The value of the green certificates that are used to prove that electricity supply contracts are derived from renewable sources has risen considerably over the last quarter, say energy research company Cornwall Insight.
When a unit of renewable energy is generated, a Renewable Energy Guarantee of Origin (REGO) is also produced, this can then be used by the consumer to verify that their energy has come from renewable sources. As REGOs can also be detached from the wholesale energy component, they also trade independently and suppliers can buy/sell any shortfall/excess in order to make sure that the amount of green energy they sell is fully accounted for and auditable.
The cost of REGOs can fluctuate and over recent years has tended to trade somewhere between £0.40/MWh to £0.80/MWh. However, according to Cornwall’s latest survey, in Q2 ‘20 the cost of a REGO has now fallen below £0.30/MWh, which is less than 0.25% of a typical supply contract. Green Gas equivalents (RGGOs) held their price better, but on average the prices fell slightly.
It is thought that the dip in prices has been caused by unusually high levels of renewable generation (meaning high supply) and COVID-19 demand destruction (meaning low demand).
Although there is some uncertainty as to how long this low-price context will persist, Tom Andrews, Senior Analyst at Cornwall Insights, concludes that, “overall sentiment amongst the respondents was that the values are expected to rebound as the economy recovers from COVID-19”.
The low price of REGOs is a double-edged sword. On the one hand, it’s good news for consumers as it helps to keep green energy prices low. However, some would say that the cost is so low that it does little to bring true additionality to the renewables market.
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