Winter and sustainability are coming

We are facing winter 2022-2023 with a lot of uncertainty. The news are filled with disturbing headlines about the war in Ukraine, soaring inflation rates and the deepening energy crisis. In the midst of these challenges we are facing as a community in Europe, there are also rays of light shining through the clouds.

After all, we are not just talking about the volatility of the markets, or the deepening crisis. We are also talking about the future of the European energy system. The choices we make under tremendous pressure today define how the system looks in 20 years. Now is the time to ensure sustainability and the acceleration of the green transition. Well-functioning, transparent and reliable markets have a clear role in making this change a reality.

Today we see an increase in investments in sustainability and in green energy. While many of new investments in increased European green energy production are forced by the circumstances right now, others have already happened. And a lot of these investments are channeled to the acceleration of green transition through several European Union financing mechanisms.

These investments are now more important than possibly ever. It is not just crucial that they are made, but also that they are made efficiently and in a way that improves the energy supply (relatively) quickly. If these criteria are used as basis for investment decisions, there is little choice but to invest in the renewable production methods.

Political determination will play a crucial role in the coming months. Speeding of the green transition will require massive investments in the national infrastructure throughout the Union. These will not happen without strong political will. This will, or determination, is crucial both within the European Union and in each member state individually. While bureaucracy is often well-intended (and even important), it can become a bottleneck for the much-needed investments and the related projects. It is a matter of politics and good governance to ensure efficient and adequately resourced processes.

Mere investments are, of course, not enough. This is where the markets step in. Grexel, as well as the entire EEX Group to which we belong to, have long been committed to building sustainable markets, together with our customers. Well-functioning markets help to allocate scarce resources in the most efficient manner and enable the market actors to manage their business risks through various services. Reliable and transparent price signals together with improved risk management in energy and commodities sales also encourage investment decisions even in this volatile market situation.

Markets can only be credible when they are transparent. This is something we need to work on also within the field of Guarantees of Origin (GO). For a long time, the GO market functioned mainly through OTC-deals, leaving the only transparency to the auctions of the state-supported production. Lately, however, new market initiatives are being launched and we can expect the market to become more transparent. The two most interesting ones to me are the EPEX GOs Spot auctions and the HUPX multiple seller auctions . The author for one is interested to see what their launch in September 2022 will do to the liquidity of the market.

Winter is coming and we are doing our best to face it in an enduring, sustainable way. This cannot only mean that we try to keep things going, but also that we find a way to keep things going also for the decades to come.