This article will present an overview of the results from the CNMC of the issuances, transfers, imports, exports and cancellation figures of the Guarantees of Origin related to the electricity produced throughout 2021 in Spain. Additionally an explanation on some of the possible market drivers and expectations for the current year are presented below.
Overall, Spanish Guarantees of Origin accounted for a 94.9% share of national production. Increases were witnessed in both the supply, demand and exports of GoOs. Exports increased by 41% while there was a record-breaking 2 million increase in Spanish final customers that redeemed GoOs in 2021. Tight Spanish GoO supplies, increasing local demand and high domestic GoO prices are expected in 2022.
In Spain, Guarantees of Origin are issued as national GOs (non-EECS GOs) unless at the time of issuing an entitled producer explicitly applies for GOs that can be exported over the AIB hub. Furthermore, if a producer has a subsidized generator but wants to export GOs then support received must be waived on the related energy.
The Order ITC/1522/2007 states that any generator that has received any premium for its production or surplus, must waive, for each Guarantee of Origin exported, the economic quantity equivalent to the premium. For FiT generators, the amount to be waived by the producer for each Guarantee of Origin exported shall be the difference between the remuneration for GOs, and the final price set in the market organized for that technology. This artificial curb on exports has resulted in two markets a local Spanish GO market with slightly lower prices and the Pan-European (EECS) GO market with higher prices as presented below:
In Spain last year, the issuance of Guarantees of Origin (GoOs) represented a 94.9% share with respect to the national production from renewable energy sources and high-efficiency cogeneration. Total GoO issuances from renewable and non-renewable sources in Spain increased by 12% from 109.2 TWh in 2020 to 121.9 TWh in 2021. Renewable GO issuances had the largest share at 112.9 TWh (93%) while high-efficiency cogeneration GO issuances were at 9 TWh (7%).
In 2021, Spanish domestic GOs had a 70% share of the total GOs issued (down by 3% compared to 2020) while Spanish exportable EECs GOs had a 30% (up by 8% compared to 2020) as such a majority of GOs issued in Spain continue to be consumed domestically. Additionally, of the GOs domestically cancelled in the country about 61% were redeemed for final consumers which was 7% less than the volumes cancelled in 2020.
Wind, Hydro, and Solar GOs continue to dominate Spanish GO issuances and accounted for a 92.2% share (104.1 TWh) of the total issued renewable Spanish GOs in 2021 this was an almost 8 TWh increase when compared to 2020 (96.3 TWh). Wind GOs continue to be the most prominent standing at 57.4 TWh, representing 51% of the total issued renewable GOs increasing by 7 TWh when compared to 2020. Meanwhile, issuances for Solar GOs increased by 5.7 TWh in 2021 when compared to 2020 standing at 18.35 TWh, Hydro GOs remained somewhat stable with only a minor 3% decrease in issuances.
It is of note that the economic equivalent of support for some renewable production is less than the current price of a GO and historically has made GO exports more attractive. According to the CNMC, Spanish GO exports in 2021 increased by 41% when compared to the previous year from 23.6 TWh to over 33 TWh which could be attributed to exports being economically attractive due to the high and rising EU GO prices witnessed throughout 2021.
The Guarantees of Origin transferred for commercial use by suppliers in 2021 was around 78.5 TWh, representing a 64% share of total GoO issued. Meanwhile, GO imports stood at 17 TWh having increased by 6 TWh when compared to 2020.
Around 234 Spanish marketers participated in the GoO market in 2021 and while participation has been growing year on year since 2009 it reduced by slightly over 5% when compared to 2020 (247 participants). Electricity suppliers in Spain that participated in the GoO market accounted for an 87% share in 2021.
Moreover, fifty-five per cent (55%) of electricity suppliers supplied 100% renewables in 2021 down by 13% when compared to figures in 2020. For the first time since 2017, the number of 100% green default suppliers in Spain decreased by 23% in 2021 compared to 2020 showing a significant decrease in green electricity offerings in Spain last year.
Additionally, a large share of suppliers that had 100% renewable claims in 2020 did not maintain this level in 2021, with statistics showing that some reported levels were well below 50%. An increase in suppliers exporting most of their production and the significant increase in domestic GoO prices made it less economically attractive for suppliers to pursue 100% renewable energy labelling. Further in-depth analysis of what contributed to the decline in 100% green defaults in Spain is available here .
The Guarantees of Origin redeemed from suppliers for final consumers in 2021 represented a 64.5% share of the GoOs issued, transferred or imported. As per the figure below, there was a record-breaking increase in the number of final customers that redeemed GoOs standing at slightly over 5 million customers which was up by more than 2 million customers when compared to figures in 2020.
This clearly shows that there continues to be a rapidly growing increase in the local demand for GoOs in Spain and this demand is expected to continue to grow in the coming years. This demand for green electricity is largely driven by corporations and industries that want to pursue an environmentally friendly profile but in the retail market, households also play an important role.
In 2021, while the number of electricity suppliers providing 100% renewable energy labelling decreased the share of renewable electricity on the Spanish grid increased.
Renewable sources accounted for 121 TWh of power generated up by 9.7% when compared to the year prior. Additionally renewables reached a record share of 46.7% in the national power generation mix up by a 43.6% share in 2020. Wind producers came on top last year having the larger share in the generation mix at 50%.
Furthermore, the country increased its renewable energy installed capacity by 6% from 70.7 GW in 2020 to 74.9 GW in 2021. Despite the global pandemic, this growth in renewables last year was driven mainly by wind and solar energy. Notably, solar photovoltaics had the greatest capacity increases witnessed from 11.7 GW in 2020 to over 15 GW in 2021 showing a 30% growth with over 3 GW of newly installed capacities.
Since the beginning of the year, Spanish domestic GO prices continue to trade quite close to EU OTC prices with spreads narrowing. Market sources have mentioned that this strong movement in domestic prices has been attributed to limited domestic GO supplies against growing demand.
This is mainly since a lot of the newer power plants coming onto the grid in Spain are unsubsidized and export their associated GOs however there is a continued growing limitation in domestic GO supplies as most are related to much older power plants. As such this limitation is expected to continue to provide support towards current Spanish domestic price levels. Additionally, it is due to this domestic supply limitation that most contacted sources believe that there will be a high demand for EU GOs in Spain in 2022.
In 2022, hydro production continues to be significantly lower than normal mainly to continued dry weather conditions and wind production has also been lower than normal. Should this reduction in production continue the market could expect lower GO supplies from Spain. However, it is of note that solar production in the Iberian Peninsular has been reported to be picking up and it is expected that the market will see more focus and demand for solar energy and their associated GOs.
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