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

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.