night, [00:37:03] depending on what happens. [00:37:04] Definitely. [00:37:05] These are such other times that we live in. [00:37:07] I think it's especially important to us to follow these developments closely [00:37:12] because we constantly need to revise our market assumptions. [00:37:15] So we do geo market forecasting, so medium, short term and long term. [00:37:22] And now with the Omnibus package, [00:37:23] we really need to sit down and think hard, [00:37:26] OK, [00:37:27] what's going to be on market assessment? [00:37:29] Because I don't think [00:37:30] the outlook that we had before may necessarily hold in the future because [00:37:34] everything is changing so rapidly. [00:37:36] We touched a lot on topics that actually do keep us up at night and really [00:37:40] appreciate all your comments and everything. [00:37:44] This has been super educational to me, Mary. [00:37:47] Anything else you want to touch before we wrap this up? [00:37:50] I think we're good. [00:37:51] Awesome. [00:37:51] Thank you so much, Mary. [00:37:52] I also mentioned that [00:37:54] Well, Mary posts like the most phenomenal content on LinkedIn as well. [00:37:57] So if you guys are interested in like following the geo market in a really [00:38:01] digestible sense, [00:38:02] and there's always something new as well. [00:38:03] It's like, it's really great. [00:38:04] You're so consistent with it. [00:38:05] So definitely shout out there. [00:38:07] Other than that, I think that was a really great episode. [00:38:09] Again, I learned a lot. [00:38:10] I'm going to have to probably re-listen to this one to make sure I caught everything. [00:38:13] But yeah, thank you, Mary. [00:38:14] And catch us in the next episode. [00:38:16] Thank you. [00:38:17] Thank you.

Soldera Markets #7: Mary Polovtseva on European GO Regulatory Landscape

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Expert Interview

March 13, 2025

soldera-markets-7-mary-polovtseva-on-european-go-regulatory-landscape

Soldera

August 5, 2025

August 7, 2025

In this episode, Fulbright Scholar Kevin Lu interviews Stenver Jerkku, founder and CEO of Soldera, as part of his research into Estonia's climate tech ecosystem. After working in content design and strategy for climatetech at Salesforce and exploring climate innovation across 21 countries, Kevin is now researching at Tallinn University of Technology where he's examining how founders build successful climate startups in Estonia.

This interview explores:

→ How Estonian entrepreneurs think globally from day one
→ Soldera's founding journey and pivot from carbon credits to renewable energy
→ Navigating fundraising as a climate tech company in Estonia
→ When founders should (or shouldn't) pursue venture capital
→ How Soldera leverages AI to automate compliance work
→ How EU regulations create business opportunities
→ Finding balance between supportive and restrictive policies
→ What Estonia could improve to better support climate startups

Key insights include:

→ Climate tech founders need laser focus rather than pursuing multiple opportunities
→ Estonia's small market forces founders to think internationally from day one
→ Taking VC means accepting responsibility to build a billion-dollar business
→ Estonia's fast company formation and digital services are models for Europe
→ Maintaining stable business policies helps Estonia attract international founders
→ Community-building events could strengthen Estonia's climate tech ecosystem

#ClimateTech #Estonia #VentureCapital

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit podcast.soldera.org

Transcript of the episode's discussion between Oliver Bonallack, Kevin Lu, and Stenver Jerkku [00:00:03] Hey, [00:00:03] everyone, [00:00:04] and welcome back to the Soldera Markets podcast, [00:00:06] where we predominantly talk about guarantees of origin and renewable energy credit. [00:00:10] But today, [00:00:11] we are joined by Kevin Liu, [00:00:12] who's doing his Fulbright scholarship in Tallinn in Estonia, [00:00:16] and he's investigating the climate tech ecosystem [00:00:19] in Estonia so we thought it would be a great opportunity to showcase what we're [00:00:22] doing here at Soldera whilst having a more interactive conversation about climate [00:00:27] trends in Europe and Estonia more generally so Kevin it's really it's really nice [00:00:31] to have you on the show and yeah over to you to just do a little bit of an [00:00:34] introduction about yourself and how you're finding Estonia so far. [00:00:38] Yeah, of course. [00:00:39] Thank you so much for having me here today. [00:00:41] So as Ali mentioned, [00:00:42] I'm a Fulbright Scholar and researcher at the Tallinn University of Technology [00:00:46] right now. [00:00:46] I actually moved from San Francisco to Tallinn here over the last year. [00:00:50] And I've been here since September. [00:00:52] And it's been a really awesome experience because [00:00:55] I just learned so much about kind of the comprehensive climate, clean tech ecosystem here. [00:00:59] And there's so many interesting developments, [00:01:01] not even just from like the founder side, [00:01:02] but also from the investment side and also the policy side as well in terms of like [00:01:06] how we can construct a very comprehensive climate tech ecosystem. [00:01:10] Awesome. [00:01:10] So why do you choose Estonia more? [00:01:13] You know, was that your initial focus? [00:01:14] Did you always want to choose Estonia or how did that work out? [00:01:17] It was such a funny story because I had initially I knew about Estonia in terms of [00:01:21] like their Estonia programs and how digital society is. [00:01:25] And I think that's a narrative that's really commonly kind of put out there in the ecosystem. [00:01:29] especially among startups and founders and entrepreneurs. [00:01:33] But I knew for myself that, [00:01:34] at least in Asaf, [00:01:35] when I was working over there, [00:01:36] I was really heavily focused in on new clean tech developments over there, [00:01:41] working with a lot of different founders over there in that space. [00:01:43] And so I wanted to kind of take that interest and knowledge over to Estonia. [00:01:47] And I think there's a really interesting... [00:01:49] transition period going on right now where it's not just about those digital IT [00:01:53] solutions that so many different founders were working on in the past. [00:01:56] But now there's a lot of spinoffs and scientific breakthroughs and like labs at universities. [00:02:00] And those are becoming kind of this predominant force of clean tech startups that [00:02:05] redeveloped now. [00:02:06] So that's something that I've wanted to explore deeper. [00:02:09] And that's kind of like what I'm focusing in now. [00:02:12] Yeah, I'll say a quick word about myself as well. [00:02:14] I'm Stan Wirth, [00:02:15] founder and CEO of Soldera, [00:02:17] here to support renewable energy producers, [00:02:20] minimize their compliance costs and maximize their revenue on renewable energy. [00:02:25] Very excited to have you here, [00:02:27] Kevin, [00:02:27] and hear more about your journey and, [00:02:30] you know, [00:02:30] happy to answer about my journey as well, [00:02:31] because you had a lot of questions for both me and Oli, [00:02:34] right? [00:02:34] Yes, of course. [00:02:35] Yeah. [00:02:36] So, [00:02:36] I mean, [00:02:36] a lot of like these interviews I'm conducting right now with founders and [00:02:40] entrepreneurs in Estonia, [00:02:40] they're really focused in on like not only just like their own founder journey, [00:02:44] but also what they've been noticing in the space as well. [00:02:46] And so I'm trying to identify through these interviews, [00:02:48] like, [00:02:49] you know, [00:02:49] how we can better support climate entrepreneurs like you in terms of like what [00:02:53] you're building and how we can create better models and support mechanisms to help [00:02:56] accelerate this kind of growth. [00:02:58] So, I mean, obviously, you know, we've had context on like, you know, what Sildera is. [00:03:02] I've looked through the website as well, [00:03:03] but we'd love to just kind of learn just generally like what's the founding story [00:03:06] behind the company and how did you kind of like choose to construct your founding [00:03:11] team and all that kind of good stuff. [00:03:12] When we talk about my background, I'm a serial entrepreneur. [00:03:17] I founded many companies. [00:03:18] I have a technical background as well. [00:03:20] And so I've been, for example, part of Glia, which is a New York-based enterprise SaaS business. [00:03:25] It's a billion-dollar company. [00:03:26] But after Glia, [00:03:27] when I led the software engineering team there, [00:03:30] around Series B, [00:03:31] I left and founded my own company called Diagonon, [00:03:34] which is a leading climate tech company in Central Eastern Europe. [00:03:37] They raised close to like 30 million euros by now. [00:03:40] And over there, [00:03:41] I really got into the environment narrative and angle like, [00:03:45] because in Neagronom, [00:03:46] it was all about like, [00:03:47] how can we secure our soils, [00:03:49] help farmers become regenerative, [00:03:52] do better, [00:03:52] give them better overview, [00:03:53] make our food better and so on. [00:03:55] Well, one thing led to another. [00:03:57] And very soon within Neagronom, I grew to be from CTO to be the innovation lead. [00:04:02] Every new product line it ever did was spearheaded by me. [00:04:06] And my now co-founder, Al. [00:04:08] I met Al actually during E-Argonome. [00:04:11] I had heard that he's really good at like AI and data science. [00:04:17] So I met him in a cafe. [00:04:19] I sat down next to him and I asked him like, [00:04:22] hey, [00:04:22] can you explain to me how neural networks work? [00:04:25] Well, he opened up a napkin, started drawing neural network paths. [00:04:29] I hired him on the spot, best hire I ever made. [00:04:32] He was the best product manager in eAgronom. [00:04:35] And at some point inside eAgronom, [00:04:37] we together created SolidWorld, [00:04:39] which was a carbon-ready trading platform. [00:04:42] Initially, it was supposed to focus on helping eAgronom solve a very specific problem. [00:04:48] But we kind of spun it out and took it way beyond that and wanted to create the [00:04:52] carbon exchange. [00:04:54] When the carbon markets had a big downturn roughly three or four years ago, [00:05:00] then we started looking at what we're doing. [00:05:03] We've been growing fast. [00:05:05] We had a lot of facets on our platform, multiple millions of dollars running, but the [00:05:10] space itself had a lot of issues, the voluntary carbon space. [00:05:14] And eventually we were like, [00:05:16] okay, [00:05:16] we can create a bootstab business here, [00:05:19] but we wanted to focus on venture impact because both me and I want to make sure [00:05:23] that we do something that really has a huge impact. [00:05:26] So we made the hard decision and decided to pivot. [00:05:30] We looked through every environmental asset that was out there. [00:05:34] You know, [00:05:34] we've been in with Diagnome and with SolidWeld in environmental assets for 10 years now. [00:05:39] So we see pretty much everything there. [00:05:41] And then our eyes stopped on renewable energy credits or guarantees of origin, [00:05:47] as they're called in Europe. [00:05:48] And we initially thought that this looks interesting because the market is big. [00:05:53] It's regulated. [00:05:54] There's no like greenwashing issues and we can reuse our technology there. [00:05:59] Well, we didn't end up reusing any technology, to be honest. [00:06:02] But we did reuse the network, [00:06:05] the know-how, [00:06:05] the knowledge, [00:06:06] and we built a completely new technology. [00:06:08] And that's how Soldera got started. [00:06:11] It's been an amazing journey since then. [00:06:12] We already have more than 2,500 power plants we manage in a year. [00:06:18] And we've grown to 10 people. [00:06:20] We've done venture rounds. [00:06:21] Yeah. [00:06:23] got it yeah and so i'm very curious i think of something i've noticed when i was [00:06:26] talking with a lot of estonian founders here is the fact that they often have to [00:06:29] think very internationally because you know estonia is a generally smaller market [00:06:33] so when you were kind of identifying some of those like main customers or users how [00:06:38] did you kind of approach the way that you were able to identify both the problem [00:06:42] and were you thinking about the international growth aspect of like the market [00:06:47] already like or were you thinking more so like okay let's start off on estonia [00:06:51] And then maybe kind of like look towards like bigger visions beyond that. [00:06:55] So I don't know how it is for you, [00:06:56] Kevin and Ollie, [00:06:57] but in UK and US, [00:06:58] but in Estonia, [00:06:59] there's a saying that you don't get rich in Estonia. [00:07:02] So day one, [00:07:03] when you start building something, [00:07:05] you're thinking immediately, [00:07:06] like, [00:07:06] how can I make this global? [00:07:08] If you can't, [00:07:09] then it's, [00:07:09] you know, [00:07:10] not worth doing, [00:07:11] especially in software business, [00:07:12] which is usually all about scale. [00:07:14] Unless you're solving a very niche problem and you just want to build a lifestyle business, [00:07:18] then you have to think day one, [00:07:21] how it looks like globally. [00:07:23] There's only a million Estonians. [00:07:24] There's only so much they can do. [00:07:27] Anything you build inside Estonia is going to be very limited by the tiny Estonian [00:07:32] market as it is. [00:07:33] Day one, global, that's the only way how to do it. [00:07:36] And it's all about scale and figuring out what's the business model that can [00:07:40] actually have a big global impact. [00:07:42] Also, the nature of Guarantees of Origin being an international system, right? [00:07:47] And with EECS geos in Europe being portable across different geographies, [00:07:51] it really doesn't make sense to only stay in one country. [00:07:54] And, [00:07:55] you know, [00:07:55] you would have built out the system for Estonia and then you would have had a lot [00:07:58] of free time on your hands, [00:07:59] right? [00:07:59] So, yeah, I think international was definitely the way to go. [00:08:02] Yeah, that makes sense. [00:08:03] That makes sense for sure. [00:08:04] And I think it's always very fascinating, [00:08:06] also inspiring to see how people in Estonia just kind of have to think about that [00:08:10] in a way. [00:08:11] But I think because of that, [00:08:12] that's also something that, [00:08:13] you know, [00:08:13] investors that I've talked with, [00:08:15] they're like, [00:08:15] that's something I actually appreciate about Estonian founders is the fact that [00:08:18] they get the ability to just think internationally from the ground up. [00:08:21] And it's like, there's not even a question about it. [00:08:23] It's already included in the pitches, the decks, like the product roadmap. [00:08:27] It's actually been funny. [00:08:28] I've spoken with some other founders and investors in Poland and Japan and so on. [00:08:34] And they often say that the biggest issue they find is that most of the local [00:08:37] founders want to stay local. [00:08:40] Because the market is big enough that you can build a successful business just [00:08:44] being in your own country. [00:08:45] Yeah. [00:08:46] When you do venture investing, [00:08:47] you want to look for global businesses, [00:08:49] businesses that can scale globally. [00:08:51] And Estonians' tiny size is both a blessing and a curse in this case, right? [00:08:55] Because it really forces us to go outside and figure out, [00:08:59] can I make this into a bigger thing than just an Estonians? [00:09:02] Yeah, that makes sense. [00:09:03] And like, [00:09:04] can you tell me a little bit more about that fundraising journey that you've gone [00:09:06] through so far since like, [00:09:08] the conception of Solidera and then being able to kind of like navigate through [00:09:12] that like fundraising cycle? [00:09:13] Like, [00:09:14] what are some of the things that you've kind of encountered while going on this [00:09:18] fundraising journey? [00:09:19] I've raised a lot of capital throughout [00:09:21] many different fundraising companies and journeys, right? [00:09:24] So like overall the ventures that I've been part of, [00:09:27] like I've raised more than 30 million euros and I've also been part of like Clia [00:09:34] and so on, [00:09:34] which have also raised tons of money. [00:09:37] So I have seen the journey repeatedly. [00:09:39] I've spoken with probably... [00:09:42] over a thousand venture capitalists at this point. [00:09:44] So over all the 10 years, [00:09:47] I think it's pretty well known what makes for a good fundraising story and [00:09:51] narrative and how to approach this. [00:09:53] What I do see is a lot of newer founders for some reason don't apply these lessons. [00:09:57] But I mean, in the internet, all the [00:10:00] big important things are written out right and in general like if you have an [00:10:04] ambitious plan a grave traction it's not hard to raise money even in the current [00:10:10] environment we for example took us five weeks to go from zero to closing term [00:10:16] sheets and completely oversubscribed so like and having to choose like who's going [00:10:20] to be like the best partner for us [00:10:22] So like the fundraising journey and the way you do like venture capital fundraising [00:10:28] is always like, [00:10:29] I think a CEO should do it. [00:10:30] You can't outsource it, especially in an early stage venture firm. [00:10:34] You have to get your story straight. [00:10:35] You must have a good story and narrative. [00:10:38] It has to be simple and high level. [00:10:41] And at the same time, [00:10:42] you need to be, [00:10:43] it needs to be resilient enough that you can answer any questions that come up and [00:10:48] you just need to go through a lot of numbers, [00:10:50] you know, [00:10:51] and not stay only in raising in Estonia. [00:10:53] Like I remember very early on when we just started eAgronome, [00:10:58] then we went to investors and this was like 10 years ago. [00:11:02] And we asked them like, what's the valuation of eAgronome? [00:11:05] And they told us 6 million. [00:11:07] Then we went to UK, did a roadshow and Sweden and Germany and so on. [00:11:14] and came back with the term sheet of 10 million. [00:11:18] And suddenly all Estonian investors said the valuation is 10 million. [00:11:21] It's really like fundraising and investment. [00:11:23] Like you got a great competition for your company. [00:11:26] It's honestly as simple as that because investors are looking for good deals. [00:11:31] That's their business, right? [00:11:32] Yeah. [00:11:33] Do you think that within Estonia, [00:11:35] so you've seen, [00:11:36] you've seen this narrative, [00:11:37] you've seen the narrative, [00:11:38] common narratives that you have to kind of navigate when fundraising in Estonia. [00:11:41] And you also had to, [00:11:42] you know, [00:11:43] build, [00:11:43] you've worked on multiple different kinds of like clean tech companies here. [00:11:47] What are some advice that you might have for founders who now want to build in this [00:11:52] space in Estonia? [00:11:53] Also, like when they have to navigate the fundraising cycle here? [00:11:56] I don't know if there is any unique advice I will give. [00:12:01] The general startup advice still applies, right? [00:12:04] Find a niche, first of all, that is on tap validate the niche. [00:12:11] Make sure it's actually a venture niche. [00:12:14] That's very important. [00:12:15] Make the decision if you actually want to raise venture capital. [00:12:19] That's extremely important. [00:12:21] You shouldn't always raise money. [00:12:23] In fact, most of the time you shouldn't raise money. [00:12:26] Taking venture capital is a double-edged sword. [00:12:29] Suddenly you have a clock ticking on your back. [00:12:32] And at the same time, [00:12:34] as soon as you take money, [00:12:35] you have five years to deliver a billion dollar business. [00:12:38] That's the expectation that you're given. [00:12:41] And that's what investors want from you. [00:12:43] You lose control of your company. [00:12:45] You don't have absolute authority anymore what's going on. [00:12:48] You need to do reporting. [00:12:49] You need to build shareholder relationships. [00:12:52] And so you take on a lot of responsibility by taking venture capital. [00:12:57] And while it may sound glamorous and fancy, there's absolutely downsides for it. [00:13:03] So that's the most important decision you can make. [00:13:06] As soon as you sell away part of your company, [00:13:08] it's a completely different game than just owning your own business. [00:13:12] But if you do decide to go the venture route or you decide not to, [00:13:16] I mean, [00:13:17] ultimately what matters is building a good business. [00:13:19] That's the most important part. [00:13:21] You deciding whether to take venture capital or not should only be honestly [00:13:26] dictated by one question. [00:13:28] Can you build a billion dollar business within the next five years? [00:13:32] If the answer is yes, then maybe venture capital can help you. [00:13:37] If the answer is no, then maybe you shouldn't take investment money. [00:13:41] Yeah, that makes sense. [00:13:42] It seems like, [00:13:42] you know, [00:13:43] among many different, [00:13:44] not even just in Australia, [00:13:45] but like climate tech companies around the world, [00:13:48] like the way to navigate the fundraising cycle is like any other traditional company. [00:13:51] It's always as kind of like the same, essentially the same blueprint. [00:13:54] And you still have to, [00:13:55] you know, [00:13:56] even though you're doing positive, [00:13:57] amazing impact for the world, [00:13:58] you still have to be able to kind of show investors, [00:14:02] yeah, [00:14:02] like this is something that will also give you like those financial returns as well. [00:14:05] maybe for people who are looking to raise, [00:14:08] because obviously your initial question was, [00:14:09] what advice would you give? [00:14:11] I think some great insight would be how to choose the most strategic venture partner, right? [00:14:16] Because closing around within five weeks with oversubscription interests, [00:14:20] you obviously have to decide between different partners, [00:14:23] right? [00:14:23] What were you looking for to really add value to your mission, right? [00:14:27] There's no one answer fits all here. [00:14:29] Every business is different and you got to find what's useful for your business. [00:14:35] You know, that's fundamentally what entrepreneurship and businesses are. [00:14:39] It's finding new niches that nobody has tapped into and exploiting them and [00:14:45] bringing solutions that bring value there. [00:14:47] That's basically the entire hallmark of entrepreneurship. [00:14:51] And you can't like [00:14:52] fit it into a box, right? [00:14:54] I can't really answer that because you have to figure it out as a CEO of your own company, [00:15:00] like what sort of partner brings value to you. [00:15:03] If you're a more traditional business with physical foods and supply chains, [00:15:09] you maybe need a partner that opens up like critical doors for you and critical [00:15:14] supply chain options for you. [00:15:16] And you maybe need like a strategic partner. [00:15:18] If you're simply super fast-growing software tech business, [00:15:23] then maybe you just need somebody who has a good name and can help you reach the [00:15:28] next stage. [00:15:29] In our specific case, [00:15:31] we really wanted to have somebody who has entrepreneurial background and can help [00:15:36] us navigate and find quickest growth paths possible. [00:15:40] It ultimately comes down to what your business is, [00:15:42] and there's no one-size-fits-all answer over here, [00:15:45] so... [00:15:45] I was talking recently to a partner of a fund. [00:15:49] They have a very dispersed model, so they write lots of very small checks. [00:15:52] And he was talking about the benefits and disadvantages of that. [00:15:55] One being that if a round is heavily subscribed, [00:15:58] you can kind of tag on to the end and get involved because it's not a lot of money. [00:16:02] But also maybe Stenber, you can comment on this. [00:16:05] Founders are kind of a little bit more wary when it comes to smaller checks because [00:16:09] they want the sort of bigger, [00:16:11] like when they set a minimum ticket, [00:16:12] they want somebody who can actually apply themselves, [00:16:15] bring something more than just capital, [00:16:17] you know, [00:16:18] give access to network as well. [00:16:19] Right. [00:16:19] And I think that's maybe some of the thought process that you went through. [00:16:23] Yeah, [00:16:23] to be, [00:16:24] you know, [00:16:25] completely honest, [00:16:26] often like it really depends on what type of a business you are in. [00:16:30] If you're in like B2B SaaS business, [00:16:32] having a right investor with the right connections can help you open up your right [00:16:38] doors and really push you to the next level. [00:16:40] At the same time, like let's say you're a B2C SaaS business. [00:16:45] Or even if you're a B2B SaaS business, [00:16:47] like often the network of the investor gets exhausted quite fast, [00:16:53] actually. [00:16:54] There's like a limited amount of real support to help over there. [00:16:58] And it's more important. [00:17:00] In my opinion, that they have a strong name. [00:17:03] They can help in the next fundraising round. [00:17:05] That's very important. [00:17:07] And also that they're a partner for you. [00:17:11] So, [00:17:11] you know, [00:17:12] as you go through the daily struggles of growing your company, [00:17:15] there's going to be struggles like it's inevitable. [00:17:18] That's what every... [00:17:19] startup is, you know, you constantly have like this roller coaster. [00:17:24] They're the type of investor who's supportive and not destructive in that journey. [00:17:28] And I think those are like really, really important things. [00:17:32] Our investor actually, [00:17:33] I think the way he worded it is that he wants his founders basically be in a room [00:17:38] where even if they're like [00:17:40] freezing, they can still breathe. [00:17:42] So even if it seems like the whole world around them is falling apart, [00:17:46] they can still breathe and discuss things and make sure that you have productive [00:17:52] conversations on how to take the company forward and make sure it goes in the right direction. [00:17:57] Can you tell me a little bit more about maybe some of those challenges that you've [00:18:00] encountered when building the product itself? [00:18:03] Because I think something that's also been very fascinating is the fact that [00:18:06] Soldera is more on the software side, [00:18:07] right? [00:18:08] It's really software focused, [00:18:09] AI and software, [00:18:10] but it really still focuses on engaging with real people's lives in terms of [00:18:14] infrastructure and also development of infrastructure around multiple different markets. [00:18:19] And I think something that's super fascinating is the fact that, [00:18:22] you know, [00:18:23] in the climate tech realm in Estonia, [00:18:24] there is there's software, [00:18:26] there's hardware, [00:18:27] and then there's like software enabled hardware or like come something in more of [00:18:30] that gray area. [00:18:31] So can you tell me a little bit more about kind of maybe the more technical [00:18:34] challenges that you might have encountered when building Soldera as a company? [00:18:37] Yeah. [00:18:38] Well, [00:18:38] the key points I'd actually like go to take a few years back, [00:18:42] like from my previous company. [00:18:43] And this is really when me and Al spun out from eAgronome to SolidWeld. [00:18:47] The biggest key lesson for us was, honestly, was that focus is important. [00:18:54] Like so easy to get pulled into 10 directions because your clients are asking a [00:19:01] million features and you have a million ideas what to do. [00:19:04] And as you get deeper, you see so many opportunities. [00:19:08] And what's important is to stay focused, [00:19:10] like really figure out like what's your tip of the spear, [00:19:14] the most highest impact, [00:19:16] important activities, [00:19:18] and just laser focus on that. [00:19:20] Every additional feature is going to make it exponentially more complex because it [00:19:26] has more connections in the background, [00:19:28] how everything pulls together. [00:19:30] And eventually, the more complicated your product becomes, the slower your development comes. [00:19:37] Because of that, it's better to even say no to some opportunities. [00:19:41] It's often better to say no to some opportunities [00:19:45] Try to grab every opportunity because like you want to make sure that the time and [00:19:50] effort you do booked into development really hits the spots and staying focused on [00:19:57] that and rather being 10 times better in one thing than being like 50% better in 10 things. [00:20:04] That's not going to move the needle if you're just slightly better than the existing solutions. [00:20:09] But you're actually not the best in anything. [00:20:12] You really want to be best in one thing and you want to focus all our effort on that. [00:20:16] And that has to be the part where you can basically make the most impact with your business. [00:20:21] I think that totally makes sense when you're trying to navigate building the [00:20:24] product that you're now doing. [00:20:26] But do you think there's anything... [00:20:28] different when you're building software and AI in the climate tech space. [00:20:32] You can do anything significantly, any specific nuances that you have to navigate. [00:20:37] Maybe especially if it relates to understanding the policy landscape, [00:20:42] understanding global landscapes in terms of how different countries are navigating [00:20:47] clean energy. [00:20:47] One of the big differences is that it's often expected for you to be perfect. [00:20:52] Because like in climate and policy, [00:20:56] if you don't have a perfect solution, [00:20:58] everybody says it's greenwashing. [00:21:01] So that's sort of something to be just aware of. [00:21:05] And as a technical challenge, [00:21:06] that just reinforces my point of be very focused on what you do best. [00:21:11] because like you can't be best at everything and if you need to choose one thing to [00:21:15] be perfect within then you know make sure you have that very very well covered but [00:21:20] like when it comes to like other technical challenges like code or whatever i i [00:21:24] don't think there's anything like that special or different in clean tech that [00:21:29] makes it more technically complex it's more a lot more on business side challenges [00:21:35] Yeah, that makes sense. [00:21:36] There's a lot of more social implications involved in like what you're building now. [00:21:40] And it seems like the ability or kind of giving yourself grace in terms of knowing [00:21:45] that it won't be perfect on the first try, [00:21:47] and that it's okay to, [00:21:49] you know, [00:21:49] like, [00:21:49] make a couple of mistakes, [00:21:50] but to learn along the way. [00:21:51] That's how you kind of iterate your product. [00:21:53] I mean, yeah, that's like building a startup. [00:21:54] It's like never going to be perfect on the first try. [00:21:56] But I think it's harder to do that in the climate tech space, because [00:21:59] it's people expect it to be so like right on the dot because if you're selling a [00:22:04] product as well and you expect it to be like super super perfect because it's [00:22:08] something to do with sustainability i think we need to be able to kind of break [00:22:11] down that mindset of like oh we need this asap like right now or else it's an [00:22:16] absolute failure and you'll never be able to recover from that ever again but we [00:22:20] have to be able to kind of just say you know it's okay like we're learning as we're [00:22:23] going [00:22:24] Exactly. [00:22:24] And there's a lot of grants and government board schemes when you're in clean tech [00:22:28] or climate tech. [00:22:29] So you can actually take a lot of advantage from these, [00:22:32] which can maybe even help you avoid raising venture capital. [00:22:36] These are not like, you know, technical challenges. [00:22:38] They're all like business challenges and... [00:22:40] And any compliance reporting that comes with it is just, you know, cost of doing business. [00:22:46] What do you think for Soldera? [00:22:48] Did Soldera use any of those specific support mechanisms in Estonia? [00:22:52] And if so, [00:22:53] maybe what were some of the most helpful ones for your company in terms of scaling [00:22:58] and growing the business? [00:23:00] Actually, [00:23:00] a bit tying into the previous question and topic, [00:23:03] then one thing I do think is that because sustainability and cleantech has a lot of [00:23:09] compliance issues, [00:23:11] it's sort of like the perfect use case for LLMs and AI, [00:23:14] because LLMs and AI are really good at just filling out all this bureaucratic paperwork. [00:23:19] So that's actually something to keep in mind that we have sort of calculated. [00:23:25] We currently are roughly around 10 people, [00:23:27] but like if we had to hire all the people to take care of all the work we've [00:23:32] automated with AI, [00:23:33] we probably need like 20 to 30 people right now. [00:23:37] So we have this saying that we have like 10 full-time people, [00:23:41] but 200 AI agents basically doing everything in the background. [00:23:44] So that's basically like this industry really benefits in the bureaucratic [00:23:52] landscape of the AI innovation. [00:23:54] That's one of the most greatest things that have come out of building the business [00:23:58] is understanding how to leverage AI to basically help accelerate [00:24:02] the stuff that you don't really have to care about, [00:24:04] you know, [00:24:04] like that's kind of something that's like really a big pain. [00:24:07] So can you tell me a little bit more about like the you said there were [00:24:09] bureaucratic things that they've worked on? [00:24:11] Like, [00:24:11] what are some of those things that like they've helped to automate or like quickly [00:24:16] kind of get out of the way? [00:24:18] It's easier to say what they haven't helped because they helped in paperwork, [00:24:23] in compliance, [00:24:24] in integrations, [00:24:25] in marketing materials, [00:24:27] in sales materials. [00:24:28] We now will soon start leveraging them for calling, [00:24:31] in developments after development and coding, [00:24:34] in creating ads and marketing material. [00:24:38] They're basically all over the place. [00:24:40] Literally every function has been touched by AI in our firm zone. [00:24:45] I thought that's crazy. [00:24:46] That's good. [00:24:47] And honestly, [00:24:47] I think that by the end of this, [00:24:49] you should definitely have a blueprint of like, [00:24:50] here's how to leverage AI to build a climate company. [00:24:53] I think that would be such a such a good, [00:24:55] helpful playbook, [00:24:55] I think for like future founders in the space, [00:24:57] honestly, [00:24:58] unsolicited advice, [00:24:59] probably great content marketing material. [00:25:01] I think the main thing is simply to keep an open mind, [00:25:04] you know, [00:25:04] follow these channels, [00:25:05] like especially like X, [00:25:07] for example, [00:25:08] formerly Twitter, [00:25:09] right? [00:25:09] Like there's a lot of these people who are very on top of reporting latest developments there. [00:25:14] And then they create threads of all the different solutions that have come to [00:25:18] market within the last month or something. [00:25:21] And you can take a look and think about what could apply to your business. [00:25:25] And plus, literally, I think it was one month ago or something, we had DeepSeek come out. [00:25:29] As soon as it came out, I put it on my own personal laptop. [00:25:34] Suddenly you can run these extremely complicated models and build your own [00:25:40] solutions for a fraction of the cost of what you had before. [00:25:44] So this is really honestly just transformative to how business is done. [00:25:50] And the AI will change everything. [00:25:53] It has now become possible to run and create companies that can become really big, [00:25:59] but don't actually need thousands of employees anymore. [00:26:03] Yeah, yeah, agreed. [00:26:04] I mean, [00:26:04] even when I'm doing my research right now in the client tech space, [00:26:07] because there's so many different people I've been interviewing and talking with, [00:26:10] I have so much information to parse through. [00:26:12] But then one day I just sat back and I was like, wait, I should just run this through. [00:26:17] Basically, [00:26:17] I have this platform called Otter AI, [00:26:19] and I've been able to extrapolate so much good data and insights that even I [00:26:24] probably couldn't have identified if I had went through and parsed through the data myself. [00:26:27] So it's like having an extra buddy, and I think it's just super cool just to see [00:26:32] how much time is saved through that process. [00:26:34] It's really, really awesome. [00:26:37] I agree. [00:26:37] And in my perfect world, [00:26:40] the way I see Soldera going is that instead of having a massive amount of people [00:26:45] where every person does a small paper push from one corner to another in the company, [00:26:51] we have a pretty small, [00:26:54] tight team of really top experts. [00:26:56] These are well-made top people who are very open-minded [00:26:59] and can really run and use these tools to the maximum. [00:27:03] And all the things that otherwise would require hundreds of people are just [00:27:07] automated by AI agents. [00:27:09] Yeah, yeah, that makes sense. [00:27:11] And I mean, [00:27:11] so obviously, [00:27:12] you know, [00:27:12] this is what helps to construct the foundation of how you run your business and how [00:27:17] you kind of like manage the team on a day to day basis. [00:27:19] But I'm very curious about just the company's like maybe business model and also [00:27:23] just like around around that business model that you have right now. [00:27:26] Do any like you have to navigate it through specific like environmental regulations or policies? [00:27:32] And if so, like what are some of those [00:27:34] things that you have like specific policies that you have to kind of like work with [00:27:38] right now in the current like European landscape or maybe into the future as well. [00:27:44] Well, [00:27:44] in our case, [00:27:45] our solution basically costs precisely as much value we bring to the producer. [00:27:52] So the way it works, [00:27:53] right, [00:27:53] is that we automate entire compliance and then we also help them to monetize and [00:27:59] maximize revenue in the sales of the renewable energy. [00:28:03] And we just get the percentage fee from the sales. [00:28:06] So in effect, the more value we bring, [00:28:09] And the more money they make, the more money we make. [00:28:12] And the bigger they are, the more we get. [00:28:14] So it's like a very fair compensation. [00:28:17] And, you know, that has worked really well for us. [00:28:21] In a nutshell, [00:28:21] we take 10 to 30% of trading fees from our producers, [00:28:25] like depending on their size. [00:28:26] If they're really small rooftop solar, we get 30%. [00:28:30] If a huge production conglomerate, we get 10%. [00:28:33] And that works well. [00:28:34] But in our case, we are in the compliance market. [00:28:37] Like a big part of our solution is compliance automation. [00:28:40] So, [00:28:41] you know, [00:28:42] you're asking like, [00:28:43] how do the environmental regulations and policies affect our business? [00:28:47] Well, it is our business. [00:28:48] Yeah. [00:28:49] So, [00:28:50] so, [00:28:50] so basically in, [00:28:52] in some sense, [00:28:52] the existence of these policies has actually enabled our business. [00:28:58] There is like a big chunk of like private market as well. [00:29:01] Like when we talk about the global IRAC market and so on, [00:29:04] a lot of it is driven by purely private interests and like environmental goals that [00:29:09] the corporates have towards their shareholders. [00:29:12] But at the same time, [00:29:13] like why European guarantee of origin market is the most mature of direct market. [00:29:18] is because of the environmental regulations and policies that are across Europe as well. [00:29:24] The way we see it is that sort of a lot of these environmental problems that are [00:29:29] coming up across EU and the world, [00:29:33] we are looking currently at India and US and UK as well, [00:29:36] for example, [00:29:37] they are often set by some bureaucrat in an office. [00:29:42] They write down some law, how something should happen. [00:29:45] And they don't really think about how people actually and companies and corporate [00:29:50] should actually comply with these regulations. [00:29:53] And they often create like disproportionate amount of unreasonable paperwork. [00:29:57] And the adoption of that paperwork is quite uneven in its effectiveness. [00:30:02] But by us bringing fully automated solution that just does all the work for all the [00:30:07] parties in the system. [00:30:08] So like they can literally forget about what's going on there. [00:30:12] then it doesn't really impact them that much. [00:30:14] And that's one of the biggest values you can bring to the business. [00:30:17] You just remove the headache from them. [00:30:19] You remove the entire compliance part and it's just fully automated. [00:30:23] And that's how we see it. [00:30:24] We're just taking these compliance issues and fully automating them for the [00:30:30] producers of renewable energy. [00:30:32] Yeah. [00:30:32] So just adding on to that, [00:30:33] like that would be the legal standing of each nation where the GOs are being issued. [00:30:40] They would have ratified the sort of European AIB compliance requirements into [00:30:45] their own law and they have their own registries. [00:30:47] So it's a very complex local process that needs to be done. [00:30:50] But I think also something really important to mention is how much [00:30:53] the business is impacted by high-level European regulatory requirements because, [00:30:58] you know, [00:30:58] obviously with Geos being an environmental asset class, [00:31:02] as the price of Geos changes, [00:31:03] you know, [00:31:04] the complete outlook of the business changes quite drastically, [00:31:07] right? [00:31:07] So that's a really interesting thing. [00:31:09] And overall, we're quite bullish on the outlook of guarantees of origin. [00:31:13] So I think that's, yeah, that's another factor to consider. [00:31:17] Yeah, [00:31:18] Oliver had to call a lot these registries lately and talk with them and get the [00:31:24] feeling of the different implementations of the same EU directive in each country. [00:31:29] Yeah. [00:31:30] I saw a great quote on LinkedIn. [00:31:32] It was like, it's a standard instrument, but just like with custom implementations. [00:31:37] Technically, [00:31:37] everybody should be doing roughly the same thing, [00:31:39] but there's just these little niche tweaks that you have to get your head around [00:31:42] with each country. [00:31:43] Yeah. [00:31:44] And, you know, imagine you're a huge multinational energy firm. [00:31:47] You produce in like 15 countries. [00:31:49] Suddenly you need to learn the laws of 15 countries. [00:31:52] It's a lot of overhead. [00:31:53] It's not efficient at all. [00:31:55] It's completely understandable that companies are kind of frustrated and doing the [00:32:00] bare minimum to simply get it done. [00:32:03] And they can benefit from automated tool that just do it for them. [00:32:06] And so they don't need to think about it. [00:32:08] Yeah, [00:32:08] that's actually really so cool to hear that these policies create this very awesome [00:32:13] tailwind for you to kind of like for businesses to come out of it. [00:32:15] So I mean, [00:32:16] as a result, [00:32:16] like policies create economic opportunity, [00:32:18] which is I think something that I think more countries need to kind of like realize [00:32:21] and understand. [00:32:22] Yeah, [00:32:23] like what are some things that you've noticed in Estonia's like climate tech sector [00:32:27] as a result of these different kinds of like [00:32:29] policies, [00:32:30] at least something I've noticed is the fact that like with each entrepreneur I'm [00:32:33] talking with who's working in a different sector of climate, [00:32:36] they always mention a specific policy that helped to drive their business forward. [00:32:40] So yeah, [00:32:41] like what are some things that you might have noticed over time as just from like a [00:32:45] general point of view of the ecosystem? [00:32:47] Like what are some things that you've kind of observed changed in the last couple of years? [00:32:52] Well, [00:32:53] I think one big thing that has changed, [00:32:56] and I agree with it on a personal level a lot, [00:32:59] is that a lot of companies have gotten tired of the level of policies and [00:33:03] regulations affecting them. [00:33:06] And a lot of businesses are actually moving out of EU or their local countries if [00:33:13] the policies are too strong. [00:33:16] So there has especially lately been a very strong wind across Europe that we should [00:33:20] simplify and we should like, [00:33:23] you know, [00:33:24] make sure we're not hurting our own internal competition. [00:33:28] And I mean, you don't only see it in the EU. [00:33:30] The US, [00:33:31] of course, [00:33:31] obviously is going through the same phase with the deregulation with Doge or [00:33:36] Argentina and so on. [00:33:37] So this happens all over the world. [00:33:39] And honestly, [00:33:40] I think it needs to happen because the bureaucratic machine has the tendency to [00:33:45] just sort of grow uncontrollably. [00:33:47] And definitely not everything they've done is good. [00:33:51] So we need to sort of pull back a bit and reassess if everything we actually [00:33:58] decided is good or not. [00:34:00] Even though our business relies a lot on automating the policy, [00:34:04] that's not the only value proposition we have, [00:34:06] right? [00:34:07] we also maximize on the revenue part. [00:34:10] And we are true believers that we shouldn't make our companies suffer and we [00:34:14] shouldn't force too much policy on them. [00:34:18] We should, in fact, help them to be more competitive. [00:34:22] And the policies we are creating should be there to defend and help them to grow [00:34:27] better and protect them from the outside influence, [00:34:31] essentially. [00:34:31] So I do think that a lot of policies, whenever we do make these policies, [00:34:36] we need to make sure it's not hurting our internal market more than the external [00:34:41] market outside of the EU. [00:34:43] And we need to be like protective of our own industries as well. [00:34:47] I think ever since I moved here to Tallinn, [00:34:49] like one thing that I've been so much, [00:34:51] I just got so much more in this like rabbit hole of like, [00:34:53] yeah, [00:34:53] like what does Europe, [00:34:55] the future of Europe's like startup ecosystem in general, [00:34:57] not even just climate tech, [00:34:58] but just like startups in general, [00:34:59] like how, [00:35:00] what does the future kind of look like? [00:35:01] And there's just so many conversations around like, [00:35:04] Is this because of like the new administration in the United States? [00:35:07] Like, [00:35:07] is there an opportunity for Europe to really kind of like create some sort of like [00:35:14] it could be a policy model or it could be just some sort of way to help better [00:35:17] support these companies while still simultaneously [00:35:21] being able to create positive social outcomes by being able to protect people, [00:35:26] by being able to create a social safety net, [00:35:28] but also being able to still keep some of those sustainability standards that [00:35:31] they've done so well in place, [00:35:34] because that in itself creates a buffer [00:35:36] rest of the world because it kind of signals to the rest of the world that hey like [00:35:39] this is something that really still does matter and we're reaching that really [00:35:42] cares about it actually a big reason why like i even like wanted to come to estonia [00:35:45] in the first place was the fact that like yeah like there are they've been able to [00:35:49] remove so many different kinds of like business like regulatory policies over here [00:35:54] and be able to create like you know that digital society but simultaneously it also [00:35:58] still aligns with like sustainability standards so i'm wondering if that kind of [00:36:02] like mindset or like model that they've created can be applied to the rest of Europe as well. [00:36:09] And I think that's a great example because the Estonia government is a massive [00:36:14] support for businesses. [00:36:16] You know, you can open a company online in like a few minutes. [00:36:19] You can access like every single government service online. [00:36:22] You never need to visit any like government offices. [00:36:25] These are the good types of policies. [00:36:27] These are the supportive ones. [00:36:29] And these are really like, how can we help our companies strive and move forward faster? [00:36:34] And I think this is also like great inspiration we can bring to the rest of the Europe as well. [00:36:40] Yeah, I agree with you. [00:36:41] Is it worth mentioning the specifics of grants that were received by Sodera? [00:36:46] There are a few from, was it EU climate or energy particular grants? [00:36:51] Yeah, there's a couple of good grants. [00:36:53] Like we were part of Green Accelerator. [00:36:55] We were part of Energy Beam, of the Beamline Foundation. [00:36:59] And these grants are always very nice if they happen. [00:37:04] But I am a strong believer that every business... [00:37:06] should be able to drive without grants and grants should be there as only like an [00:37:11] accelerator and help drive even faster, [00:37:14] essentially. [00:37:15] So I think that's a very important part when building up these grants. [00:37:20] I will say, I think Beamline is doing a good job. [00:37:22] I had an early start this morning. [00:37:24] I joined at Beamline, go-to-market strategy consultation, and I found it really valuable. [00:37:30] And I think if that's the kind of stuff that's being offered to startups in Estonia, [00:37:33] then I think, [00:37:34] yeah, [00:37:34] that's definitely a model that should be replicated elsewhere. [00:37:37] I'm curious, it was all like energy companies, so that specific batch is about energy. [00:37:42] Do you think there's a disproportionate amount of energy startups in Estonia or in Tardu, [00:37:46] or was that just this batch is like an energy-focused one? [00:37:49] This particular grant and batches focuses on energy. [00:37:53] There's like other sectors as well. [00:37:55] There's many different types of grant schemes going on. [00:37:58] Yeah, [00:37:58] I think the Green Accelerator right now also does, [00:38:00] I think they're launching one soon about forest and biodiversity. [00:38:03] There's one focused on that. [00:38:05] And I think there's also another one focused in on like, [00:38:07] I think it was circular economy as well. [00:38:10] There's multiple different avenues. [00:38:11] And I think they're starting to not just focus, [00:38:14] at least from my own observations, [00:38:16] I saw that a lot of like Accelerator programs kind of started off as like, [00:38:19] quote unquote, [00:38:20] deep tech, [00:38:20] but deep tech not just doesn't encompass just climate, [00:38:23] it also encompasses like, [00:38:24] you know, [00:38:24] health and biotech and [00:38:26] Many of like really hard, like hardware based solutions. [00:38:30] But then I think now I'm starting to see like they've kind of split off into very [00:38:34] more granular topic areas. [00:38:37] And that's kind of as a result of the fact that there were more climate tech [00:38:41] startups being developed in the country. [00:38:42] And the fact that if you want to create a very successful outcome for your clients, [00:38:47] essentially, [00:38:48] you want to be able to create very tailored programs. [00:38:51] for the specific companies. [00:38:52] So yeah, it's not just, I think it's not even just clean energy now. [00:38:55] It's also like there's, you know, the other accelerators that I mentioned as well. [00:38:59] Yeah, [00:39:00] I think one last thing I kind of wanted to ask you, [00:39:02] though, [00:39:02] just like wanted to cover ground is like, [00:39:03] you know, [00:39:04] like we've kind of covered like the EU, [00:39:05] Estonia as well. [00:39:06] And they're both, you know, there's obviously areas for improvement. [00:39:09] But I'm just very curious, [00:39:10] like in the context of Estonia itself, [00:39:13] you know, [00:39:13] there's a lot of support mechanisms, [00:39:15] a lot of grants, [00:39:16] a lot of consultation programs. [00:39:17] But in your opinion, [00:39:18] like what is something that Estonia could be doing to kind of improve the way that [00:39:23] we can build new climate companies in the country? [00:39:27] Or what are some ways that they can better support current existing client companies? [00:39:31] I think Estonia has a great reputation of being a startup ecosystem and a good tax system. [00:39:39] I think they shouldn't do the tax changes they're planning to do. [00:39:43] Because a lot of that reputation is starting to give back dividends. [00:39:46] And we want to give this perspective of stability, that this is how it is here. [00:39:51] Just let the reputation building keep going and doing itself. [00:39:55] I mean, I've traveled the world in Dubai, US, Brazil. [00:39:59] It doesn't matter. [00:40:00] Everybody knows about Estonia. [00:40:02] It's a great place to do business. [00:40:05] I know a lot of founders and investors who are considering moving their funds and [00:40:09] companies to Estonia. [00:40:10] We shouldn't ruin that. [00:40:11] We should just keep doing what we've been doing and let the system sort of take care of itself. [00:40:17] So I think it's not even like climate specific, [00:40:20] but actually like in general, [00:40:22] Estonian ecosystem, [00:40:23] just let it drive. [00:40:25] Don't put too much effort into trying to bring changes. [00:40:30] And I mean, of course, there are small things that can be improved here and there. [00:40:33] But in general, [00:40:34] Estonia has put a lot of effort into building this ecosystem and just keep watering [00:40:41] it and let it keep on growing. [00:40:42] It's pretty simple. [00:40:43] Yeah, [00:40:44] I think the marketing around or the narratives were created by the government [00:40:49] around Estonian business opportunities has been very prominent. [00:40:52] So like, [00:40:53] I mean, [00:40:54] even when I first landed in Tallinn, [00:40:55] like I was walking out, [00:40:56] I just saw all these different like posters kind of just about kind of [00:41:00] heavily hinting at that and I think the more that I talk with like these different [00:41:04] kinds of companies the more I realize like oh my goodness like this is a real thing [00:41:07] and we should really really kind of dive into the fact that this is such a huge [00:41:11] selling point for the country while simultaneously also noting that yeah like [00:41:15] we can do business in a very impactful way here. [00:41:19] And you can build really game-changing, [00:41:21] industry-defining companies that can also help to change the world and help to [00:41:25] protect our planet as well simultaneously. [00:41:26] And I think that is something that I think maybe E-Estonia or the Enterprise [00:41:32] Estonia division can also look into is knowing that you can actually have the best [00:41:36] of both worlds by knowing that we can create really impactful policies while [00:41:39] simultaneously also protecting our businesses. [00:41:41] And, you know, just encourage people to take risks. [00:41:44] I think it's a cultural thing, [00:41:45] you know, [00:41:46] more risk-taking, [00:41:47] more entrepreneurship, [00:41:49] more international attention. [00:41:52] That's all we need. [00:41:53] But I think on that point, [00:41:55] you know, [00:41:55] I think people need to understand that for a lot of people looking inwards to Estonia, [00:41:59] moving a business to Estonia or moving a fund to Estonia or relocating to Estonia [00:42:02] is a risk, [00:42:03] right? [00:42:03] So for them, at least at a high level. [00:42:06] So Stemper, would you be in favor of something like... [00:42:09] golden visa scenario like an investor visa where like if you make that effort you [00:42:13] might get an ability to integrate into Estonian society more like a residency or [00:42:20] something I don't I don't think that's currently possible but I'm curious about [00:42:22] what your thoughts on that would be [00:42:23] Yeah, it's a good question. [00:42:25] I haven't thought about that. [00:42:26] But I mean, [00:42:26] you can already get the residence and start the company without ever coming to Estonia. [00:42:30] So that's pretty nice, right? [00:42:32] And like you can sort of start testing the waters and see if you like it pretty easy. [00:42:36] There's a bunch of online services that specialize on these types of companies like [00:42:41] Solo and make it super easy and take care of all your accounting and bookkeeping. [00:42:45] And I actually don't know what Estonian stance on Golden Visa programs are. [00:42:49] I mean, I'm always supportive in those. [00:42:51] Like it sounds like a no brainer to me. [00:42:54] I will say, [00:42:54] I do think that, [00:42:55] I mean, [00:42:56] yeah, [00:42:56] so they obviously have the digital residency program. [00:42:58] So that's really prominent here that we often talk about. [00:43:00] But I think something that, [00:43:01] or this is something that I would think that would be even better, [00:43:04] I think, [00:43:04] for the ecosystem. [00:43:05] Like there are a good amount of like, [00:43:06] you know, [00:43:07] tech events being hosted around like Tallinn as well. [00:43:10] But I think that when back when I was in Asaf, like it was every single... [00:43:13] like day every single day there was always some major event around the city that [00:43:17] you can go to and it's for free it's like for open it's like and i think that in [00:43:21] itself was why asaf was such a prominent tech hub not because like i mean obviously [00:43:26] they're doing really awesome work but it's like the fact that i'm also here in [00:43:29] estonia i'm like everyone's doing also really awesome work here but i think that [00:43:32] community building aspect is [00:43:35] could be something that would take the country to the next level. [00:43:37] Not even just like, [00:43:38] oh, [00:43:38] among like, [00:43:39] you know, [00:43:39] Estonian founders, [00:43:40] but just inviting people from outside of the country to come visit and to kind of [00:43:44] just see like all the different opportunities being offered here. [00:43:47] Yeah, [00:43:47] once you get that exposure and you like, [00:43:49] you know, [00:43:49] find a community of like really awesome people, [00:43:51] it's like, [00:43:51] I would say it's kind of like you're trapped in a way. [00:43:53] Mentally, [00:43:54] you're like trapped in because you're like, [00:43:55] wow, [00:43:55] like there's just a lot of awesome things here. [00:43:57] And I know that whenever I leave Estonia this coming July, [00:44:00] like it's something that's always going to be a part of me in terms of like, [00:44:03] OK, [00:44:03] like this is something that's always going to be on top of my mind in some shape. [00:44:06] But, you know, most of these events in SF are driven by private people. [00:44:10] So, [00:44:10] Kevin, [00:44:11] you have the honor and opportunity to start your own event series here there in Tallinn. [00:44:17] yeah that's true i'm already talking with some people actually thinking about it as [00:44:21] well at least from the university level trying to see you as well so yeah i think [00:44:25] more a little bit more of that would be really awesome to look into all right guys [00:44:28] it's been a cool conversation and thank you so much kevin for coming here and [00:44:34] asking the questions and sharing your experience and thank you ollie for giving [00:44:37] your insights we'll see you guys soon yeah nice thanks kevin yeah thank you all [00:44:42] this is super awesome

Soldera Markets #8: Estonia's Climate Tech Ecosystem

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March 22, 2025

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August 5, 2025

August 7, 2025

As we enter Q2, we examine the key factors influencing the European Guarantees of Origin (GO) market while evaluating our Q1 predictions.

Looking Back at Q1 and Assessing Our Predictions

→ Most predictions materialized, especially regarding March 31st disclosure deadline activity
→ Record Norwegian cancellations show market progress with 22 TWh more domestic consumption 🇳🇴
→ Pricing remained sideways despite high volumes and record cancellations
→ Geopolitical factors and defense priorities temporarily overshadowing sustainability initiatives

Critical Supply Dynamics

→ 47 TWh renewable underproduction silently reducing market oversupply 📉
→ Nordic hydro reservoir levels have less market impact than commonly believed
→ Rapid value decline of 2024 GOs problematic for remaining holders
→ Germany's June deadline creates final window for 2024 GO consumption 🇩🇪

Demand Outlook and Market Sentiment

→ Forward prices historically low at €1+ despite continued interest
→ CSRD scope reduction from 50,000 to 10,000 companies impacting price modeling 📋
→ Potential hydrogen regulation relaxation could significantly boost GO demand
→ Voluntary GO adoption in Iceland signals sustainable demand growth

Strategic Considerations

→ Why some people are considering leaning toward 30% forward volume hedging 📊
→ Market's contango state reflects confidence in long-term improvement
→ Country-specific vintage rules create arbitrage opportunities in Estonia and Italy
→ Energy-intensive industry incentives creating new demand sources across Europe ⚙️

Stay informed with our quarterly market updates to navigate the evolving GO market landscape!

#GuaranteesOfOrigin #RenewableEnergy #EnergyMarkets #Sustainability

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit podcast.soldera.org

Transcript of the episode's discussion between Oliver Bonallack, Al William Tammsaar, and Stenver Jerkku [00:00:03] Hey guys, and welcome back to another episode of Sodera Markets. [00:00:07] We are the podcast to talk about all of the developments in the Renewable Energy [00:00:11] Certificate and Guarantee of Origin Space. [00:00:14] Today we're doing our state of the geomarkets. [00:00:16] So it's our outlook for 2025 Q2. [00:00:18] If you missed our 2025 Q1, you can go back and check and see how our predictions stacked up. [00:00:24] But today I'm joined here with Alan Stemba. [00:00:26] So it's nice to have you guys. [00:00:28] Yeah, [00:00:28] I guess we start by looking back at Q1 and see how we kind of did with our [00:00:34] predictions last time. [00:00:35] How do we do? [00:00:36] Yeah, I think generally we hit the nail on the head. [00:00:39] I think we got most things right, except one, which we'll talk about in a bit. [00:00:43] But in the first quarter, [00:00:45] actually, [00:00:46] we saw even more market activity than we expected with the March 31st disclosure deadline, [00:00:52] which affected most countries that use guarantees to origin. [00:00:55] As a special highlight, [00:00:57] however, [00:00:57] I would like to point out the fact that we saw record cancellations of guarantees [00:01:02] of origin in Norway. [00:01:04] And this is incredibly relevant because historically Norway is very bad at using [00:01:09] their own guarantees of origin. [00:01:10] So we saw an increase right now of around 22 terawatt hours of more consumption in [00:01:16] their domestic market than last year, [00:01:18] which is a huge increase. [00:01:20] The final numbers are still pending. [00:01:22] We'll get to see how everything played out after they have calculated the residual [00:01:27] energy mix and everything. [00:01:28] But usage of guarantees of origin in Norway has gone up significantly. [00:01:32] And I think that's major progress for the market. [00:01:35] Since historically, [00:01:36] the reason why Norway is such a major exporter is because their domestic market thinks, [00:01:43] oh, [00:01:43] we're green anyway, [00:01:45] doesn't put money into this and sells off essentially the greenness of their [00:01:49] electricity to other countries. [00:01:51] And now both of them think that everything's fine. [00:01:53] While in reality, the energy producers in Norway... [00:01:57] They're selling their green electricity to someone else, [00:01:59] not you, [00:02:00] like the factory that's not buying it. [00:02:02] It's great to see that they're starting to buy because I actually was just yesterday, [00:02:07] came back from direct market meeting in Amsterdam, [00:02:10] and people are starting to get very critical of Norway. [00:02:13] Actually, [00:02:14] there were sessions and seminars where people put it straight on the slides and [00:02:17] were criticizing Norway for that. [00:02:20] And somebody even was asked on stage that, [00:02:24] hey, [00:02:24] if Norway would leave the AIB, [00:02:27] would it raise the geo prices? [00:02:28] And he was like, yes. [00:02:30] So like, yes, people are getting critical of Norway and I think it's rightfully so. [00:02:36] But a very interesting counterpoint, actually. [00:02:39] I met the director of IREC and he said that we had a quite interesting conversation. [00:02:46] He said that we can't blame Norwegian government for that because Norwegian [00:02:51] government is not responsible for reporting like we should be blaming consumers. [00:02:55] I actually want to address that because this is such an interesting point. [00:02:59] This brings me back to the carbon markets. [00:03:01] In carbon markets, it was the same thing. [00:03:03] Everybody was shifting the blame. [00:03:05] It's not Vera's responsibility. [00:03:07] It's the project's responsibility or the VVP's responsibility or whatever other [00:03:12] term that nobody understands. [00:03:13] This is the law. [00:03:14] You know, you joined AIB, it's the law, you know, you need to follow the rules. [00:03:18] You need to enforce the rules. [00:03:20] If you're not enforcing them, like who is like, I'm sorry. [00:03:23] Like I'm in the firm belief that it's Norway's government fault. [00:03:28] Not anybody's government's fault for not enforcing the rules they have agreed. [00:03:33] And I will fight that opinion. [00:03:36] Like anybody that comes to tell me it's not government's fault and consumers fault. [00:03:40] No, yeah, consumers break the rules, but who's enforcing it is the question. [00:03:44] And like, [00:03:45] this is not the voluntary carbon market where nobody's enforcing and everybody's [00:03:48] just chitchatting. [00:03:49] Yes. [00:03:50] Another thing that I will point out is Norway is not part of the European Union. [00:03:55] So that makes everything very complicated because the renewable energy directive [00:03:59] that we have in Europe, [00:04:01] Norway hasn't even fully adopted it. [00:04:05] Not RET2, definitely not RET3. [00:04:08] So everything's a bit weird and strange compared to other countries that have [00:04:13] guarantees of origin. [00:04:15] They work on, in some sense, outdated requirements at this point. [00:04:19] Yeah, [00:04:20] I'm very excited to see where all of these conversations go of Norway potentially [00:04:24] joining the EU or at least transposing like renewable energy directive to its full extent. [00:04:30] Because right now it's in this like very strange borderland between being adopted [00:04:36] fully and not being adopted at all, [00:04:39] where everybody's just kind of closing their eyes and going like, [00:04:42] okay, [00:04:43] it's fine. [00:04:43] It's okay. [00:04:44] It's okay. [00:04:44] Just keep exporting. [00:04:45] It's fine. [00:04:47] It doesn't make sense that you sell away your renewable power and then at the same [00:04:53] time you claim that we have renewable power. [00:04:56] This is not good for the market. [00:05:00] I'm very scared of the credibility of the market. [00:05:03] I worked in carbon markets and we need to get rid of these discrepancies. [00:05:08] So despite all of that, I mean, what's behind the driving cancellations in Norway then? [00:05:13] Do we know? [00:05:13] A big part of this is like CSRD because there are a lot of Norwegian companies or [00:05:20] companies that have a Norwegian presence that follow the CSRD. [00:05:25] And then they do all of the nice things that they have to disclose the energy mix [00:05:28] and they have to follow certain protocols. [00:05:31] And it does seem that that has moved the needle. [00:05:33] There are also major industrial players in Norway that have announced that [00:05:37] yeah okay we're taking it seriously we're working on it all of this has moved [00:05:42] demand forward significantly and that's very positive it seems like the market over [00:05:48] there is moving in the right direction i guess the only question is how long is it [00:05:52] going to take for everything to kind of settle out and start making perfect sense [00:05:56] Yeah, [00:05:57] and I actually heard in the conference that, [00:05:59] if I'm not mistaken, [00:05:59] but the Iceland aluminum refineries now started buying geos. [00:06:03] So those are all very, very good signals and very encouraging of that. [00:06:08] And applaud all the stakeholders involved who have done the hard work in these [00:06:15] local markets to push this forward and make sure we have a credible system across [00:06:20] the EU. [00:06:20] All of this being said, [00:06:21] we are still in a sort of oversupplied market state, [00:06:25] I think, [00:06:26] when it comes to guarantees of origin. [00:06:28] There's quite a big overhang. [00:06:29] We've seen some reports that have essentially said that the overhang didn't really [00:06:34] increase last year significantly. [00:06:37] We're still dealing with about the same amount of guarantees of origin circulating [00:06:41] in addition to whatever is being produced. [00:06:43] It hasn't gotten worse, but it also... [00:06:46] So far, hasn't gotten significantly better. [00:06:50] And I think the prices also reflected that across the last quarter. [00:06:56] We did see 2024 prices go down and down and down, stabilizing at some point. [00:07:03] And we did see 2025 prices stabilize a bit faster and, well... [00:07:09] We basically just had a sideways kind of a couple of months. [00:07:13] I would say pretty good market action, but at price points that aren't very inspiring. [00:07:19] Actually, I'd like to inject some of the learnings from direct market here again. [00:07:25] You mentioned the word pretty good market action. [00:07:28] What do you mean by that? [00:07:29] Volumes were good. [00:07:30] Like we did see like pretty good trading volumes. [00:07:33] So here's a nice question, right? [00:07:35] So we had good volumes, [00:07:37] we had record cancellations, [00:07:39] but we had sideways market, [00:07:41] which in trading term is called crab market, [00:07:43] right? [00:07:44] Actually, [00:07:44] a lot of traders in the conference, [00:07:46] like they expressed the concern about the fact that we have a [00:07:51] we are having a sideways market, [00:07:53] nothing is happening because, [00:07:54] you know, [00:07:55] traders, [00:07:55] you know, [00:07:57] they take positions and they trade positions. [00:08:00] And if the market is not moving, there's nothing to take over there. [00:08:04] And, [00:08:05] you know, [00:08:06] it's clear some firms are struggling actually on that front and some organizational [00:08:11] changes are happening. [00:08:13] Rumors are going on in some places. [00:08:15] But can you explain to that or what's your hypothesis on why we have record volumes, [00:08:21] record cancellations, [00:08:22] but not price moments? [00:08:24] So I think a lot of this comes down to the uncertainty. [00:08:27] And that's also something that we, [00:08:29] I think, [00:08:30] can smoothly transition into uncertainty in the market of like guarantees of [00:08:35] origins role going forward, [00:08:37] especially due to all of the geopolitical turmoil. [00:08:41] So we have our own position. [00:08:43] Obviously, energy independence also means having your own production capacity. [00:08:48] It means having a strong base of renewable energy. [00:08:51] It means having good storage, and it means having strong baseload. [00:08:54] Stuff like nuclear or, well, potentially gas, depending on response speed, right? [00:09:00] But ultimately, we need to be energy independent. [00:09:04] This is just a priority for Europe as a geopolitical entity. [00:09:10] But we have seen the omnibus package. [00:09:13] So for context, European Union, I don't think has still completely accepted it. [00:09:19] The proposal was made to essentially simplify the CSRD reporting scope, [00:09:25] this thing that has been driving significant demand, [00:09:28] to reduce the scope from 50,000 companies to 10,000 companies. [00:09:33] And to significantly simplify the kind of data points required in it, [00:09:37] I don't think it affected renewable energy. [00:09:40] It affected all of these like qualitative questions. [00:09:43] But a lot of this has damper on sustainability as a theme that corporations [00:09:50] prioritize or believe in. [00:09:52] I'm interested, [00:09:52] sorry to sneak something in here, [00:09:54] but last episode, [00:09:55] I mean, [00:09:55] last quarterly report for the Q1 Outlook, [00:09:58] you mentioned that eventually if you try and model everything, [00:10:00] it gets to the point where you're trying to model the entire world economy. [00:10:03] And I thought that was a really profound point. [00:10:05] But I would say that recently the world economy has been pretty volatile. [00:10:09] And I think you can completely disregard it and isolate GOs to their own little vacuum, right? [00:10:14] So how has the recent volatility on the world financial stage impacted GOs at all? [00:10:20] Well, [00:10:20] I think this is one of the things that we ultimately see is that the sustainability [00:10:24] has taken a backseat to questions of defense. [00:10:28] I think defense has become a more major theme in global discussion. [00:10:33] And I think that is reflected in, to some extent, the excitement around guarantees of origin. [00:10:39] Now, the flip side of this is that we did see record cancellations. [00:10:44] I think we will, [00:10:46] after all of the numbers have come in, [00:10:47] we'll see that the adoption of guarantees of origin is at an all-time high. [00:10:51] While at the same time, this kind of vibe of the market, you could say, is not optimistic. [00:10:57] And because of these animal spirits essentially driving what people think things [00:11:01] are worth, [00:11:02] we're ultimately going to have depressed prices if people just have this vibe of [00:11:06] Well, [00:11:06] maybe guarantees of origin, [00:11:08] maybe they aren't the thing, [00:11:09] even though the numbers would suggest heavily that they are. [00:11:12] I asked that question actually from many people in conference as well, [00:11:17] and this was a big discussion topic over there. [00:11:20] People had very differentiating opinions on it, actually. [00:11:23] It was quite interesting to see. [00:11:24] Many said, we don't know, no idea how it's going to affect, of course. [00:11:28] A lot of uncertainty. [00:11:30] Some believe the bearish narrative, [00:11:32] believe that the tariffs will start, [00:11:35] you know, [00:11:36] further reducing the sustainability importance and like all the light green stuff [00:11:42] will be starting to be rollbacked. [00:11:44] And some believe that they'll have no impact. [00:11:46] because geos are not in the US market. [00:11:49] It doesn't matter that the European laws and objectives still apply and the [00:11:53] companies doing business in Europe still need to, [00:11:56] you know, [00:11:57] be compliant with EU laws. [00:11:59] In fact, [00:11:59] like the Germany, [00:12:00] I think just announced with the new government coalition that they're going to [00:12:05] firmly stay on path to the 2040 net zero commitments. [00:12:11] And in fact, they increased some requirements as well. [00:12:14] Which was an interesting side note, [00:12:15] they actually are considering accepting international carbon credits for the [00:12:21] reduction targets as well, [00:12:22] but that's another story. [00:12:23] That will be very interesting. [00:12:25] Yes. [00:12:26] All right. [00:12:27] But yeah, [00:12:27] another thing that we gave an overview of last time when we had this call was the [00:12:34] German elections. [00:12:35] And as Denver already mentioned that the German election, [00:12:38] they went exactly as everyone predicted, [00:12:41] ended up with a CDU, [00:12:42] CSU and SPD coalition. [00:12:45] The negotiations possibly even went better than expected in the sense of there were [00:12:50] negotiations which ended up getting more green topics into the picture. [00:12:55] And overall, [00:12:56] I'd say this was even better, [00:12:59] possibly from a sustainability perspective than we were expecting as this kind of [00:13:05] baseline scenario. [00:13:06] And I think we should mention that, [00:13:07] obviously, [00:13:08] you know, [00:13:08] for those who haven't been following politics too closely, [00:13:11] last time we were worried about, [00:13:12] you know, [00:13:12] a certain party getting into German political power and that didn't happen, [00:13:16] which is overall, [00:13:18] it's a good thing for the geo market. [00:13:19] So I guess now let's look at short term market drivers. [00:13:22] So what do we think is going to happen in the sort of near to immediate term that's [00:13:25] going to be impacting geos that traders should be keeping an eye on? [00:13:29] So one of the major things to highlight is just the fact that so far this year, [00:13:33] we have produced 47 terawatt hours less than last year in terms of renewable energy. [00:13:40] At least 47 terawatt hours less. [00:13:43] It's been less wind this time around. [00:13:45] And it's been actually even a bit less hydro this time around. [00:13:50] And all of this has created this picture where we're actually quite behind on [00:13:55] renewable energy generation than what you would otherwise expect. [00:13:59] i think this is something people are possibly sleeping on because again the market [00:14:05] overhang like the total amount of floating supply that has been carried over year [00:14:10] to year [00:14:11] is somewhere in the ballpark of 180 terawatt hours. [00:14:15] That's it. [00:14:16] So the lowest the overhang has ever been is around 90 terawatt hours. [00:14:21] The highest it has been is like 180 terawatt hours. [00:14:25] The difference is around 90 terawatt hours. [00:14:27] That's the difference of like this overhang. [00:14:29] I think the underproduction has actually eaten into this overhang significantly already. [00:14:34] If this continues, who knows? [00:14:37] Can't predict the future. [00:14:38] But even if we don't like compensate somehow for this underproduction going forward [00:14:43] into this year, [00:14:44] I think this will have profound effects on supply and demand already. [00:14:48] And I think that is a very bullish signal. [00:14:51] Now, [00:14:51] the second part we need to consider is hydro, [00:14:55] since now that we're entering the time where we're getting snowmelt and we're [00:15:00] seeing Norway's hydro really start kicking in and doing more and what's happening [00:15:06] with the reservoir levels. [00:15:07] Again, [00:15:08] they are at what you could say unusually high levels, [00:15:13] but the total energy stored, [00:15:15] I'm saying a number off the top of my head and perhaps we can fact check you this [00:15:19] if I'm wrong. [00:15:20] But I believe the total storage is less than 12 terawatt hours total. [00:15:25] So when people talk about the effect of reservoir levels, [00:15:29] I think they are somewhat overemphasizing how much this could possibly affect [00:15:37] market dynamics compared to what people have been sleeping on, [00:15:40] which is like major underproduction actually across the whole EU region right now. [00:15:45] So I'd say actually we ended up this quarter in very positive supply and demand dynamics. [00:15:54] And I think I'm just sad this has not really materialized in the prices yet. [00:15:59] I think we will see some changes coming up. [00:16:02] But again, can't predict the future with complete accuracy. [00:16:05] I do have, looking at the numbers, a sort of bullish feeling about it. [00:16:10] That's cool to hear. [00:16:11] Does this apply to both 24 and 25 or only 25? [00:16:15] I would say it more applies to 25 because 24 is really heavily dropping off a cliff. [00:16:21] So what you have to keep in mind is that in a couple of countries, [00:16:25] you can't use 24 geos for 25 consumption. [00:16:29] Yes, [00:16:29] that reduces the amount of areas where you can realistically even use the old [00:16:34] guarantees of origin. [00:16:35] They have less market staying power. [00:16:37] So if you have them for speculative reasons, like at some point they will just go to zero. [00:16:42] But that's like part of the picture, right? [00:16:44] And ultimately, well, we are still in overproduction. [00:16:47] So I think there will just generally be a lot more people trying to get still [00:16:52] offload their 24 geos when trying to buy them. [00:16:55] Another thing that I would like to highlight is actually while we have been talking [00:16:59] about the March disclosure deadline, [00:17:01] Germany does not have a March disclosure deadline. [00:17:05] Their deadline is in, I believe, June. [00:17:08] It's like a bit of time to consume 24 geos. [00:17:12] But for the second half of the year, [00:17:13] obviously, [00:17:14] they will rapidly be losing value anyway, [00:17:17] because everything will just start expiring. [00:17:19] So that's kind of the last run out the door. [00:17:21] I don't think the market liquidity will be significantly high, [00:17:25] except for these regions, [00:17:26] for example, [00:17:27] in Estonia, [00:17:28] where you can buy guarantees of origin, [00:17:30] which are just about to expire and then have another six months where you can use them. [00:17:34] Like, [00:17:35] you know, [00:17:35] in those kind of arbitrage situations, [00:17:38] I think that kind of demand will stick around. [00:17:40] But it has limited use cases in the market. [00:17:42] I wasn't aware of this until you mentioned it recently. [00:17:44] Do you want to quickly go over that little like 12 to 18 months difference with [00:17:49] this sort of EU law? [00:17:50] Because that's the base, isn't it? [00:17:52] According to the Renewable Energy Directive, [00:17:55] guarantees of origin can be traded for up to 12 months. [00:17:58] 12 months is the limit for trading period. [00:18:01] That's like you can't have guarantees of origin that are tradable longer than that. [00:18:06] But you can, [00:18:08] however, [00:18:09] specify in your laws, [00:18:10] if you want, [00:18:11] up to a 18-month period from issuance where they can be used. [00:18:15] So that means for the last six months, [00:18:18] you can't transfer them off of your account, [00:18:20] but you can cancel them. [00:18:21] You can use them still. [00:18:23] Like that, there's like this sort of grace period. [00:18:25] But what that grace period allows you is if you are, [00:18:29] for example, [00:18:29] a major utility, [00:18:31] you can buy these 24 geos and keep using them on an ongoing basis for whatever you [00:18:36] need if the law doesn't tell you to do otherwise. [00:18:38] And I think that's like a major point of arbitrage. [00:18:41] I believe Italy changed their laws recently to also a law force. [00:18:44] That's been a kind of point of drama there. [00:18:48] What's your opinion on that? [00:18:49] Is that a good thing or is that a bad thing? [00:18:51] Personally, [00:18:52] I feel guarantees of origin from one production year at minimum, [00:18:57] what our law should say. [00:18:58] Same production year, same consumption year. [00:19:01] So like if you are consuming in 24, you're producing in 24. [00:19:05] 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.

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

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April 16, 2025

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August 5, 2025

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As Q3 unfolds, we analyze the evolving dynamics shaping the European Guarantees of Origin (GO) market while reviewing our Q2 predictions.This episode is based on our full in-app quarterly report available to Soldera members. You can also listen to this episode your favourite podcast platform here.

Looking Back at Q2 and Assessing Our Predictions

→ Market experienced prolonged decline before dramatic recovery in final weeks 📉
→ Prices bottomed at 40 cents before recovering to 80 cents, validating under-supply predictions
→ German June disclosure deadline created delayed market activity separate from March patterns 🇩🇪

We Need To Talk About Norway…

→ Q2 Episode correction: Total Norwegian GO consumption actually decreased year-over-year despite record cancellations.
→ Problematic government behaviour impacting the GO market intensifies 🇳🇴

Critical Supply Dynamics

→ Europe producing 8-9% less renewable energy than last year, creating 50 TWh deficit
→ Nordic hydro reserves normalizing after record-high levels, hot summer predictions threatening further decline ☀️
→ 2024 vintage GOs now in end-of-life phase as traders rotate inventory 🔄

Demand Outlook and Regulatory Shifts

→ CSRD scope reduction from 50,000 to 10,000 companies but targeting largest emitters 📋
→ Hydrogen RFNBO requirement relaxation lobbying could unlock hundreds of TWh demand
→ Corporate sustainability commitments remaining strong despite regulatory changes
→ Forward curve premiums moderating as regulatory uncertainty impacts long-term pricing 📈

Strategic Market Considerations

→ Forward markets showing 50% premiums for 2026 vintage as utilities hedge exposure 📊
→ Record-low oversupply reduction expected to significantly impact market dynamics
→ New government auctions emerging while market fragmentation challenges persist 🆕
→ Cross-border virtual GO accounts on the horizon at Soldera. Watch this space …

As always, stay connected with our quarterly market outlooks to track the GO landscape. Catch our next outlook in Q4!

#GuaranteesOfOrigin #RenewableEnergy #EnergyMarkets #Renewables

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit podcast.soldera.org

Transcript of the episode's discussion between Oliver Bonallack and Al William Tammsaar [00:00:04] Hey everybody, and welcome back to another episode of the Sardera Markets podcast. [00:00:09] This is actually one of our market outlook episodes. [00:00:11] So for those unfamiliar with the podcast, [00:00:13] every quarter we run an outlook on the guaranteed origin market and some of the [00:00:18] things that we think are most impactful. [00:00:20] The way we structure it is we take a look back at our predictions from the previous quarter. [00:00:23] So in this case, [00:00:24] we're going to be looking back at Q2 and then we move into discussing short-term [00:00:28] trends and long-term trends. [00:00:30] And the whole episode is based off the report that's available to Solitaire members. [00:00:34] So, yeah, it's great to be here with you, Al. [00:00:37] Let's just dive straight in. [00:00:39] Let's look back at Q2. [00:00:40] How did we do? [00:00:41] Our general impression was that the continuing under-supply or under-production in [00:00:47] the market would cause something to shift. [00:00:50] I think we eventually saw that, but we saw quite a long... [00:00:54] dip in prices. [00:00:55] I mean, [00:00:56] most of the last quarter was not necessarily the best to look at from a chart [00:01:02] perspective. [00:01:02] I mean, [00:01:03] we saw a long, [00:01:04] long trend downwards and kind of last couple of weeks of the quarter came in clutch [00:01:10] and recovered quite a lot of price that was lost. [00:01:13] So we bottomed out that I think it was around 40 cents and we're back at around 80 now. [00:01:19] Yeah, there's been a bit of, I wouldn't say dramatic price action, but [00:01:23] Easily like 30, 40 cent gains, right? [00:01:25] Which isn't bad. [00:01:26] I don't think necessarily the bearishness in the market was that justified to begin [00:01:31] with, [00:01:31] as we discussed, [00:01:32] I think, [00:01:33] in the last episode as well. [00:01:34] But I think we are seeing the outlook improve significantly now that people are [00:01:40] realizing what this year is shaping up to be. [00:01:42] Though I would like to also issue a correction at the start of this episode. [00:01:47] Last time we talked about Norway actually canceling a lot more geos in the last [00:01:52] calendar year than the previous one. [00:01:54] While this was correct, it wasn't the complete full picture. [00:01:58] And now that we have the residual mixed data and we have the full picture of [00:02:02] everything, [00:02:02] we do know that Norway actually ended up consuming less guarantees of origin than [00:02:07] last year. [00:02:08] which is frustrating and annoying. [00:02:10] And then you look at what their government has been doing and it's even more [00:02:14] frustrating and annoying. [00:02:15] I think that's a new record for us being sidetracked by talking about Norway. [00:02:18] It's been two minutes and 41 seconds. [00:02:20] But you have to keep in mind, [00:02:23] like the guarantees of origin market is driven by primarily two factors, [00:02:27] the biggest exporter and the biggest importer. [00:02:30] So the biggest exporter is Norway. [00:02:32] They make up like one fourth of the total exports in the market. [00:02:36] And the biggest importer is Germany, [00:02:38] which makes up significantly more than one-fourth of the imports. [00:02:42] So all of these factors together, [00:02:45] those are really the countries you need to keep your eye on in order to understand [00:02:49] how the supply and demand dynamics are shaping up. [00:02:52] And what we have seen from Norway recently is a ramping up of the rhetoric of, [00:02:58] hey, [00:02:59] our grid is so green, [00:03:00] guys, [00:03:00] our electricity is so green. [00:03:04] We don't really want to leave the guarantees of origin system, [00:03:08] but we just want to degrade it while we make money off of it. [00:03:11] So the current approach that we've kind of been running is, [00:03:14] hey, [00:03:14] all of our local companies, [00:03:16] please just look at grid averages. [00:03:18] Just look at grid averages. [00:03:19] It's fine. [00:03:19] Like we're producing so much renewable energy. [00:03:22] Yeah, [00:03:22] producers, [00:03:23] if you want to sell guarantees of origin elsewhere, [00:03:26] we don't really use them internally. [00:03:29] If you have to, for some other compliance reason, you can do it. [00:03:33] But we won't make you. [00:03:34] It's fine. [00:03:35] On emissions accounting, you can use the... [00:03:38] grid averages while everybody else uses the market-based one. [00:03:41] So functionally, [00:03:43] they are really lobbying hard for making the most money out of the system, [00:03:49] destroying the system, [00:03:51] actively working against the system that's making the renewable energy producers [00:03:55] money. [00:03:55] It's like institutionalized double accounting, right? [00:03:58] But my question is, why does everybody else allow it to happen, right? [00:04:01] It's a very good question. [00:04:03] And honestly, that's the frustrating thing about how the market works. [00:04:07] Ultimately, it is a sort of political construct. [00:04:10] So while we do have the AIB, [00:04:13] the Association of Issuing Bodies, [00:04:15] who should be the watchdog and the police for these kind of things, [00:04:18] I mean, [00:04:19] they do have rules about these kind of things. [00:04:21] It doesn't feel like they're particularly well equipped to deal with this kind of [00:04:26] an approach or to police really this kind of behavior. [00:04:30] Because ultimately what this is packaged as is sort of like a political position. [00:04:34] Guarantees of origin in the Norway government opinion is just for consumer disclosure. [00:04:39] So if you have a consumer and they want basically renewable energy into their [00:04:43] house, [00:04:43] like, [00:04:44] you know, [00:04:44] then you can do it. [00:04:45] But if it's a corporation, no, no, no, whatever. [00:04:48] It's fine. [00:04:49] Like, don't think about it too hard. [00:04:52] But is this messaging actually quite explicit by the Norwegian government? [00:04:55] Like if we looked it up, we'd have to find it. [00:04:57] Oh, yeah. [00:04:58] So they recently issued a press release. [00:05:02] But what the press release essentially said was that they plan on even lobbying [00:05:06] other governments now to make location-based emissions reporting more common and [00:05:13] that they will push for it more. [00:05:15] So we are seeing this kind of a movement, which is frustrating, to say the least. [00:05:22] So what the press release is titled is New Measures to Preserve Norwegian Renewable [00:05:27] Energy as a Competitive Advantage for Businesses. [00:05:30] What that essentially internally says is that we think location-based emissions [00:05:34] reporting is really dope, [00:05:36] but because we don't really want our producers to stop making money off of selling [00:05:41] the renewable attributes, [00:05:44] we'll just have both at the same time and just degrade the system. [00:05:49] Yeah, that's the thing. [00:05:50] It's like if they were totally full location based and the criticism of market base [00:05:54] came with the acknowledgement that they were going to leave and they don't want to [00:05:57] deal with it anymore, [00:05:58] then that would be fine. [00:06:00] No, that's a very reasonable. [00:06:02] Exactly. [00:06:02] That would be a very reasonable thing to do. [00:06:04] Just like leave the system. [00:06:06] You can like very credibly make claims about your renewable energy now. [00:06:09] Like there's no double counting issues. [00:06:11] Everything solved. [00:06:12] It's very green. [00:06:12] But up until they do that... [00:06:14] They're currently playing both games at the same time and it's to the detriment of [00:06:19] everybody else playing this. [00:06:21] Yeah, guys, we need to talk about Norway. [00:06:23] Let's make that a trend. [00:06:24] I'm going to make an article with the title. [00:06:27] Yeah, guys, we need to talk about Norway. [00:06:30] We need to talk about Norway. [00:06:31] Obviously, you mentioned looking at Germany. [00:06:33] Did that have a role to play in the sort of price action that we've seen so far? [00:06:37] Yeah, [00:06:37] so one of the important things you need to understand about Germany is that while [00:06:42] everybody else for their 2024 energy disclosures, [00:06:46] so essentially like what percentage of guarantees of origin did they use, [00:06:50] like where did the energy come from, [00:06:53] all of this. [00:06:53] So most places do this by end of March. [00:06:56] So... [00:06:58] March is the deadline. [00:06:59] End of March, they have a pretty clear picture. [00:07:02] Somewhere in April, things start getting a bit clearer. [00:07:05] In May, things are rather clear. [00:07:08] And essentially, we have an idea of what's happening. [00:07:11] But the thing is, Germany... [00:07:14] Germany's disclosure deadline for 2024 is actually in the end of June. [00:07:19] So that's very unusual. [00:07:21] They have this separate time schedule for how everything plays out. [00:07:25] It used to be, I think, even later into the year, they've moved it up. [00:07:28] It's in the middle of the year. [00:07:30] And it's kind of awkward from that perspective. [00:07:33] Because, well, they just have a different schedule of things. [00:07:37] And this ultimately means that you see more market activity from the German energy [00:07:42] market somewhere in June. [00:07:44] instead of seeing it with the rest of the market somewhere in March. [00:07:48] Is the fact that this deadline is different, [00:07:49] does that have anything to do with the fact that Germany is the biggest consumer? [00:07:52] Or is it just purely coincidental? [00:07:54] I think that's coincidental. [00:07:56] Germany has pretty reasonable systems in the sense of you can't use 2024 GOs for [00:08:03] 2025 consumption. [00:08:06] So they have that yearly matching system happening that many countries don't. [00:08:11] Generally, like a lot of the market activity, you'd expect to be around the 2024 GOs as well. [00:08:18] But what we did see is that utilities and consumer-facing electricity providers [00:08:25] also hedged their bets and just made sure that they're protected against the market [00:08:28] movements. [00:08:29] Because ultimately, [00:08:30] what we're seeing this year is that we, [00:08:32] in Europe, [00:08:33] have produced somewhere between 8% to 9% less renewable energy so far than we [00:08:39] produced last year up to this time frame. [00:08:41] So we are around 50 terawatt hours behind right now. [00:08:45] That's interesting. [00:08:46] And I think... [00:08:47] It's a sticky place to be when you're in an environmental commodities industry like [00:08:52] EACs, [00:08:52] because if your revenue relies on EACs being higher in price, [00:08:59] then it's a bittersweet feeling when renewable production is less. [00:09:03] But at the same time, you remember that this tool is designed to be elastic, right? [00:09:07] The reason the price is high is because you want to incentivize renewable production. [00:09:10] So we all have a stake in making sure these markets work efficiently and correctly. [00:09:15] Yeah, exactly. [00:09:16] From the perspective of a new producer coming in, [00:09:20] the funny thing about renewable energy production is that when the sun is shining, [00:09:24] the sun is shining to all of your neighbors as well, [00:09:27] right? [00:09:27] Like ultimately, [00:09:28] if you have solar panels, [00:09:30] solar panels have this tendency of what's called cannibalizing the demand. [00:09:35] So essentially, everybody's all trying to service the same demand. [00:09:38] So ultimately, there do come these like hard limits of [00:09:43] okay this is about as much renewable energy production of that kind that can exist [00:09:48] in this area before we have good options of storing this uh storing this [00:09:54] electricity and batteries right yeah in in some sort of storage solution i mean you [00:10:00] mentioned it was very sunny in estonia i think a week ago and you said uh you know [00:10:03] electricity is basically free right like yeah crazy [00:10:09] Yeah, essentially, in Estonia, I have this joke of like, oh, look, the sun's shining. [00:10:14] That means electricity is like 100% free. [00:10:17] Turn on your AC, like everything's fine. [00:10:19] The situation we're in, [00:10:21] in like many areas of the world, [00:10:23] and I think this somewhat plays a role in also why we're seeing a bit of less [00:10:29] production than we were seeing last year. [00:10:32] Obviously, there's a lot of factors to this, actually. [00:10:34] Part of this is that even on hydro, [00:10:36] we've been underproducing last year's levels, [00:10:39] which I think to many was perhaps unexpected because of how full we've seen the [00:10:47] Scandinavian hydro reserves be for the last year. [00:10:52] They've been significantly above average fields. [00:10:55] But now they're coming more down to this average. [00:10:59] We're 5% above historical averages at this point, which isn't. [00:11:02] And at the same time, [00:11:04] the prediction is we're heading into a very dry, [00:11:07] very warm, [00:11:09] very hot summer. [00:11:11] So all of these things together, [00:11:13] we're expecting hydro production to be down compared to last year. [00:11:17] We're expecting that reserves to get eaten away at a bit more. [00:11:23] And the whole picture altogether is that we're expecting renewable energy [00:11:28] production to lag behind last year's levels this year, [00:11:32] which does have positive impacts on the guarantees of origin market in the [00:11:37] bittersweet way you described before. [00:11:39] But my understanding about hydro in Norway is it's not the entire country that gets analyzed. [00:11:43] And you have to look at also the distribution, right? [00:11:46] Am I correct in thinking that? [00:11:47] Yes. [00:11:47] So a lot of these reserves are currently in the northern parts of Norway. [00:11:53] So the southern parts aren't nearly as full, to my understanding. [00:11:57] So Norway has multiple bidding zones, so electricity prices in general. [00:12:02] And because of that, the dynamics are a bit different since... [00:12:06] there is a long distance the electricity needs to travel to get to where it needs [00:12:11] to go that affects the unit economics of it that affects how reasonable it is to [00:12:16] actually start emptying your reserves deep in northern Norway if demand is coming [00:12:22] somewhere in a very southern part of the country or perhaps even [00:12:29] moving through the transmission lines down to mainland Europe, [00:12:34] you know, [00:12:35] these central European countries. [00:12:38] Now let's talk about demand, right? [00:12:40] I mean, we've just gone over all of the things that are impacting supply in the short term. [00:12:44] Where do you see demand going? [00:12:46] So one of the things that we need to keep in mind is that we're now entering this [00:12:51] period of time where trading volumes are generally a bit lower. [00:12:54] There's just less parties trying to sell their supply. [00:12:57] There's less parties buying that supply. [00:13:00] There's just less activity in the market. [00:13:02] And that's not necessarily bad. [00:13:05] That's not necessarily good. [00:13:07] It just means that we can expect to see a bit more volatility as the liquidity is lower. [00:13:13] So there's less parties trying to buy and sell. [00:13:16] That means at any point in time, [00:13:17] finding the right buyer, [00:13:19] finding the right seller that's willing to do something at a certain price, [00:13:22] it's lower. [00:13:23] So because of that, [00:13:24] we might see a bit higher swings in the market in either direction during this [00:13:29] time. [00:13:30] But what we are seeing... [00:13:32] Yes. [00:13:33] But what we are seeing is that because there's so much uncertainty about how the [00:13:38] rest of the year is going to play out, [00:13:40] and this is going to be one of these years, [00:13:43] by all indicators we're looking at, [00:13:45] this is going to be one of these years where we have a record-lowering [00:13:50] of the general oversupply that we have in the guarantees of origin market. [00:13:55] The guarantees of origin market historically quite oversupplied. [00:13:58] There's like hundreds of terawatt hours of guarantees of origin that just [00:14:02] essentially get rolled over in a very [00:14:06] complicated way. [00:14:07] But this is going to be one of these years where we actually chip into that quite significantly. [00:14:13] And I think that's going to be a very positive development. [00:14:16] What we do see is that there's a lot of uncertainty on demand side of where the [00:14:20] prices are going to go because of this. [00:14:22] And because of that, [00:14:23] we might see a bit higher interest in hedging their bets and making sure that [00:14:29] they're not caught out in [00:14:31] If there is more liquidity contraction and people get a bit more spooked and [00:14:35] worried that there isn't the right guarantee of origin for them available at the [00:14:41] time where they finally need it. [00:14:42] So just to summarize, July and August are pretty much always typically super low volume. [00:14:47] And now that's kind of compounded by the fact that all of the compliance related [00:14:50] deadlines are behind us. [00:14:52] Yes. [00:14:53] So we're essentially working towards the 2025 compliance deadline now instead of [00:14:59] the 2024 one, [00:15:01] which we've been doing so far. [00:15:02] In the guarantees of origin market, [00:15:04] you can use guarantees of origin for last year's consumption a bit later than the [00:15:10] end of the year. [00:15:11] So there's this couple of months at the end where you usually do all of the market [00:15:15] activities that you still need to do. [00:15:17] That time is now over. [00:15:18] The market has done this already, and now we're looking towards the future. [00:15:23] So we're thinking about 2025 compliance. [00:15:26] What's going to happen when we have the next compliance deadline? [00:15:29] Do we have all of the guarantees of origin we'll need? [00:15:32] Are we properly spread out in terms of our risk? [00:15:36] Are we hoping too much that the prices will be a certain way once it reaches that point? [00:15:41] Or do we want to deal with part of that question right now? [00:15:45] And when it comes to 2025 vintage positioning, does that usually happen around Q4? [00:15:50] That happens generally around Q4, [00:15:53] but we do see that activity happen all across the year, [00:15:56] actually. [00:15:58] So you usually see the current vintage really come into its own and really take [00:16:03] over the spot trading activity exactly after all of these compliance deadlines have [00:16:07] passed. [00:16:07] Going to generally expect the 2024 vintages to now start [00:16:11] They're going through their end of life procedure where people just try to get rid [00:16:16] of them at whatever price possible because they are going to expire soon. [00:16:19] At some point, you're just not going to be able to trade them anymore. [00:16:22] You're going to want to get them out of your inventory. [00:16:24] You're going to want to rotate it. [00:16:26] Okay, nice. [00:16:26] So I think a topic that we first saw in our last market outlook was the kind of [00:16:30] discussion around new use cases for Geos, [00:16:33] especially with like state qualification for aid and subsidy. [00:16:36] I think Italy was a good example of that. [00:16:38] Has anything changed in that sort of area? [00:16:40] Well, [00:16:40] we still continue to see this development of certain subsidy schemes that you can [00:16:46] only benefit from if you are using some percent of renewable energy. [00:16:50] So there are quite a couple of countries that have some sort of this subsidy scheme [00:16:57] for their industries. [00:17:00] So that's definitely continuing. [00:17:02] But on the other hand, [00:17:03] we do need to keep in mind that on the European Union level, [00:17:07] the discussions on CSRD aren't necessarily very bullish for the guarantees of [00:17:12] origin market, [00:17:12] which is also why I think we don't see such a highly pronounced forward curve as we [00:17:18] did perhaps at some point. [00:17:20] Like, [00:17:21] if you try to sell 2026 or 2027, [00:17:25] the difference between those is going to be a bit less, [00:17:28] I think, [00:17:29] than we saw previously in terms of how this premium was getting priced in. [00:17:34] Interesting. [00:17:34] Because there is uncertainty. [00:17:36] There's a bit of uncertainty of how fast the demand is going to grow. [00:17:40] Because... [00:17:41] The discussions that we're seeing right now are going to limit the scope of how [00:17:46] many companies actually have to do all of the CSRD reporting. [00:17:50] And that's getting delayed. [00:17:52] That's getting renegotiated. [00:17:56] What's getting put into those reports is getting renegotiated. [00:18:00] It's getting streamlined. [00:18:01] So a lot of these discussions are happening right now. [00:18:04] There's nothing final. [00:18:06] But we do see... [00:18:07] what feels like an inevitable conclusion that CSRD is going to get weakened to some extent. [00:18:14] And what it looks like right now is that we're going to see significantly less [00:18:18] companies overall having themselves to comply with this. [00:18:23] But it's not all doom and gloom. [00:18:26] And I'd like to explain why it's not all doom and gloom. [00:18:29] So when you are one of these large corporations that has to do emissions reporting, [00:18:33] you generally have to force that down your supply chain to some bigger or smaller [00:18:39] degree. [00:18:40] As a consequence of that, [00:18:41] if you're a very large corporation, [00:18:44] even if you don't fall under the CSRD requirement, [00:18:47] you still might have... [00:18:49] kind of upstream from you organizations that do have those requirements and then [00:18:54] demand that you follow them to some extent as well. [00:18:57] I think we're going to take a big loss when it comes to transparency on these kind of things. [00:19:03] I don't know if we're necessarily going to see that big of a loss in terms of demand. [00:19:07] We'll see. [00:19:08] Do we have the numbers? [00:19:09] I think last time we spoke about CSRD, we understood... [00:19:12] what was at stake, right? [00:19:13] We had the kind of speculation on the timeline purely because things moved through [00:19:17] the EU at the speed of government, [00:19:19] as we like to say. [00:19:21] But yeah, did you know the numbers? [00:19:23] Yes, [00:19:24] we have seen some numbers which essentially have estimated that while right now, [00:19:30] the expectation is that around 50,000 companies need to do CSRD reporting. [00:19:37] That number is going to get cut down to around 10,000. [00:19:40] So that's an 80% reduction in scope. [00:19:43] But it is going to keep affecting the largest, biggest organizations. [00:19:47] So these would be over 1,000 employees and over 450 million euros in turnover. [00:19:55] So the threshold is quite high because previously the lowest bar was 250 employees [00:20:02] or 40 million euros of turnover. [00:20:06] So the general scope is going to go down. [00:20:09] But I don't think that's necessarily the end of the world. [00:20:13] It is just a bit disappointing. [00:20:17] Yeah. [00:20:17] I mean, I'd like to reiterate the point. [00:20:19] I think I made it in the last episode as well. [00:20:21] It's like one of the benefits of reducing the scope is you then, [00:20:25] I mean, [00:20:25] if the political willpower is there, [00:20:27] you have a much more tightly defined category of the people who you already know [00:20:30] are the biggest emitters, [00:20:31] right? [00:20:31] Especially if they're the largest companies. [00:20:33] So if there is the willpower to, [00:20:35] you know, [00:20:35] make more use cases for Geos, [00:20:37] then it's easy to apply it without also affecting the small guys as well. [00:20:41] Yes, that is true. [00:20:45] I think also we really need to keep in mind that the CSRD does also deserve some [00:20:50] level of simplification. [00:20:52] I mean, [00:20:53] it's thousands of data points that from a compliance perspective, [00:20:56] I don't think it's necessarily in the most reasonable state right now. [00:21:01] I think it's a lot of work and I'm not necessarily sure everything that's being [00:21:05] collected is even useful for anyone particularly. [00:21:08] Do you want to give context on the amount of CSRD data you've been looking at yourself? [00:21:16] The funny thing is that we have somebody internally working on analyzing CSRD data, [00:21:20] and it's so non-standardized that we can't manage to throw everything into a single [00:21:26] structure, [00:21:26] even though it's almost prescribed on a EU level. [00:21:31] Not everything is as standardized and as specific as you might expect, [00:21:35] but there are hundreds, [00:21:40] if not thousands of data points, [00:21:42] and not all of these are even quantitative. [00:21:46] Some of these are qualitative, so they're just like subjective, not measured things. [00:21:51] They're just like, here's what we're doing about it. [00:21:56] All right, let's move on to talking about hydrogen. [00:21:59] So hydrogen, [00:22:00] I think we've had, [00:22:00] we've discussed it in the past from the standpoint of the criteria and how it [00:22:05] relates to guarantees of origin. [00:22:06] We haven't been too happy about, but it's been looking up, right? [00:22:08] So what do you think? [00:22:10] Yeah, I'm happy where this is going. [00:22:13] I guess we'll see how this plays out. [00:22:15] But there has been lobbying to relax these RFNBO requirements. [00:22:22] So previously, [00:22:23] we've discussed the fact that if you want to have green hydrogen, [00:22:27] it needs to be in the same neighborhood. [00:22:29] It has to be... [00:22:32] basically proven additional demand it has to be timed in like one hour increments [00:22:40] it has to have like a whole lot of things that the market is just not capable of [00:22:45] supporting in any meaningful way right now [00:22:48] on like a measurable level. [00:22:49] We just don't have the technological infrastructure to support this and there's no [00:22:53] ambition to create it. [00:22:55] So we're kind of in this strange state and there is some lobbying on the EU [00:23:00] parliament level of loosening these constraints and just having it be more [00:23:05] reasonable so you could actually buy guarantees of origin, [00:23:09] use them for the purposes of creating green hydrogen. [00:23:13] with less complex accounting around it because I don't think the current state is [00:23:19] something that the market is just able to support even as best effort. [00:23:24] It feels like something put together by a consultant who I'm sure had the best [00:23:29] intentions, [00:23:30] but the reality of things is if you are expecting things to move at the speed of [00:23:34] government, [00:23:34] you have to be pragmatic around where do you set the goalposts [00:23:41] And how do you make sure that goalposts can even be reached in a reasonable time? [00:23:45] Because if it is like, [00:23:46] hey, [00:23:46] we have this nice goalpost, [00:23:48] hey, [00:23:48] look at how nice the goalpost is, [00:23:49] but the goalpost is so far away, [00:23:51] you can't even see it, [00:23:52] then, [00:23:52] you know... [00:23:54] Who cares? [00:23:56] What is it going to do for you? [00:23:57] And I think you don't even have to be tapped into energy or even really [00:24:02] sustainability to understand the hydrogen. [00:24:04] It's been underwhelming. [00:24:05] And I think anyone can tell you that, even if they're not in the industry. [00:24:10] But the hope is, [00:24:11] if it does end up getting relaxed, [00:24:13] that can be quite a significant driver of guarantees of origin demand over time. [00:24:21] Especially as we figure out how to use these extremely low renewable energy prices [00:24:27] during certain parts of the day and actually take advantage of that more and [00:24:31] stabilize the grid. [00:24:33] I think that's a very positive outcome that we can have from hydrogen. [00:24:38] But, you know, we'll see. [00:24:39] Any ballpark figure for the demand increase, do you think? [00:24:44] Mm-hmm. [00:24:47] We've seen estimates going to hundreds of terawatt hours a year. [00:24:53] That's the best I can do. [00:24:56] Honestly, at this point, it more feels like tea leaf reading. [00:25:00] Honestly, hundreds of terawatts works for me. [00:25:03] You can stop talking now. [00:25:04] We'll leave it there. [00:25:05] Yeah, let's go for hundreds of terawatts. [00:25:07] If by 2030, [00:25:08] we'll have hundreds of terawatts of geo demand just coming from hydrogen, [00:25:12] I'd also be incredibly happy. [00:25:15] Yeah. [00:25:16] I think something to understand about the EU is that you have these high-level [00:25:19] directives and then things get transposed into national law and national policy, [00:25:24] right? [00:25:24] But as I understand, [00:25:27] you've identified that there's a divergence in certain national policies that's [00:25:31] impacting long-term [00:25:33] your, your kind of your opinions on the market. [00:25:37] It's complicated, right? [00:25:38] Because, [00:25:38] uh, [00:25:39] I, [00:25:39] I mean, [00:25:39] one of the interesting things that we did see at some point, [00:25:42] uh, [00:25:42] in this last quarter was, [00:25:44] uh, [00:25:44] French guarantees of origin got like an incredible premium on the market at some [00:25:48] point. [00:25:48] And then I, [00:25:49] uh, [00:25:50] I, [00:25:50] I've never looked too deep into the French, [00:25:52] uh, [00:25:53] geo market, [00:25:53] but then I found out that they actually have monthly, [00:25:56] uh, [00:25:56] matching when it comes to demand and supply. [00:25:59] Uh, so, uh, [00:26:01] I mean, [00:26:02] there are so much more reasonable ways of using guarantees of origin that I think [00:26:07] governments should adopt. [00:26:08] And on one hand, [00:26:10] we're seeing Norway go like, [00:26:12] no, [00:26:12] no, [00:26:12] we just use location-based and everybody else can count their renewable energy [00:26:16] against our geos and everybody's happy, [00:26:18] right? [00:26:19] While in Germany, we have this logic of, no, we need to go harder. [00:26:25] We need to do more. [00:26:26] We need to electrify faster. [00:26:28] We need to move our industry into using renewable energy. [00:26:32] We need to actually take advantage of the electricity prices, [00:26:35] and we need to make sure that we have the infrastructure to actually use what we're [00:26:40] putting out there, [00:26:40] right? [00:26:42] So I think there are multiple different ways governments are approaching this. [00:26:45] And personally, [00:26:46] I really just hope that on an EU level, [00:26:48] somebody gets the guts to just propose like, [00:26:51] no, [00:26:51] like 2024 geos for 2024 demand, [00:26:55] 2025 geos for 2025 demand. [00:26:57] That would be so reasonable. [00:26:59] I think we're going to reach a tipping point where it has to happen. [00:27:02] Speed of government. [00:27:03] Yeah, speed of government. [00:27:06] Like I'm not holding my breath. [00:27:08] I would suffocate. [00:27:10] I'm hopeful. [00:27:13] I am legitimately hopeful, [00:27:15] but these things take so long that it's like a generational timescale kind of [00:27:22] activity more than anything. [00:27:25] It's interesting you mentioned auctions because we haven't actually touched on [00:27:28] auctions this episode so far. [00:27:30] I think some context for listeners is that whilst you also have private entities in [00:27:35] the geo markets, [00:27:36] they coordinate auctions, [00:27:37] Sardar being one of them. [00:27:38] You also have governments, right? [00:27:39] And they get involved and they do things very differently. [00:27:42] Some of them said, [00:27:43] price floors that they're unwilling to go below and they try and control it. [00:27:47] And you also have governments who divvied up by region. [00:27:50] So you touched on France, [00:27:52] but it'd be nice if you can expand on how you see governments impacting trends more [00:27:55] broadly and how people who are interested in analyzing the geo market can kind of [00:27:58] look at government auctions. [00:28:00] Yeah. [00:28:00] So the French auction is, [00:28:02] I think, [00:28:02] one of the most reliable in the market in terms of they move nice, [00:28:07] good amounts of volume. [00:28:09] The last auction... [00:28:11] was a very good indicator. [00:28:14] For example, they put a lot of terawatt hours onto the market. [00:28:18] The market responded positively. [00:28:20] Prices actually ended up going up. [00:28:21] There was more buying interest. [00:28:23] There was more trading interest. [00:28:25] At the same time, we have another relatively big auction, which is the Italian one. [00:28:30] But the Italian one just feels like a problematic series of events that never seem [00:28:37] to play out just how they are expecting it to. [00:28:41] They set price floors that make the auction fail at least partially. [00:28:45] They go like, no, no, I'm not selling you any of my expiring geos. [00:28:48] Like, these are premium expiring geos I'll have, you know. [00:28:51] They're going to... [00:28:53] I would rather have him expire than you give me a couple of sets. [00:28:56] Yeah. [00:28:56] So we have seen like an unreasonable amount of guaranteed version end up actually [00:29:03] just dying from that. [00:29:05] So what does their residual mix look like in Italy? [00:29:07] Is there significant amounts of expired geos that go into there making it renewable? [00:29:12] That's a good question. [00:29:13] I don't have the residual energy mix in front of me right now. [00:29:18] You do also need to keep in mind that it does get spread out over the market a bit more. [00:29:23] Okay. [00:29:24] Due to just how everything moves around in the market. [00:29:27] So the residual energy mix does take into account how the geos are moving in and [00:29:32] out of the market. [00:29:33] But... [00:29:36] The thing about Italy specifically is that they ended up being a net importer, [00:29:40] I think, [00:29:41] as perhaps a market surprise to everybody, [00:29:44] mostly because of just how their options were unable to fill out the demand that [00:29:49] was in the market. [00:29:51] Gotcha. [00:29:53] All right, [00:29:54] so now onto the kind of second part of our long-term market drivers, [00:29:58] which we kind of call like the structural demand growth. [00:30:02] So that kind of looks at things like corporate momentum. [00:30:05] So yeah, why don't we start there? [00:30:07] We touched on CSID a little bit, [00:30:09] but you think there's kind of broad implications for Scope 2 that are happening? [00:30:13] Yes. [00:30:14] So what we have seen in CSRD reports, [00:30:18] now that we're out, [00:30:18] now that we can read them, [00:30:20] we have been processing them on our own as well. [00:30:24] I think the podcast might get an episode soon about the results, actually. [00:30:29] But we've been analyzing the CSRD reports. [00:30:33] We've seen other organizations analyzing them. [00:30:36] And the reality is that a lot of them are using Guarantees Origin. [00:30:39] It's pretty clear and explicit from the data. [00:30:44] So we're quite happy to see that. [00:30:47] We're quite happy to see their disclosed targets on climate. [00:30:52] And we don't necessarily see those commitments significantly reversing over the [00:30:58] next couple of years. [00:30:59] So demand in 2024 was up. [00:31:04] CSRD reports clearly show guarantees of origin usage and PPA usage and actual [00:31:12] interest by corporations of using renewable energy. [00:31:17] That's generally, [00:31:18] I would say, [00:31:19] positive, [00:31:20] even though you do have to keep in mind that these CSRD requirements are being [00:31:24] weakened a bit and that will have some sort of an impact. [00:31:26] I just don't think it will have as big of an impact as people assume it will. [00:31:31] Yeah, it's so interesting. [00:31:33] This could go either way, right? [00:31:34] So, [00:31:34] I mean, [00:31:35] I'm leaning towards agreeing with you that CSOD isn't as necessarily as [00:31:40] catastrophic as people think it is with the changes. [00:31:42] Yeah, exactly. [00:31:44] Because it gets passed down the supply chain. [00:31:46] Ultimately, that's what it comes down to. [00:31:49] There's quite an aggressive push in the whole supply chain of doing something about it. [00:31:54] And you ultimately see that materialize in various ways. [00:32:00] Many of them just being, hey, let's electrify more of our industrial process. [00:32:04] Let's get some more furnaces. [00:32:06] Let's get some electrolyzers. [00:32:08] So it's kind of like a cascading effect, right? [00:32:10] Down the supply chain. [00:32:12] Okay, so finally, and I'm sure lots of people are waiting for this, forward markets. [00:32:17] We spoke a little bit about how you think that 2026 and 2027 might not perform as [00:32:23] well as we have seen them do in the past. [00:32:25] Is that the forward curve declining? [00:32:26] What do you think is happening? [00:32:29] So the forward curve is still pretty strong in the sense of 2026 geos are valued at [00:32:36] 50% premium above 2025 geos right now. [00:32:40] So there is a willingness to lock in that certainty for next year for a lot of organizations. [00:32:47] And I think we're just looking at the general price right now and going like, [00:32:50] well, [00:32:50] this isn't that bad, [00:32:52] right? [00:32:54] you'd lock in 1.5 euros if your expectation is that it might go up to 3 or 4. [00:33:00] On the other end, [00:33:01] from a producer perspective, [00:33:03] you'd lock in 1.4 euros if your expectation is that it might go to zero. [00:33:07] But there is a pretty healthy supply and demand dynamic that's giving a relatively [00:33:14] good premium over the spot prices for 2026 right now. [00:33:17] And we're seeing a small premium on top of that for 2027, [00:33:21] a smaller premium even than that for 2028. [00:33:25] But the near future kind of forward purchases of 2026 seems to be the sweet spot of [00:33:31] you get a pretty significant premium for that compared to spot prices. [00:33:36] And the market does seem to be pricing in an expectation that this oversupply will get better. [00:33:44] that there will not be this much circulating infinite supply in the market for [00:33:50] older vintages as time goes on. [00:33:53] Is it worth talking about the demographics of who's actually interested in forward markets? [00:33:58] My understanding is it's mainly utilities who are trying to hedge their future [00:34:04] potential positions. [00:34:06] Part of this is utilities. [00:34:09] Utilities is definitely a big part of it, [00:34:11] because you have to keep in mind that all of these utilities selling consumer [00:34:15] products, [00:34:16] such as we bring renewable energy to your home, [00:34:19] they don't necessarily follow the market price when it comes to what they charge [00:34:24] for that service, [00:34:25] right? [00:34:25] They don't say like, [00:34:26] oh, [00:34:26] guarantees of origin were like one euro today, [00:34:30] so we're going to charge you one euro and 10 cents. [00:34:33] They're more likely going to be like, [00:34:35] yeah, [00:34:36] this is a service that costs five euros per megawatt hour. [00:34:40] It's what we're offering, take it or leave it. [00:34:43] If you're a consumer, that's what it costs. [00:34:47] And ultimately, [00:34:48] because of that, [00:34:49] they do want to spread this out a bit more and make sure that they can hold on to a [00:34:55] healthy premium on what they're doing over there. [00:34:58] So... [00:34:59] The renewable part of the renewable energy package that they're selling, [00:35:04] it does lend itself quite well to just making sure that they're hedged and averaged [00:35:10] out enough that whatever price they're offering the service at, [00:35:13] they make money off of it. [00:35:16] So you're saying that even at like 50% premiums, [00:35:20] they're looking at it and they're thinking, [00:35:21] well, [00:35:22] this still works for us because it's worse than, [00:35:25] I mean, [00:35:25] it's better than there not being any supply available when we need it. [00:35:28] Yeah, exactly. [00:35:29] It's better than being in a situation where there's a price shock, [00:35:33] there's some sort of a liquidity squeeze, [00:35:35] and hey, [00:35:35] look, [00:35:36] suddenly you're not making money off of selling renewable energy. [00:35:40] A lot of these packages aren't priced based on some sort of a market price, [00:35:45] because in the geomarket, [00:35:47] everything's so over the counter that there's not necessarily that kind of a thing [00:35:52] available to everybody at any given moment, [00:35:54] right? [00:35:56] So from that perspective, [00:35:58] you just want to make sure that you're making money off of the renewable energy [00:36:01] that you do so. [00:36:02] And that comes down to making sure that you have your supply and demand locked in. [00:36:07] I think the final forward market signal is kind of like this infrastructure evolution. [00:36:13] You're going to have to lead on that one. [00:36:14] Because when I hear infrastructure evolution, [00:36:16] I hear another long conversation about granularity that nobody needs to hear again. [00:36:20] No, we're not talking about granularity this time. [00:36:25] But we are seeing a couple more governments come out with their own auctions. [00:36:31] I think Bulgaria is one of them. [00:36:33] There are a couple more auctions coming into the market. [00:36:36] Yeah. [00:36:37] I'm happy always to see these kind of things. [00:36:39] I don't think they all necessarily will end up working, [00:36:42] but if we do see some increased liquidity, [00:36:45] I'm happy with that. [00:36:46] And there's just more venues. [00:36:49] And I'm not sure if more venues is necessarily what we need, [00:36:52] but that seems to be where things are heading. [00:36:54] While at the same time, at Soldera, we're... [00:36:56] more focused on making sure everything's interoperable and you can move things [00:37:00] around and you can get it from one country, [00:37:03] use it in another, [00:37:04] make everything super streamlined, [00:37:06] make everything very convenient. [00:37:09] So that's generally where we see the market going. [00:37:11] While there are these kind of menus that fragment things, [00:37:15] we are trying to work exactly in the opposite direction. [00:37:18] We want to make sure everything's nice and interoperable, easy to access, easy and convenient. [00:37:25] extremely well I think it's not that the new venues are trying to fragment things [00:37:29] it's the fact that there are new venues all the time that is the fragmentation in [00:37:33] itself right yes exactly like that's a consequence of them seeing that the market [00:37:39] is what it is but the reality of it is that the [00:37:43] the market is in this shape for a reason. [00:37:46] And the reason ends up being that the liquidity is weird over here. [00:37:49] Like a guarantee of origin for one organization might be worth a different amount [00:37:54] to another sometimes. [00:37:56] The exchange kind of model gets a bit complicated to manage. [00:38:02] you need the right buyer in the right place at the right time to make those kind of [00:38:05] things work. [00:38:06] And they necessarily, [00:38:08] the right seller and the right buyer are not necessarily on the same venue at the [00:38:11] same time in this market. [00:38:14] Gotcha. [00:38:14] Gotcha. [00:38:16] Well, [00:38:16] we usually wrap up talking about forwards and how Solera can help people who are [00:38:19] interested in forwards. [00:38:21] But you also just spoke a little bit about now about virtual accounts and kind of [00:38:25] our long-term plans. [00:38:26] So I don't know, which of those two features would you like to just quickly promote at the end? [00:38:31] Yeah, so we can talk a bit about our future plans right now. [00:38:35] One of the things that we're actively working on is making sure that if you need [00:38:41] registry services in one country and you need to cancel something in one country or [00:38:47] another and you need help or services with that, [00:38:50] we're actively... [00:38:52] working on solutions to service you, to make it very easy and simple for you. [00:38:57] So if that is something you're interested in, [00:38:59] if you'd like to handle all of the geos across all of your countries in a [00:39:05] streamlined point-and-click kind of way, [00:39:08] get in touch with us. [00:39:09] Let's see if we can help you. [00:39:10] Awesome. [00:39:12] All right. [00:39:12] Well, I think that's a great place to wrap with our Q3 outlook. [00:39:15] As a reminder, [00:39:17] a full formal report with all of the data we have is available inside the Soda app [00:39:21] for our members. [00:39:22] But other than that, yeah, thank you very much, Al, and catch us in the next one. [00:39:26] All right. [00:39:26] Cheers. [00:39:26] Bye.

Soldera's Q3 GO Outlook | State of the GO Market | Soldera Markets #10

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July 12, 2025

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🌍 Guarantees of Origin — Building a Market Maker

In this episode of Soldera Markets, Stenver, Al and Ollie from Soldera chat with Koen Andriessen and Chris Myers from Faraday Trading, about what it takes to build a Market Making (MM) operation in the current Guarantee of Origin (GO) market.

This episode delves into:

→ How Faraday transitioned from financial derivatives to GO market making 📊
→ Their passive approach: waiting for counterparties rather than chasing trades
→ Why they focus on AIB grid-connected certificates for sharper pricing
→ How constant trading volume creates effective risk management
→ How Faraday views the market: learn about the MM approach to risk and strategy.

Faraday’s Origin Story:

→ Three co-founders with extensive careers in financial market making
→ Started January 2024 as their first entrepreneurial venture together
→ Saw GO market as less developed compared to efficient financial markets
→ Drew parallels to financial products that became liquid over time
→ Brought MM expertise to a space dominated by back-to-back trading

Soldera Auctions:

→ Learn how Faraday and Soldera work well together
→ Explore how market makers access quality GO supply efficiently
→ Understand how streamlined sourcing strengthens MM liquidity provision

Enjoyed this episode? Sign up for more GO market expertise in your inbox ⬇️

Renewable Producer in GO Markets? Try Soldera ⬇️

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit podcast.soldera.org

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

[00:00:03]
Hey everybody, and welcome back to another episode of the Soldera Markets podcast.

[00:00:08]
Today we're joined by Faraday Trading.

[00:00:10]
So we've got Koen Andriessen and Chris Myers from Faraday.

[00:00:13]
I want to hand over to you guys to do a little introduction about yourselves and

[00:00:17]
tell us about Faraday.

[00:00:18]
Just for the audience, we can say that Faraday are an environmental commodities trader.

[00:00:23]
And obviously,

[00:00:24]
this is a podcast that focuses on the guarantee of origin and renewable energy

[00:00:28]
certificate space.

[00:00:29]
There's going to be a lot to talk about, specifically price action.

[00:00:31]
I think that's what this episode is going to be focusing on.

[00:00:33]
But yeah, over to you guys just to do a little bit of an intro about yourselves.

[00:00:37]
So my name is Kuhn Andries.

[00:00:39]
I'm together with Hide and Christopher, one of the co-founders of Faraday Trading.

[00:00:44]
Our backgrounds are actually in financial markets.

[00:00:47]
And we're kind of the new kid on the blog in terms of the geo market.

[00:00:50]
We started January last year.

[00:00:53]
And now we're quite active in the geospace and getting to be a household name.

[00:01:01]
Anything to add to that, Chris?

[00:01:03]
Yeah,

[00:01:04]
well,

[00:01:04]
basically,

[00:01:04]
I think it's fairly important to highlight that we have an extensive background in

[00:01:10]
market making.

[00:01:11]
So all three of us,

[00:01:13]
our careers have started in the financial industry,

[00:01:15]
mainly focusing on market making financial instruments and derivatives.

[00:01:21]
So an extensive knowledge when it comes down to risk management.

[00:01:26]
to liquidity provision and well because equity markets and financial markets are

[00:01:33]
technologically a little bit more advanced we obviously bring a huge technology

[00:01:38]
knowledge that comes with it so you guys are one of the most active guys i've seen

[00:01:44]
on the market and always very much enjoyed working with you and things move fast

[00:01:48]
get done fast and it's like very to the point so

[00:01:52]
What initially brought you to this market?

[00:01:54]
Why did you decide to open shop with GEOs?

[00:01:58]
I think it's a fascinating story.

[00:02:00]
So,

[00:02:00]
well,

[00:02:00]
effectively,

[00:02:01]
what we saw is the market that we're coming from,

[00:02:04]
the financial market,

[00:02:05]
is,

[00:02:06]
let's say,

[00:02:06]
a bit more developed in that sense compared to the GEO market.

[00:02:10]
You're working already quite efficiently.

[00:02:12]
And what we saw specifically in the geo market,

[00:02:15]
besides that it's,

[00:02:16]
you know,

[00:02:16]
everything renewable is just very interesting because there are a lot of changes

[00:02:20]
happening.

[00:02:20]
It means that there are definitely interesting parts that you can focus on.

[00:02:25]
But what we saw...

[00:02:27]
as our role within the geo market is just a party that you go to for a good price.

[00:02:33]
And, you know, that's it pretty much, right?

[00:02:36]
So everything at the backend is efficient.

[00:02:38]
We try to automate, simulate to you guys as much as possible.

[00:02:42]
So I don't want to do any...

[00:02:45]
stupid work in terms of filling in everything so that's really what we try to do

[00:02:50]
and I think a key difference between us and well a key let's say a strategic point

[00:02:57]
for us is that we're actually rather

[00:02:59]
passive in obtaining flow.

[00:03:02]
So we're more of the approach that we wait for the flow to come to us.

[00:03:06]
So if you want to have a good price or a price in something I can show to you,

[00:03:11]
if you don't have anything to sell,

[00:03:13]
I'm not going to try to call you and convince you to

[00:03:17]
to sell something.

[00:03:18]
That,

[00:03:18]
of course,

[00:03:18]
also means that a big part of the market you don't interact with because some

[00:03:22]
parties just operate the other in a different way.

[00:03:26]
But what we do see is that a lot of producers,

[00:03:28]
large corporates,

[00:03:29]
they appreciate and value our approach.

[00:03:32]
If you,

[00:03:33]
again,

[00:03:33]
if you paralyze it where we were before,

[00:03:35]
is that it's always like how a market works.

[00:03:37]
You have, you know, your top 70% of volume has been traded by your top 10% of kind of people.

[00:03:43]
Nevertheless,

[00:03:44]
it means that the vast scope of people that are using these geos or are using these

[00:03:49]
geos is growing at a rapid pace.

[00:03:52]
And

[00:03:53]
the size of that market is just going to continue growing for the while,

[00:03:57]
at least for the foreseeable future.

[00:03:59]
Well,

[00:03:59]
coming back to your question,

[00:04:00]
what we see,

[00:04:01]
we want to kind of give these people the possibility to find a liquid market.

[00:04:08]
And

[00:04:09]
That's not always the case when the technology isn't there or the marketplace isn't

[00:04:14]
there or it's a bit more obscure,

[00:04:17]
let's say.

[00:04:18]
And I think that's a really good point to make that we want to be this liquidity

[00:04:24]
provider in that space that's out there that you can just reach.

[00:04:27]
No,

[00:04:28]
you get a market,

[00:04:28]
fair market,

[00:04:30]
a firm market and efficient and a quick market without having to make any more

[00:04:36]
noise about it than necessary.

[00:04:38]
How much volumes do you guys move in a year?

[00:04:41]
Because you sort of,

[00:04:43]
I think we actually started roughly around the same time,

[00:04:46]
even if I'm not mistaken,

[00:04:48]
right?

[00:04:49]
You guys had like massive amounts of,

[00:04:51]
like you've always been very efficient from what we've seen on our side,

[00:04:55]
essentially.

[00:04:55]
It's always nice to hear.

[00:04:58]
That's what we aim for.

[00:04:59]
So I can share that last year,

[00:05:02]
which was our first year,

[00:05:03]
we traded a bit north of 10 terawatt hours.

[00:05:07]
And of course, you do have to keep in mind that we started off in January.

[00:05:10]
We're new to the market.

[00:05:12]
It's a bilateral market.

[00:05:14]
So a big chunk of that year is effectively building relationships,

[00:05:18]
you know,

[00:05:19]
doing the KYC,

[00:05:20]
getting onboarding things done.

[00:05:21]
So I can say that,

[00:05:23]
I mean,

[00:05:23]
this year we've definitely surpassed what we traded last year already.

[00:05:27]
And I would expect it to be a multiple of last year's trades.

[00:05:32]
Probably important to highlight is also that we don't do any double counting.

[00:05:36]
So it's not because we trade with A and B that we say we did $10.

[00:05:42]
This is always directly traded with us.

[00:05:44]
We are the counterparty.

[00:05:46]
So people, when they trade, it's one trade.

[00:05:48]
It's not two trades.

[00:05:52]
Yeah, it makes sense.

[00:05:53]
Yeah,

[00:05:54]
I see a lot of numbers with the factor too,

[00:05:57]
if you obviously always count all trades on all sides.

[00:06:00]
But so that's clean, direct traded with us.

[00:06:04]
Nothing, nothing at it.

[00:06:06]
All right.

[00:06:06]
So do you guys have also taken a look at the REC market as well?

[00:06:12]
Or it's mainly been focused on Geo so far?

[00:06:14]
Yeah, mainly focused on the Geo.

[00:06:16]
Really focused on Geo so far.

[00:06:18]
And it's also the case that I would say that we're specifically very sharp.

[00:06:23]
in the more generic GEO, so to say.

[00:06:25]
So of course,

[00:06:27]
if you want to buy,

[00:06:28]
for example,

[00:06:29]
AIB Grid Connected,

[00:06:30]
then we can give you a sharp price.

[00:06:33]
I'm pretty confident.

[00:06:34]
Whereas due to the way that we are set up, if you come for a very specific niche volume,

[00:06:39]
you know, it might be the case that we're not the best price in there.

[00:06:43]
And that's also fine.

[00:06:43]
That's not necessarily our aim to be the best everywhere because,

[00:06:47]
you know,

[00:06:48]
coming from our approach,

[00:06:50]
we really focus being the best in the more generic things in terms of selling and

[00:06:55]
buying specific,

[00:06:56]
of course,

[00:06:56]
is...

[00:06:57]
Not really a problem.

[00:06:58]
It's logical also because it's also the way that product has been set up.

[00:07:03]
You unfortunately have niche pockets where people with very strong convictions want

[00:07:09]
to specifically do certain things.

[00:07:11]
And obviously that comes with a price.

[00:07:13]
And I think most people are aware of that.

[00:07:15]
So that's fine.

[00:07:16]
But our focus today is on the more liquid side of the specter,

[00:07:20]
which then also allows us to take away that

[00:07:23]
you know, the widespread that you might see in other niche pockets.

[00:07:29]
I want to leap on the, you used the word conviction.

[00:07:32]
So you come to the market, you started a trading firm in January 2024.

[00:07:34]
So last year, so you haven't been around for too long.

[00:07:38]
But really when it comes to the digital market and these high liquidity areas like

[00:07:42]
the AIB hub connected,

[00:07:43]
more generic certificates,

[00:07:45]
what drew you to the market besides the sort of,

[00:07:47]
you know,

[00:07:47]
fragmentation and wanting to bring transparency and volumes?

[00:07:50]
Because

[00:07:51]
A lot of people could look at the market in its current state and opinions vary on

[00:07:56]
where it's going.

[00:07:57]
So I'm curious from the standpoint of choosing to start a firm,

[00:08:02]
NGOs specifically,

[00:08:03]
that's something that interests me quite a lot because I imagine you have an

[00:08:07]
opinion either way on the market,

[00:08:09]
right?

[00:08:09]
Well, I mean...

[00:08:11]
Having an opinion on the market,

[00:08:12]
yeah,

[00:08:12]
sure,

[00:08:13]
we have a certain opinion and there are things that you can track,

[00:08:16]
especially in terms of production on the market currently.

[00:08:19]
What drew us to the market as well is just we are coming from a trading background

[00:08:24]
and by nature,

[00:08:25]
traders are people that are quite entrepreneurial,

[00:08:29]
you know,

[00:08:30]
be it that you trade for a firm or be it that you trade for yourself.

[00:08:34]
So we really wanted to give a go.

[00:08:35]
I mean, it's also the first company that I founded or that we founded.

[00:08:39]
I think all three of us is the first one.

[00:08:41]
So it's also just a really nice challenge to see.

[00:08:44]
And especially in a market that,

[00:08:46]
as I said,

[00:08:47]
you know,

[00:08:47]
I think the renewables market is really booming,

[00:08:49]
specifically the last 10 years or so.

[00:08:52]
And it's just a market that I'd like to be in, to see what is happening there, to see...

[00:08:57]
how we can actually add value to the market by being a market maker slash liquidity

[00:09:03]
provider,

[00:09:04]
right?

[00:09:04]
Which is not something I would say that's standard.

[00:09:07]
Like a lot of people trade back to back.

[00:09:09]
So I think, yeah, those things all add up to...

[00:09:14]
the fact that there is a space for us in this market right where we can start and

[00:09:20]
and trade from and that's also what we've seen and also the people that we trade

[00:09:24]
with what we typically hear is that we are good at what we do we kind of make true

[00:09:32]
on our promises in terms of

[00:09:34]
You come for a price, I give you a price, and the rest is kind of hassle-free, right?

[00:09:38]
We deliver on time, we pay in time.

[00:09:40]
The contracting is done fairly quickly.

[00:09:42]
Typically, we send you the contract the same day, if not, you know, in the next few days.

[00:09:48]
So the KYC process is all, you know, somewhat automated as far as you can do that.

[00:09:53]
so it's really there that we saw space for a party like us in this market that made

[00:09:59]
us enter it what's interesting though what's something that i'd like to talk to you

[00:10:02]
about is that one thing that kind of surprise is not the right word because it is a

[00:10:08]
european market of course

[00:10:09]
But you have all these unique registries for every single country,

[00:10:17]
whereas that's not the case for all of the environmental products.

[00:10:20]
But I believe you guys have somewhat of a,

[00:10:23]
I'm not sure if solution is the right word,

[00:10:25]
but a way to make it easier,

[00:10:27]
I believe,

[00:10:27]
correct?

[00:10:27]
Yeah, exactly.

[00:10:28]
Like tell about our side,

[00:10:30]
we got into this market because we noticed 30% of producers are not selling their

[00:10:34]
geos,

[00:10:35]
their residual mix.

[00:10:36]
Right.

[00:10:37]
And when we started looking into it, we understood it's just, there's too small.

[00:10:42]
And like you just mentioned,

[00:10:43]
like the local fragmentation,

[00:10:46]
the bureaucracy of the registries is quite insane.

[00:10:50]
So we thought we'll just build a solution to automate all of that.

[00:10:53]
Right.

[00:10:54]
Why not?

[00:10:55]
And actually,

[00:10:55]
the story goes that the first geo deal we ever did was that I went to my friend's

[00:11:00]
place who has a solar panel on its roof.

[00:11:03]
I had a wine bottle with me and I was like, why aren't you selling these things?

[00:11:07]
And he was like, I didn't even know about it.

[00:11:09]
So then we sat down with Dal with him and drank the wine and filled out all the

[00:11:13]
forms for him and let him sign on the spot.

[00:11:16]
And that was our first, actually, how we got into that market.

[00:11:21]
I mean,

[00:11:21]
we've been in carbon markets for 10 years before,

[00:11:24]
but we were very interested how this one works.

[00:11:27]
And what we found,

[00:11:28]
it's a lot of things we liked and made the entire pivot from carbon market to

[00:11:33]
renewable energy from that point.

[00:11:35]
All these government registries we discovered, they're pretty much the same.

[00:11:39]
They're just a lot of overhead, a lot of compliance.

[00:11:41]
They don't have APIs.

[00:11:43]
They're very annoying to work with.

[00:11:45]
And we were like, but we're in the age of AI.

[00:11:49]
We can automate the compliance with AI.

[00:11:51]
We can integrate with registries, even if they don't provide APIs, thanks to our technologies.

[00:11:56]
And we've been building like this virtual layer on top of the local registries.

[00:12:03]
So everybody will be able to

[00:12:06]
use these different government registries everywhere without them having to need

[00:12:11]
their own accounts.

[00:12:13]
So we've had select partners who've been using this access manually essentially,

[00:12:19]
but very soon we want to offer it out there.

[00:12:22]
Somewhere around the end of summer,

[00:12:25]
we're going to approach you guys and say,

[00:12:26]
hey,

[00:12:27]
here's all our registries.

[00:12:28]
Here's where we're integrated.

[00:12:29]
Do you want to use these different countries?

[00:12:32]
And our goal is to eventually build sort of like,

[00:12:35]
I don't know if you heard the term neo-bank,

[00:12:37]
right?

[00:12:37]
So like all these Revolut,

[00:12:39]
Wise and so on,

[00:12:41]
they offer you their bank account and you can send money and you do whatever you

[00:12:46]
want in their app.

[00:12:47]
But underneath, there's a very traditional bank they're basically built on top of.

[00:12:52]
So we're kind of doing the same for government registries.

[00:12:54]
And our goal is to make sure that you can trade, cancel, use it in any country you want.

[00:13:02]
And you don't need to go through all this local compliance pain.

[00:13:06]
You just can...

[00:13:08]
Use our platform,

[00:13:09]
send geos to our virtual accounts and cancel them,

[00:13:13]
trade them,

[00:13:14]
whatever you want.

[00:13:15]
Avoid the import export fees,

[00:13:16]
keep the geos in the local country and just pay them when you finally know exactly

[00:13:21]
how much you're going to have to send to your buyer.

[00:13:26]
I'm keen to learn more about it when the product is finished.

[00:13:31]
And just to come back on the way that you guys started,

[00:13:34]
so how much new volume have you brought to the market in terms of geos?

[00:13:38]
It's hard to say exactly because we haven't kept that specific KPI in mind.

[00:13:45]
And we do have existing customers and big utilities who have approached us and

[00:13:51]
joined us as well.

[00:13:53]
But from gut feeling,

[00:13:55]
it's about one third is completely new volumes that have never traded Geos before.

[00:14:01]
We currently manage like 1.5 derawatt hours.

[00:14:04]
So a third of that around 500 gigawatt hours is definitely new volumes.

[00:14:10]
And that's growing very fast.

[00:14:13]
The interesting thing about that,

[00:14:14]
though,

[00:14:15]
is what we discovered is that a lot of countries are breaking AIB rules.

[00:14:21]
AIB directive, the Red 2 directive, I think, specifically says... Red 3, actually.

[00:14:28]
Red 3, okay.

[00:14:29]
specifically says that the producers smaller than 50 kilowatts should be able to

[00:14:37]
have easier registration flow for their devices.

[00:14:41]
Many countries make it completely impossible for them to register.

[00:14:45]
Sweden, in fact, recently just started doing change to even ban them.

[00:14:49]
Like they don't want to deal with them because they say it's too much work.

[00:14:53]
So basically what's sort of

[00:14:56]
stunting our impact a bit is that governments are not following EU directives or

[00:15:03]
the registries rather.

[00:15:05]
So in many countries, we can only focus on 100 kilowatts or above or 1 megawatt or above.

[00:15:12]
In Slovenia, you actually have to pay 15 grand if you want to export your geos.

[00:15:19]
It's crazy, right?

[00:15:20]
So in Lithuania, they have laws, a prosumer law, which...

[00:15:26]
I won't get into too much details,

[00:15:27]
but basically it excludes almost everybody that's under like 500 kilowatts.

[00:15:33]
In Finland,

[00:15:35]
you have to pay basically 500 euros base fee a year,

[00:15:39]
which obviously excludes anybody that's like under one megawatt already.

[00:15:43]
In addition, you have to get like an audit is an extra couple of hundred euros.

[00:15:51]
That was included in that.

[00:15:53]
Because I think it's like 250 plus audit or something.

[00:15:56]
Yeah, exactly.

[00:15:57]
So per device, you know, you rack up fees.

[00:16:00]
At the same time, we see a really similar thing in...

[00:16:03]
Latvia,

[00:16:04]
hopefully we've managed to cause some changes there,

[00:16:06]
but there for a while,

[00:16:09]
it's been one auditor can only do audits.

[00:16:12]
And then everybody has to get audited every five years from this one auditor who

[00:16:16]
basically gets to set whatever,

[00:16:19]
you know,

[00:16:20]
price they want for it.

[00:16:22]
So it's been kind of confusing all around.

[00:16:25]
You look at this patchwork and you look at the renewable energy directive and you

[00:16:28]
think everything's going to be relatively standardized.

[00:16:31]
But once you start getting into the details, things start making less and less sense.

[00:16:35]
I mean,

[00:16:36]
you know,

[00:16:37]
there are countries where there's essentially like a guy with an Excel sheet

[00:16:41]
managing guarantees of origin for the country,

[00:16:43]
right?

[00:16:43]
Yes.

[00:16:44]
Yeah.

[00:16:44]
And the communication around it, the marketing around it is also done very poorly, I would say.

[00:16:49]
I mean,

[00:16:50]
we all know in most countries,

[00:16:52]
people are incentivized to put solar panels on their roofs,

[00:16:58]
to have home batteries,

[00:17:00]
et cetera,

[00:17:00]
et cetera.

[00:17:01]
But communication around this unbundling of the energy and then the certificate

[00:17:07]
itself seems to have very,

[00:17:10]
very,

[00:17:10]
very low penetration within,

[00:17:12]
you know,

[00:17:14]
households I would say and smaller companies and obviously with levels that we see

[00:17:19]
now it's maybe not the most important thing but it would be so much easier if it

[00:17:24]
would be very clear cut and transparent and obviously a bit more unified because

[00:17:29]
this is still Europe and it seems that in many ways we are still not one.

[00:17:35]
It's worth bringing the conversation back to,

[00:17:36]
you know,

[00:17:37]
how the market is structured all together,

[00:17:38]
right?

[00:17:39]
And you have AIB,

[00:17:40]
which is a non-profit based in Belgium or Netherlands,

[00:17:43]
I'm not quite sure which.

[00:17:44]
But essentially,

[00:17:45]
right,

[00:17:45]
the EU doesn't prescribe any idea of how these things should work other than a

[00:17:50]
high-level sort of technical mandate.

[00:17:51]
And then the AIB's role is to find a way to integrate that from a technical perspective.

[00:17:55]
And that's how the EECS framework came around.

[00:17:58]
But, you know, like...

[00:18:00]
There isn't really a responsibility,

[00:18:03]
it feels like,

[00:18:03]
for anybody to take the lead on marketing or take the lead on making this thing

[00:18:08]
feel commercially well understood.

[00:18:10]
And I think that's one of the main problems.

[00:18:13]
And you can link that back to the accessibility of the market as well because the

[00:18:18]
AIB don't have really any enforcement mechanism besides barring people from being

[00:18:22]
in the AIB themselves.

[00:18:23]
So you have the EECS rules saying that

[00:18:27]
well, members need to make it cost effective for market participants.

[00:18:31]
But then they also say,

[00:18:32]
well,

[00:18:33]
they should be allowed to charge whatever they want to be commercially viable.

[00:18:36]
So it's like, you know, there is a constant balancing act.

[00:18:40]
And I guess,

[00:18:41]
yeah,

[00:18:41]
that's just the case with anything that's top down government driven because

[00:18:45]
they're never going to have user experience at the forefront of the equation.

[00:18:49]
Speaking of marketing, like if you go outside of the geo bubble,

[00:18:54]
Anybody you speak about and you explain what are geos,

[00:18:58]
they immediately think they're carbon credits.

[00:19:00]
And that's actually quite a big issue because carbon credits reputation,

[00:19:05]
as we know,

[00:19:06]
regardless of what carbon people say,

[00:19:08]
is horrible.

[00:19:09]
The public doesn't actually,

[00:19:11]
I don't know anybody,

[00:19:12]
honestly,

[00:19:13]
from outside of carbon world that supports it.

[00:19:16]
And it's like people are very, very skeptical of its impact.

[00:19:20]
And there's a lot of bad stuff about it.

[00:19:22]
So the first thing you always need to explain that, oh, no, these are not carbon greatest.

[00:19:25]
These are actually regulated.

[00:19:27]
But I distinctly remember one presentation I did on stage here in Estonia.

[00:19:34]
And I was basically talking about Soldera.

[00:19:39]
And in front of me was the Estonian Environmental Ministry Committee, essentially.

[00:19:44]
The guys that should know what are geos, they made the laws about geos.

[00:19:49]
So they were at least included there.

[00:19:51]
And then at the end of the presentation, I got three questions.

[00:19:56]
And all three were like, how do you ensure that these are trustworthy?

[00:20:01]
And I'm like, well, do you trust your local DSO or not?

[00:20:05]
I basically explained to her three times that these are not carbon credits.

[00:20:09]
These are for tracking electricity.

[00:20:12]
And it's completely different.

[00:20:15]
There's nothing in common there.

[00:20:17]
And it's your own grid provider that gives out these certificates and consumes them.

[00:20:23]
It's very logical, actually.

[00:20:24]
Very simple.

[00:20:25]
One megawatt hour goes in.

[00:20:26]
That's one certificate.

[00:20:28]
One megawatt hour goes out.

[00:20:29]
That's using one certificate.

[00:20:31]
We're not the party that ensures the quality.

[00:20:34]
That's the TSO, right?

[00:20:36]
I think that's actually one thing that's very interesting.

[00:20:38]
An interesting difference between financial markets, where you would just trade stocks versus...

[00:20:43]
the geo market where you can actually look at the geo because it's a tracking

[00:20:49]
mechanism nothing else pretty much than that and you can actually zoom in on the

[00:20:54]
specific power plant that produced it and I think what you see being lobbied for as

[00:21:00]
well is to go to a more granular approach probably also will help

[00:21:05]
I think in terms of the geo adoption and the story and the marketing part that you

[00:21:10]
can say about the geos.

[00:21:11]
Of course, the more granular you get, the more it makes intuitive sense.

[00:21:16]
You know, we don't have to have the discussion how granular is good enough, right?

[00:21:21]
I don't think we're going to go to 15-minute geos.

[00:21:24]
That's pretty much as granular as the power market gets currently.

[00:21:27]
But,

[00:21:27]
you know,

[00:21:28]
steps towards a more granular approach will definitely help the marketing of the

[00:21:32]
product,

[00:21:33]
I'd say.

[00:21:33]
I think we just all agree that the up to two hour window is probably not the

[00:21:39]
correct granularity we have right now.

[00:21:41]
Well, in Estonia, we essentially have the system of where you have this 12 month trading period.

[00:21:46]
And after that 12 month trading period,

[00:21:48]
you also have a six month hold period where you can still use it.

[00:21:51]
And that makes it so you can...

[00:21:52]
Like how a very long timeline where you actually,

[00:21:56]
you know,

[00:21:57]
can use it for canceling against the consumption of electricity.

[00:22:01]
And that has never made intuitive sense to us of like why it doesn't work that way.

[00:22:06]
While you do see governments moving at least towards this logic of you produced it

[00:22:12]
in this year,

[00:22:13]
you consume it in this year.

[00:22:15]
I think that makes a lot of intuitive sense at the bare minimum.

[00:22:19]
and even less than a year.

[00:22:21]
But wrecks are half and half, right?

[00:22:23]
So the international wrecks.

[00:22:24]
So you can say that the international wrecks are somewhat ahead of the curve on

[00:22:30]
that one,

[00:22:31]
even,

[00:22:32]
if that makes sense.

[00:22:33]
I guess one of the big...

[00:22:35]
Now that we're on the granularity topic,

[00:22:37]
I mean,

[00:22:37]
the market participants in general are very much against the granular geos because,

[00:22:44]
well,

[00:22:44]
mostly because they don't want to change their business,

[00:22:46]
right?

[00:22:46]
And it's very simple right now.

[00:22:48]
And more, I mean, just...

[00:22:50]
Again,

[00:22:50]
adds another layer of complexity to a market where a lot of people who are using

[00:22:55]
these products are where it's not their main job.

[00:22:59]
So it's an admin layer on top of the total package.

[00:23:05]
And if you're obviously going to have to incentivize to do even more around all

[00:23:10]
this,

[00:23:11]
although it would be good for...

[00:23:13]
the environment.

[00:23:14]
It's the ask, I think, to be very frank.

[00:23:16]
We need to automate it and make it simpler.

[00:23:19]
And this is the other side of it, right?

[00:23:21]
Why is this still so difficult?

[00:23:24]
And how can it not just be,

[00:23:26]
again,

[00:23:26]
as we said,

[00:23:27]
one registry,

[00:23:27]
everything goes into one,

[00:23:29]
you know,

[00:23:29]
simplify things.

[00:23:31]
For years in the financial industry,

[00:23:32]
you've had financial products that were misused by the players on the streets,

[00:23:38]
mainly because of the granularity,

[00:23:40]
because there was this

[00:23:42]
you know, difficulty around it.

[00:23:44]
And the second you take those difficulties away,

[00:23:46]
well,

[00:23:47]
you suddenly see loads more volume,

[00:23:50]
a lot more players,

[00:23:51]
and it becomes a lot more liquid and a lot tighter.

[00:23:54]
So that is the big argument often brought up against granularity.

[00:23:58]
Like, how do you ensure liquidity?

[00:24:00]
And you guys being marketplace makers would be fascinating to hear your thoughts on it.

[00:24:05]
Well, yes, data.

[00:24:06]
Speaking from other markets,

[00:24:07]
you basically have some automated trading tools essentially to manage,

[00:24:11]
let's say,

[00:24:12]
a 15-minute window or one-hour window.

[00:24:14]
So the power market exists.

[00:24:16]
The geos are issued based on the power that is produced.

[00:24:20]
So effectively, all the data is there, right?

[00:24:22]
So if you go towards a more granular approach,

[00:24:25]
then it would just mean that the registries have to add more data.

[00:24:28]
And from us as market participants,

[00:24:30]
It means that we have to digest the data.

[00:24:33]
Digesting data,

[00:24:34]
I would say,

[00:24:35]
being automated,

[00:24:36]
doing things efficient,

[00:24:37]
is kind of up our alley in that sense.

[00:24:40]
But do you guys see that there will be liquidity issues with more granular markets

[00:24:45]
or it actually will just force evolving of the existing plot layers,

[00:24:49]
essentially?

[00:24:50]
Well,

[00:24:50]
I think the more granular approach,

[00:24:53]
what would happen is that it would actually help more renewable energy at the point

[00:24:59]
that there is not enough of it.

[00:25:00]
So you would get very large price differences, like in a power market.

[00:25:05]
Of course, the GO will never be worth less than zero.

[00:25:08]
But effectively,

[00:25:09]
when the sun shines in the Netherlands,

[00:25:11]
the power price dies very quickly below zero because there's plenty of it.

[00:25:16]
How nice is it that those GOs will be virtually worthless,

[00:25:21]
meaning that you actually stimulate the use of GOs and renewable energy,

[00:25:25]
additional renewable energy at times when it's actually not there.

[00:25:29]
And it can be,

[00:25:31]
obviously it won't be solar here,

[00:25:32]
but maybe putting a battery in between then suddenly becomes a little bit more

[00:25:35]
viable.

[00:25:36]
Having said that though,

[00:25:37]
currently,

[00:25:38]
I mean,

[00:25:38]
as is,

[00:25:39]
the GOs are just a small part of the power price that companies pay.

[00:25:43]
Like if I pay 70 euros per megawatt hour and my GO is worth 75 cents,

[00:25:48]
let's say a euro,

[00:25:50]
what does it really add in terms of making a decision whether or not to invest in a

[00:25:54]
new wind plant?

[00:25:55]
Yeah, probably doesn't have a very big impact.

[00:25:57]
The Landesweekern from Iceland did put up a surprising statistic,

[00:26:02]
though,

[00:26:02]
that 7% of their revenues came from geos.

[00:26:06]
That was very surprising for me.

[00:26:07]
They probably made some good trades there, right?

[00:26:10]
I would assume so.

[00:26:10]
I wasn't familiar with that number, but it sounds pretty good.

[00:26:15]
Or they don't make enough of power.

[00:26:17]
But I haven't made enough of that number, so I can't really comment too much about it.

[00:26:20]
Yeah,

[00:26:21]
the granular geos are definitely...

[00:26:24]
I'm interested,

[00:26:25]
do you have any gut feeling yourself when we'll start getting these things actually

[00:26:31]
happening?

[00:26:32]
That's the European Union, right?

[00:26:34]
Those things are decided from the European Commission.

[00:26:37]
So, no.

[00:26:39]
It's a short answer.

[00:26:41]
I'm not sure how long it will take for any changes to take place.

[00:26:45]
No.

[00:26:45]
And on the other side, obviously it sounds so logical.

[00:26:48]
You have all the data.

[00:26:49]
It is there.

[00:26:49]
It shouldn't be that difficult, blah, blah, blah, blah, blah, blah.

[00:26:52]
But in the end,

[00:26:53]
as Kuhn mentioned,

[00:26:54]
rightly so,

[00:26:55]
is that it will have implementations on pricings around these moments when there is

[00:27:00]
plenty and moments when there's not enough,

[00:27:02]
making it a lot more variable,

[00:27:04]
potentially attracting a lot more people who might speculate.

[00:27:07]
That's one.

[00:27:08]
Second part of it is that...

[00:27:10]
I think it's part of the balancing exercise that this whole market is doing between

[00:27:16]
the old style non-renewable versus today the energy mix with a lot of renewable and

[00:27:23]
planting batteries everywhere and it's

[00:27:27]
It's also, it takes time.

[00:27:28]
It's not something you can just,

[00:27:30]
again,

[00:27:31]
it's not a financial public that you just launch and say,

[00:27:33]
okay,

[00:27:33]
here we go,

[00:27:34]
here it is,

[00:27:34]
and let's make it.

[00:27:35]
No, it's physical construction.

[00:27:38]
I think Europe in that point of view is always slow, don't get me wrong.

[00:27:44]
But in this case,

[00:27:45]
it's maybe not always so wrong to do it step by step instead of just saying,

[00:27:50]
as of tomorrow,

[00:27:51]
we could do it.

[00:27:52]
What will the implementation be?

[00:27:55]
Maybe there will be a lot more focus on the geo, I think, at that point.

[00:27:58]
It could be really swinging about.

[00:27:59]
Yeah, well, you always have to.

[00:28:01]
If you invent the phone, you can't start from iPhone.

[00:28:04]
You have to start from Nokia, right?

[00:28:06]
And even earlier.

[00:28:07]
So things have to come step by step.

[00:28:10]
And I think geos are, in general, like in a...

[00:28:15]
You know,

[00:28:15]
there's still a young instrument,

[00:28:17]
like they only got regulated like a bit more than five years ago.

[00:28:21]
So, so with the AIB.

[00:28:23]
Same goes for, you know, electric cars, you know, it's infrastructure.

[00:28:27]
Things have to,

[00:28:28]
you know,

[00:28:28]
you can,

[00:28:28]
you can claim that everybody needs to drive electric fine,

[00:28:31]
but we're going to produce all the electricity.

[00:28:33]
Where are these cars going to charge?

[00:28:35]
What's the technology behind it?

[00:28:37]
How long will they last?

[00:28:37]
I mean, there's loads of questions that come into play.

[00:28:39]
I think the ultimate goal,

[00:28:40]
I think we agree there is that grant granted more granular prices and.

[00:28:45]
You know,

[00:28:45]
shorter windows will be beneficial and helpful for people who really want to be

[00:28:50]
very specific and balance it all out.

[00:28:53]
I mean, there's a commitment that a lot of companies do, right?

[00:28:56]
A lot of commitments around, we want to be green, but we don't want to be legally green.

[00:29:01]
We just want to be real green.

[00:29:03]
We want to have either the windows on site.

[00:29:05]
We want to have the storage of our green PVs on site with batteries.

[00:29:10]
We're replenishing our total fleet,

[00:29:13]
and that needs to be able to load up on all our different venues.

[00:29:17]
So the wheels are in motion, but might not be for tomorrow.

[00:29:22]
Plus, it brings more volatility to the market as well, which is good for getting more actors.

[00:29:29]
It's not bad, it's real, right?

[00:29:31]
Volatility is real.

[00:29:32]
And it's just like players like Faraday,

[00:29:35]
who are market makers,

[00:29:37]
who try to balance out these kind of irregularities.

[00:29:44]
Honestly, I think people that think volatility is bad don't understand how markets work.

[00:29:48]
Yeah.

[00:29:50]
And it brings it back to us, right?

[00:29:52]
I mean, the question that Ollie asked in the beginning is what triggers you in such a market?

[00:29:57]
Well,

[00:29:57]
what does trigger us is that you've got days where prices go up 35%,

[00:30:03]
40%,

[00:30:03]
back down 25%,

[00:30:04]
30%,

[00:30:04]
and then end up pretty much flat somewhere.

[00:30:08]
And very often what we feel, it comes from lack of people who are willing to make markets

[00:30:16]
And that kind of pushes things and it pushes it quite extensively, right?

[00:30:20]
So if you're managing a portfolio of GOs as an energy producer and you suddenly up

[00:30:25]
35% on the day and then you go for lunch and you come back and you realize you're

[00:30:29]
down five.

[00:30:30]
I mean,

[00:30:31]
don't get me wrong,

[00:30:31]
it doesn't move that quickly in their minds either,

[00:30:34]
but it's cool to have a player who's there to give you markets and actually

[00:30:39]
tradable markets,

[00:30:40]
prices that are fun and that you can,

[00:30:42]
you know,

[00:30:44]
lean on in case you say actually I want to capitalize on that move and one or two

[00:30:50]
days later maybe move back in so it kind of as an investment tool and also as a

[00:30:54]
hedging tool towards larger institutions we seem to be quite favorable when it

[00:31:00]
comes down to that

[00:31:02]
Offset some of that risk you're holding.

[00:31:04]
Take back on some of that risk if you're willing.

[00:31:07]
Instead of the discussions that we sometimes have with people is, oh, we have a view.

[00:31:12]
It's going to go somewhere there.

[00:31:14]
And if it goes there, then I'll do that.

[00:31:16]
I'm like, okay, but that means you're not moving for six to eight months probably.

[00:31:20]
Oh, yeah.

[00:31:21]
Okay.

[00:31:22]
How about all the other moves that are happening at the time?

[00:31:26]
Oh, well, we have a strategy it's called then.

[00:31:30]
Well,

[00:31:30]
we're very keen to interact with those strategies and offset some of that risk and

[00:31:37]
take on some of that risk when you feel like it.

[00:31:40]
And instead of having to,

[00:31:41]
you know,

[00:31:42]
feel like you're pushing your product to another guy who's then going to hold on

[00:31:46]
for it forever.

[00:31:47]
That's just not us.

[00:31:48]
Speaking of which, what's your view on the market?

[00:31:51]
That's a good point, right?

[00:31:52]
We have this very,

[00:31:54]
very sweet spot that means that we don't really have to worry too much where it's

[00:32:00]
going.

[00:32:01]
If it dries up, that's a different story.

[00:32:03]
For us, it's the interaction, it's the trading, the constant trading we do all day long.

[00:32:09]
That's what makes our risk model, let's put it that way, efficient.

[00:32:14]
And the more we trade, the more it becomes efficient.

[00:32:17]
It would be,

[00:32:18]
I would say,

[00:32:19]
quite dangerous to say if you take one huge view and act upon that or only that,

[00:32:25]
because I think it's the way to get burned.

[00:32:28]
We feel like the more we can attract people to trade with us,

[00:32:32]
the more that we have a sensation or a feeling of where the market is going at that time.

[00:32:37]
And that will influence the way we would potentially trade.

[00:32:41]
So to generically say, for example, in six months' time, we'll be at two euros again.

[00:32:47]
Some of those discussions we've had with some people at some of the meetings that we've had.

[00:32:53]
It's fine.

[00:32:53]
There needs to be a market.

[00:32:55]
Everybody needs to take on a view.

[00:32:57]
But I think for Faraday,

[00:33:00]
it's a bit precautious to say,

[00:33:03]
well,

[00:33:03]
we're only going to trade one side or one way or one direction.

[00:33:06]
Well, you're a market maker, right?

[00:33:07]
Your main thing is volumes, basically.

[00:33:10]
Somebody told me that geos on average are traded around seven times before they get

[00:33:16]
to cancellation.

[00:33:18]
Do you have any data points on that front?

[00:33:21]
Sounds like new data to me.

[00:33:22]
You can see from the AIB data that bring out every source and how often the geo is transferred.

[00:33:28]
I don't know the exact number by heart, but it can very well be the case.

[00:33:33]
So what you do see is that there are more people active in the market and there's

[00:33:37]
more trading happening.

[00:33:39]
Making the market, you would assume, more efficient as well.

[00:33:43]
Yeah, absolutely.

[00:33:44]
And what is your view on the market?

[00:33:46]
So one of the things that we historically have been seeing is last year,

[00:33:50]
there was quite a significant increase in supply.

[00:33:53]
Well, we've been seeing this last couple of years, but it's been building up.

[00:33:57]
So there's a relatively high amount of just supply looking for a home, essentially.

[00:34:04]
What we do see this year,

[00:34:06]
the counter trend to this is just the fact that so far renewable energy production

[00:34:11]
actually in Europe is down.

[00:34:12]
So we're seeing that affect the incoming supply.

[00:34:15]
The other thing that we're seeing is that demand is still growing.

[00:34:19]
So overall, we're quite optimistic on the supply and demand dynamics right now.

[00:34:23]
Do you have any numbers?

[00:34:24]
Well,

[00:34:26]
I've seen a couple of estimates,

[00:34:28]
trying to estimate the whole year of how this is going to play out.

[00:34:31]
The numbers that we are currently seeing is somewhere between 60 and 80 terawatt

[00:34:39]
hours of less production than last year.

[00:34:42]
And in addition to that, an estimated growth of at least 50 terawatt hours of demand.

[00:34:47]
So those two things together,

[00:34:49]
if you consider that in the bigger picture of there's around 700 something terawatt

[00:34:55]
hours of float essentially in the market,

[00:34:57]
it's a pretty significant chunk of that.

[00:35:00]
I'll be very curious,

[00:35:01]
you know,

[00:35:01]
to compare actually the production numbers that you have,

[00:35:04]
because looking at Anto ourselves,

[00:35:06]
we don't really estimate such a big drop in volume this year.

[00:35:10]
But where I do agree with you is that there is quite a large amount of geo overhang

[00:35:15]
at the moment that essentially will supply the market for some time to come,

[00:35:21]
I'd say.

[00:35:21]
Because if you're talking about 400 to 500 terawatt hours that are currently...

[00:35:28]
left or looking for a home,

[00:35:29]
as you said,

[00:35:30]
Al,

[00:35:30]
you know,

[00:35:30]
there's pretty much half a year's production,

[00:35:33]
roughly.

[00:35:34]
And, you know, a bit more than that, more than half a year's demand, right?

[00:35:38]
So it's interesting to see how that develops and at what point in time,

[00:35:43]
you know,

[00:35:43]
of course,

[00:35:43]
if a trend continues that there's more demand than maybe in,

[00:35:47]
you know,

[00:35:48]
X years from now,

[00:35:49]
you will see a bit more of a balanced market that effectively demand chips away a

[00:35:54]
little bit of that supply.

[00:35:56]
Then again,

[00:35:56]
looking at the targets of the European Union in terms of the amount of renewable

[00:36:01]
energy,

[00:36:02]
the projects that are still ongoing and just the sheer amount of extra supply that

[00:36:08]
will become available every year,

[00:36:09]
especially solar,

[00:36:10]
I believe that's a really big increase.

[00:36:12]
So it's interesting to see how it develops in the next couple of years.

[00:36:15]
And solar especially,

[00:36:16]
I find like really interesting as a case,

[00:36:19]
since even though we do see more production coming online,

[00:36:22]
the solar market feels like it's in this awkward place where the sun is shining and

[00:36:27]
everything looks great,

[00:36:28]
then prices have a tendency of being close to zero,

[00:36:31]
if not negative.

[00:36:33]
So the feeling is that we do also see some curtailment and some cannibalization come with this.

[00:36:38]
So essentially,

[00:36:41]
it really depends on the area,

[00:36:42]
but there are areas in Europe where you can add more solar panels.

[00:36:46]
It does not necessarily translate into more energy production necessarily anymore.

[00:36:51]
That's fair.

[00:36:52]
Did I hear correctly, Al?

[00:36:53]
You said there's 700 terawatt hours over...

[00:36:57]
I think it's between 5% and 7% roughly.

[00:37:00]
It fluctuates.

[00:37:02]
And there's a methodological difference as well.

[00:37:05]
So one way you can look at it is people can also be holding supply.

[00:37:10]
Essentially,

[00:37:11]
even though we produce every month,

[00:37:13]
we don't necessarily cancel for the consumption every month.

[00:37:16]
So what you do end up seeing in the market is also there are these periods where

[00:37:19]
cancellations go up.

[00:37:21]
And then we see the floating supply go down significantly.

[00:37:24]
Well,

[00:37:25]
at the same time,

[00:37:25]
you can't assume that every single megawatt hour on the market that isn't canceled

[00:37:29]
is necessarily,

[00:37:30]
you know,

[00:37:31]
actually trying to find a new home.

[00:37:32]
But these are like rough numbers.

[00:37:34]
You mentioned that the production is reduced this year by hundreds.

[00:37:40]
Yeah, somewhere between 60 to 80.

[00:37:43]
At the historical float, I remember you had that as well.

[00:37:46]
So we could actually compare how it's been moving, if I'm not mistaken.

[00:37:50]
Yeah, I have a more, I guess a more conceptual question.

[00:37:53]
And forgive me for making a crude analogy to financial markets,

[00:37:57]
given you guys are both,

[00:37:58]
you know,

[00:37:59]
you come from financial backgrounds,

[00:38:00]
but...

[00:38:01]
It feels to me like there's two kind of places where data to make insights into a

[00:38:07]
market come from.

[00:38:08]
And that's kind of the underlying asset.

[00:38:10]
So in the case of equities, you're looking at the performance of the company.

[00:38:14]
And in the case of like a commodity,

[00:38:15]
like an environmental commodity,

[00:38:16]
you're looking at production data and the discrepancy between issuance and

[00:38:20]
productions and stuff like that.

[00:38:23]
But then you've also got data on sort of market participation and participants.

[00:38:27]
And,

[00:38:28]
you know,

[00:38:28]
there's a particularly spicy day in the office a couple of days ago when prices

[00:38:32]
were surging.

[00:38:32]
And there was kind of,

[00:38:33]
it almost feels like,

[00:38:34]
in a sense,

[00:38:35]
when you're in that conversation,

[00:38:36]
a little bit like a conspiracy,

[00:38:37]
like who's doing what?

[00:38:39]
I was wondering as a trader,

[00:38:41]
you know,

[00:38:41]
or a market maker in your case,

[00:38:43]
how much of the job is having your ear to the ground and trying to work out what

[00:38:46]
other people are doing?

[00:38:48]
You know,

[00:38:48]
trying to find data on that as opposed to finding data on the underlying market

[00:38:51]
itself.

[00:38:52]
And does that question relate to timeframes in terms of short-term decisions and

[00:38:57]
long-term decisions?

[00:38:58]
That's a good question.

[00:39:00]
I mean,

[00:39:01]
I think being a trader and trading in general,

[00:39:05]
regardless of the product or the market,

[00:39:07]
is about developing a certain case based on several factors.

[00:39:14]
And there are always unknowns.

[00:39:16]
There are known unknowns, so to say, and there are unknown unknowns.

[00:39:20]
So there will be things that you won't ever be able to explain because you cannot

[00:39:26]
see the whole market,

[00:39:27]
right?

[00:39:27]
Because it's so complex.

[00:39:29]
And I remember when I was a trader,

[00:39:31]
people would ask me,

[00:39:32]
like,

[00:39:32]
what's the hardest thing about your job?

[00:39:34]
And the hardest thing I said is always that at the end of the day,

[00:39:37]
you never do your job right,

[00:39:38]
right?

[00:39:39]
Because you're never, it's only a very rare occasion that you can sell the high or buy the low.

[00:39:44]
So there's always something that you can do better.

[00:39:48]
And effectively, that's pretty much every market that you'd be active on.

[00:39:53]
If there's a market that that's the case,

[00:39:55]
I'd be very eager to know and eager to join that market.

[00:40:00]
It's effectively, yeah, you're working with a lot of unknown.

[00:40:03]
So it's only, you know, it can take some time to actually have your analysis validated.

[00:40:09]
And sometimes you're correct and you can still lose money, right?

[00:40:13]
And sometimes you're wrong and you make money.

[00:40:15]
So that is the life of a trader, so to say.

[00:40:18]
When it comes down to information,

[00:40:20]
it's always important to understand,

[00:40:24]
first of all,

[00:40:25]
who are the actors within the environment that you're playing?

[00:40:29]
And what will their reaction be to this kind of information?

[00:40:31]
And I think your comparison with the whole pizza thing is amazing.

[00:40:35]
Because let's say eight, nine years ago, a lot of people would not have cared that much.

[00:40:44]
even if that information came out.

[00:40:46]
But if you look at financial markets,

[00:40:49]
thanks to the Robinhoods of this world,

[00:40:51]
we're looking at retail involvement up north of 30% of volume.

[00:40:57]
So if they happen to be,

[00:41:00]
and if you want to,

[00:41:00]
and this is a bit of a not nice thing to do,

[00:41:03]
but if you want to classify smart money,

[00:41:05]
quick money and dumb money,

[00:41:08]
If that dumb money,

[00:41:09]
I'm not saying that all retail are obviously dumb,

[00:41:12]
but unfortunately in these markets,

[00:41:15]
you do have a big boat that can move ship quite quickly and do totally irrational

[00:41:23]
things.

[00:41:24]
And I think one of the nice things we've seen in financial markets in the last

[00:41:27]
three years is the real impact,

[00:41:30]
is that when people are selling,

[00:41:31]
they're selling off in chunks.

[00:41:33]
They don't hold.

[00:41:35]
You have this real quick reversions because they come back in.

[00:41:39]
So they behave in a different way,

[00:41:41]
meaning that having your ear to the ground,

[00:41:44]
using information,

[00:41:46]
It's for you to understand what is that information going to do with the market

[00:41:51]
that I am acting in.

[00:41:52]
And if you've understood that, then yeah, then information becomes valuable.

[00:41:59]
I think that back to the question in that,

[00:42:02]
you know,

[00:42:03]
you have market infrastructure data and data.

[00:42:06]
linking that to retail participation in financial markets,

[00:42:09]
for example,

[00:42:10]
you see people starting to clock on to the fact that there's,

[00:42:13]
you know,

[00:42:13]
incredibly high short interest in a particular stock,

[00:42:16]
for example,

[00:42:17]
or that there's a large amount of trading volume that's happening off exchange and

[00:42:21]
happening in a dark pool.

[00:42:22]
And people start asking questions about the actual infrastructure of the market and

[00:42:26]
using that to inform their

[00:42:28]
their trading decisions.

[00:42:29]
Do you see any parallels in the geo market in terms of looking at how actors are

[00:42:34]
behaving and looking at how the complexity of the market is starting to sort of

[00:42:38]
form a topography and then being like,

[00:42:40]
okay,

[00:42:40]
because I'm seeing this pattern here,

[00:42:42]
that might inform how I act as opposed to purely looking at stuff like production

[00:42:46]
data.

[00:42:46]
If you really want to compare with what we see in the geo space for now is that

[00:42:51]
there are probably just not enough people who trade enough volume

[00:42:57]
There's a lot of people who use this once a year, once every six months.

[00:43:03]
The amount of people that's really active,

[00:43:05]
I think that is one of the things that is kind of important to keep in the back of

[00:43:10]
your head.

[00:43:11]
That it would be great if more people traded more often and if the smaller chunks

[00:43:18]
get spread out more,

[00:43:20]
trade monthly,

[00:43:21]
even weekly.

[00:43:22]
I know it sounds like a nightmare, but...

[00:43:25]
That's why you have us.

[00:43:27]
That is something that could really help because there is a bottleneck there still.

[00:43:31]
And that's also why we think it's great that Faraday has joined this kind of this

[00:43:37]
market because it gives an out,

[00:43:39]
gives liquidity.

[00:43:40]
Basically, it gives air to a market that could get really quickly congested.

[00:43:46]
Yeah, I agree.

[00:43:46]
I mean, it's always been very nice.

[00:43:48]
I think like Soldera and Faraday work very well together, right?

[00:43:51]
Because you guys always provide liquidity and we help these players aggregate together.

[00:43:57]
So they even have the volumes to do monthly trades, essentially.

[00:44:00]
Because if you're like a one megawatt hour producer,

[00:44:03]
you simply don't have the volumes to participate even properly.

[00:44:07]
But the podcast has been going on pretty long.

[00:44:09]
So I think we need to start wrapping up.

[00:44:11]
So I'll just ask one last question.

[00:44:14]
What happened last week?

[00:44:15]
We all know that the week of 16th to 20th of June,

[00:44:19]
we had a lot of trading,

[00:44:20]
a lot of activity,

[00:44:21]
prices almost 2x.

[00:44:24]
So any thoughts or indications there?

[00:44:27]
it's not an easy one to say yeah there no i i think there's just a lot of buyers

[00:44:32]
that's uh that's the that's the short answer yeah you know this should squeeze on

[00:44:38]
so that's your answer

[00:44:40]
I'll leave that to you.

[00:44:42]
Yeah, we saw a lot of buyers as well.

[00:44:45]
And this week you saw, especially yesterday or two days ago, price comes off quite a bit again.

[00:44:51]
And currently we're somewhat in between those levels.

[00:44:54]
So interesting to see how it develops.

[00:44:57]
I mean, that kind of goes into what Chris just mentioned, right?

[00:45:02]
In terms of how the way it comes and what it does at specific points in time.

[00:45:07]
So that's what you saw happening last week.

[00:45:10]
Yeah, it makes a lot of sense.

[00:45:12]
I guess it's a company,

[00:45:14]
you maybe have more information than us,

[00:45:16]
but I guess it's a combination of a short squeeze and German reporting period

[00:45:22]
coming up essentially.

[00:45:23]
So that's our thesis on it, but.

[00:45:26]
I'm not sure how you define a short squeeze per se,

[00:45:28]
but from a financial market perspective,

[00:45:30]
it's definitely not the case.

[00:45:32]
So, you know, as I said, we see there's plenty of geos to go around.

[00:45:36]
So,

[00:45:37]
you know,

[00:45:37]
in order for there to be a short squeeze,

[00:45:39]
you would have to have a lot less supply,

[00:45:42]
I'd say.

[00:45:42]
I'd more keep it on,

[00:45:45]
you know,

[00:45:46]
quite a decent amount of buying in a relatively short period of time.

[00:45:49]
Makes sense.

[00:45:50]
All right, guys.

[00:45:50]
Yeah, thank you so much.

[00:45:52]
Thanks for your time.

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