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Renewables certificate trading from the Windicator

Renewable Energy Certificate Trading

Prices remain low in Europe. Certificates generated from hydro are still under EUR 0.50/MWh. Interest in Guarantees of Origin certificates is growing, however. In the Netherlands, the end-2004 expiry of tax incentives, the basis of the green certificate market, kept trades low. The market is now closed. In the UK trading of renewable obligation certificates (ROCs) for the third obligation period increased, with prices tipping over £46.50. Once electricity regulator Ofgem reveals how many ROCs have been issued for the period, prices are expected to rise further as the likely value of ROC repayments to electricity suppliers for the proportion of their obligation fulfilled become known. For short term transactions, buyers seem to have moved away from ROC structures based on percentage shares of the recycle value and back towards a flat price per certificate.

Activity in the US increased towards the end of the year. A severe shortfall of renewable energy certificates (RECs) in the Massachusetts market leaves buyers facing a $51.41/MWh penalty under the Alternative Compliance Payment for the unmet proportion of their green power mandate. The penalty is $0.35/MWh above the certificate value in the last REC auction. Unless significant new renewable plant is introduced to the power pool, the market will continue to be under-supplied. As awareness of the shortfall grows, interest in buying RECS for 2005 and 2006 has increased, with prices so far reaching $46.00.

On the Connecticut market, trades of above $40/MWh for 2004 certificates continued. The market is softening and spreads widening for the 2005 period and beyond, with the last trade reported at $36.00/MWh. New buyers have been identified for the 2005 market from Connecticut Light and Power's recent auction of more load to several competitive suppliers. Indications show the Pennsylvania-Jersey-Maryland (PJM) market is softening due partly to expansion in supply within the power pool. With the REC tracking system expected to be operational early this year, many believe the PJM liquidity constraint will ease due to the system's ability to prevent creative accounting and clearly define legal ownership of RECs generated from PJM facilities. In Texas, meanwhile, REC trading remains mild, although prices have ticked up steadily to $14.50.

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