Episode #007 with Torsten Brammer & Alexandra Münzer:
Episode #007 of The Solar Journey Podcast is a little different than our previous episodes. Our honored guest is Alexandra Münzer. She was introduced to us as the “Mother of European Guarantees of Origin,” and we used the opportunity to take a deep dive into a very complex topic: The scope and application of the Guarantees of Origin (GOs) System (also known as green certificates) in Europe.
We peppered Alexandra with questions about the purpose, practical application, and possible shortcomings of the GO-System. This system is at the heart of Europe’s goal to become the first carbon-neutral continent by 2050.
We learned a lot and are excited to share these fundamental insights with our listeners.
Alexandra Münzer is the Managing Director of Greenfact. Greenfact is a market intelligence and price transparency service in the renewable energy industry. She holds a Ph.D. in physics with a special focus on semiconductor sensors, from TU-München. Alexandra was born in Austria, studied in Germany, and now lives in beautiful Oslo, Norway.
Connect with Alexandra on LinkedIn.
Show Notes:
Interesting points covered in this episode for those of us on our own Solar Journey):
[00:04] Alexandra's big move from Germany to Norway
[00:12] Explaining green certificates as if speaking to a child
[00:18] The GO and its international counterparts
[00:21] How the GOs are traded
[00:36] Oversupply of GOs on an annual basis
[00:42] Market pricing of different green electricities across Europe
[00:56] The three different scopes of carbon emissions of corporations
[01:04] Who are typical customers of Greenfact?
[01:08] What can individuals do to be more conscious in their power choices?
[01:10] How do you see the future of renewable energy playing out?
Transcript:
[00:00:01.360] - Torsten
Welcome, everybody, to a new show of the Solar Journey. And today, as our guest, we have Alexandra Münzer from Greenfact. Hello, Alexandra!
[00:00:15.160] - Alexandra
Hi, Torsten.
[00:00:16.910] - Torsten
So before we get started on Greenfact and what Greenfact is doing, I would like to introduce Alexandra, just give a quick background information. So Alexandra Münzer, she's actually born in Austria and where did you actually grow up? Are you like a big city girl or country girl in the Alps on the flat lands?
[00:00:47.390] - Alexandra
Yeah, both. Both there, including on farms and the city. But actually, Salzburg in Austria. Yeah.
[00:00:55.850] - Torsten
Ok, well Salzburg most, at least most Germans, associate that with classical music.
[00:01:03.470] - Alexandra
Yes.
[00:01:05.840] - Torsten
Did you get a classical music education?
[00:01:10.110] - Alexandra
I mean, we've been a lot in Salzburg, in the theaters and operas and such. So that's lifestyle there.
[00:01:17.590] - Torsten
OK, excellent. Yeah, good. So, um, but for her university. She went to Munich from Austria to Munich to Germany, where she lived for 10 years, and she got a Ph.D. in physics and science. She worked in the semiconductor area. And in 2016, she moved to Norway and now she has been Managing Director of Greenfact for four years! And Greenfact, just as a quick intro, but more details will follow later, it's a market analysis and consulting company for green commodities with focus on certificates of origin for renewable energies. Um. Yeah, but before we move into that, just just let me let us please share where. What you did during your Ph.D., that's pretty interesting because I think then you made a big move and it's interesting to get to know those two aspects of you.
[00:02:33.300] - Alexandra
Yeah, exactly. Now, that was definitely a big move from from semiconductor center physics to, to the renewables or the energy markets. An unexpected move as well. Ph.D. Technische Universität München. That was the university, and it was a really excellent time. We learned a lot there. And what I focused in was developing sensors at some point. So that means you take a novel material like carbon nanotubes. You take a polymer, for instance, like it was PTHC back then, and then you have these materials, 1D, 2D semiconductors. And then what was the job was to try to sense or to detect proteins or molecules with that novel type of sensor. So, yes, very different from what I do now.
[00:03:33.030] - Torsten
Wow, so really high end, high tech semi-stuff. Um, and to do a Ph.D. you must have gotten really into the details, but that didn't keep you in that area. So, at some point you must have decided, let me go to Norway and move to the renewable sector. How did how did that all come about?
[00:03:58.870] - Alexandra
Well, I think. Sometimes, you know, just life happens as it wants to happen. So that was nothing planned. And also, I think after many of us, so people that are listening now, being at university or doing their Phds or that postdocs and they don't know what to do is simply because they don't know what's out there. So it's impossible to know because the world out there is even bigger than what you did or what you're doing now, probably. So, I just took the I just took the plunge, traveled or moved to another country for private reasons. And I was looking for opportunities and I was looking for a job and I just did not know what to do. And then with the more or less a coincidence, I got to know the company. Greenfact was just founded and they were looking for analysts back then and started as an analyst there. A couple of months later, I became the managing director and that opened so much from I have never been in touch with the electricity or the energy or the power sector commodity or whatnot. I did not even know why is that important or is there any value or is there any intelligence in that? I did not know what a market is and what it is for. So, I'm starting really from scratch. And that I have to say, after four years, that was quite a ride because that universe of the power sector that has like everything in it. So, I mean, from geopolitics til really understanding market dynamics. And also, now we have this shift, of course, from the fossil-based energy sector to the renewables. So, you have I mean, this is really what excites me the most. You see a whole infrastructure you see a whole continent being morphed into something completely new. And you are a part of it. And this is great!
[00:06:05.750] - Torsten
Wow, yeah, we will come to that. And that sounds indeed pretty interesting. And the way you talk about it means it's actually bigger than I would have ever thought. Right. So that sounds really interesting. But let's jump quickly back. And I know you live in Oslo, right? So Greenfact is based in Oslo, in Norway.
[00:06:26.350] - Alexandra
Yes.
[00:06:26.690] - Torsten
So, you grew up in Austria, then? You lived in Munich for some time. So how is life for you now in Oslo, Norway? I've been to Oslo. I'd like the city a lot, but you know it's different if you go there as a as a tourist. I remember particularly the the city hall of Oslo. I loved it. It was super impressive city hall. Everybody who goes to Oslo should definitely go and see the city hall. It's a it's more like a museum and let's say a temple, a wonderful place and nicely located right at the at the waterfront.
[00:07:03.740] - Alexandra
Norwegians would love to hear that.
[00:07:06.590] - Torsten
Maybe someone's listening?
[00:07:08.750] - Alexandra
They are for sure listening. Yes, I would say life in Norway, very, very different lifestyle. So it's a whole different lifestyle. If you're used to a German lifestyle or UK lifestyle or French lifestyle, it is really different. So, Oslo probably in many countries wouldn't be considered a city. You really have short, short ways. And it's very nice to live here. It's really directed at the fjords. You can see the boats basically. I walk out of the office and I see the ocean. So that's beautiful. But actually, the most beautiful part of Norway is, comes to normal life is that actually this country is full of forests, full of fjords, full of water. So really, if you do appreciate the outdoors lifestyle this for you. I mean, you can ski in the winter, you can do sailing in the summer. So, this is probably one of the most beautiful countries on on this planet. So, the Nordics are really beautiful like Canada or really remote and has different seasons. So that's really beautiful when it comes to the lifestyle and business life. What I do really appreciate about Norway or let's say smaller countries, Norway, Netherlands and such, they really, ah in Germany, for instance, you are busy with German economy. Right? There is a very almost rather to some extent a bit closed system. But if you're in a smaller country like this, you travel a lot. You do business a lot with any other countries on this planet, basically. So, this is really exciting when it comes to, you know, looking beyond where you live. So, we've, yeah, this is probably the the best part of Norway, I would say.
[00:08:57.680] - Torsten
Interesting. So, Jason Nutter who is also part of the Solar Journey team, he's, he grew up in Singapore, so he says the same thing. Right. So right from the start, you're always looking to the onto the international picture. Right. And I mean, Germany is not gigantic, but it's still obviously, as you as you say and I would confirm that you're easily busy with yourself within the nation rather than have that international view on business and on economics. Interesting point. Of course, what I also remember about Oslo is all, the high number of Teslas running around in the on the streets, right. So that was also pretty impressive for me already a few years back, I don't know, maybe four years back, right. So, it was for me as an all about solar guy. Wonderful to see. Cool. So. Let's get started on the tough bits and the reason why I say that, because, as I did try to understand what "guarantees of origin"/ "green certificates" are all about and and you're the super-expert and some other members of the industry told me you're the considered as the mother of the European certificates of origin.
[00:10:24.580] - Alexandra
I'm not at all. They're older than me. Yeah.
[00:10:28.200] - Torsten
Yeah. Obviously, that means you've got it. All right. You've got it all. And if somebody has a question, then you're the go-to person. Um, but as from our previous talks, we understood that actually this is a real expert topic. Right. And the challenge now is for us to find out an explanation which a five year old could understand. So maybe let's start at the very beginning, right before we go into the the the second derivative of of all that. How did it all come into place? It's not a physical product, a guarantee of origin, and it's a manmade concept. How did it all get started?
[00:11:22.050] - Alexandra
Yeah well, as far as I understand that, and I hope many people in process maybe also listen to this, so forgive me if I say anything wrong, but so back in the days before we both of us were concerned with electricity or power markets or whatnot, there was a situation that you, as you just got, you did not bother about your electricity period. There was electricity monopoly, a monopoly, basically, and you did not choose. There was one big supplier in your area and that's where you got your electricity from. And at the turn of the century, basically starting with the 2000s, I suppose the electricity market, maybe even before that was liberalized in most with the EU, basically. And that means the people, businesses and households, they should have the choice to make the markets more competitive. You know, they should choose which electricity supplier they they can use and they should use. And then came basically this renewable energy transition and the EU and everyone wanted to have more renewables in the energy mix. So, no more coal, no more nuclear or less nuclear and more wind, solar and hydro and and whatnot. Right. So, and then this started with the with the EU basically. So, they said I mean, now we have to go back to this. Why why you need the certificates markets or the "GO" markets for that, which is like an accounting system, sort of like a data bank and has nothing to do with the physical realities, so to say. But it has something to do. So why do we need it? And then we need to explain really like to children, because otherwise I don't even understand that, because as you can imagine, I explained to you that before, like, if you live if you have a farm, I don't know, remote Canada, Alaska, what not. And you are not connected to the grid, the so-called off grid, where you get electricity from you probably I mean nowadays you might have your rooftop solar or you have your small windmill next, next to your house. And then, you know, whatever electricity you get, it's green. Right. So that's super simplified picture. But in reality, what happens is that we all live in and most of us live in cities or are we connected to the electricity grid. That means in this electricity grid, all the electricity that is generated, all the electrons that are generated by the power plants are fed in one grid. And you can imagine this sort of like big pool or the ocean of electricity. And so and since electrons you cannot see they don't have a color, you cannot distinguish if that electron was generated by a wind farm or by a nuclear power plant or by a coal power plant. So, what you end up with is a pool of mixed electricity. And now so now we know this pool of electricity. And the thing is, if you, for instance, live, you say you live in a town or in a city and you have a house there and you get electricity and the next power plant that is close to your home, maybe you can even see it. You see the next coal power plant, you see the next nuclear power plant or whatnot, and then the electricity. By law, it always takes the path of least resistance. That means even if a wind farm exists maybe a hundred kilometers more far away from from you, but the coal power plant is closest to you, you will get per law the electrons from the coal power plant. So what? You want to ask something now?
[00:15:39.990] - Torsten
That's a natural law, right? So, it's not something like a legislation. But the natural law like, physics.
[00:15:47.410] - Alexandra
Of course, I was talking about physics here. So let's say you you live there, you get your electricity, the physical one from, from the next coal power plant, and then you see a commercial on TV or you adjust your really of renewable energy and you want to support that. You don't even want not only want to support that, you want to reduce carbon footprint. You know, you're just like a person like you and me. Probably you want to change something, maybe. And you see this, I don't know, there are many companies now that sell green electricity and you see that commercial there and you want to switch and it's easy to switch nowadays, a few clicks away and then you have your new tariff. But then you think a bit because you saw that or you heard and listen to the podcast and Alex tells you, no the law of physics actually gives you the dirty stuff. So. And how is that possible now that your electricity supplier is allowed or can tell you that you get green electricity and this is now by this abstract means of "guarantees of origin" in Europe. And so how it works, should I explain that or do you want to stop me at that point?
[00:17:06.080] - Torsten
That's good. So and the the certificate and the guarantee of origin is that the same thing? Because it's two terms for the same thing?
[00:17:13.190] - Alexandra
Yeah. I just want to confuse you even more.
[00:17:18.480] - Torsten
Cause we already had internal discussions, if that's something else or the same thing. All right. So green certificates and guarantees of origin are the same!
[00:17:25.970] - Alexandra
Yeah, they are. It is good that we talk about it so because there is indeed confusion with terminology, because in the European Energy Directive, this is called "guarantee of origin". OK?
[00:17:42.080] - Torsten
And short that's the GO?!
[00:17:42.140] - Alexandra
That's the GO. And but a similar system exists in other continents and the US and they call it RECS. And then you have the "renewable energy certificates system". And yeah. So this is getting really complicated and there are different types of sub-certificates. They have different names, so and for different commodities. So stuff gets really complicated when it comes to the name you give to it. But for the guarantee of origin, for the electricity market that I'm talking about, the GO - guarantee of origin is the correct term. Sometimes I call this just a certificate or renewable energy attributes, but OK, yeah.
[00:18:30.080] - Torsten
And so this is something brought into action by the European Union, is that correct?
[00:18:37.110] - Alexandra
Correct.
[00:18:37.520] - Torsten
So in Brussels, it was decided we want to have guarantees of origin. And that's that's how this whole scheme came into place. Who takes part in it? Is it just really full members of the EU or is it like also associate members, like Norway is an associate member. So I guess they are also part of the scheme.
[00:18:58.730] - Alexandra
Yes, per EU directive, every member state has to have a guarantee of origin system in place. So they have to have an issuing body in for that. So a responsible body, that means in Germany that's the Umweltbundesamt for instance. Um, and but if you're sort of in this, as you call them, associated states, you can choose to be part of this more or less. I mean, but you have other states that are part of that, too, like Iceland and and Norway.
[00:19:32.600] - Torsten
OK, and a certificate, the good old days. This would have been a piece of paper. Um, I guess now it's something an electronic whatever file or what is it. Is it how do you how do you transact?
[00:19:50.910] - Alexandra
Yes, it's a piece of paper in a virtual sense. So you have this document, this data file where you have information about electricity generation. So let's say you you own a wind farm. You produce. I don't know, three hundred gigawatt hours of electricity and in a year and you just produced one megawatt hour, that's a smaller unit, OK, and for each megawatt hour of the electricity you produced, you're allowed to generate one that GOs.
[00:20:28.050] - Torsten
So one megawatt hours, is one GO? And now, for example, if I produce it in Germany, then the Umweltbundesamt, that's the environmental authority in Germany, then they would issue me what a PDF which says, here you go, you got one Go or how does it work?
[00:20:49.210] - Alexandra
I think it's in a database because it's a database. Exactly.
[00:20:54.330] - Torsten
And it's just an electronic concept, I guess. Right.
[00:20:58.170] - Alexandra
It's an electronic concept. So basically what they issue that for me. So it's actually not the HKNR - the Herkunftsnachweisregister it's a registry that does that for you in Dessau.
[00:21:13.830] - Torsten
All right. Close to Leipzig, where I Live, right?
[00:21:18.750] - Alexandra
Yes, and those guys, they make this file for you, basically, and it gives you it states, for instance. It's wind. It's it's produced in this time period, so this month, for instance, in this year, and it will expire one year later so that if no one wants it, then it's deleted. And, and if a consumer wants to have it, let's say you buy a green electricity tariff and your electricity supplier has to use it and has to cancel it, that means it's taken out of the circulation and this electronic certificate. Maybe someone in Switzerland wants to have a German hydro. Yeah. And then they imported to Switzerland, for instance. Or maybe the Germans really love to have Norwegian Hydro or Swedish wind production. And then this certificate is sort of from them transferred to Germany and used in Germany.
[00:22:21.080] - Torsten
OK, so now I am let's assume I'm a I have a big wind farm. So I have produced one megawatt hour in the last month. So I get the certificate and then. It is in the database in Dessau and do I get money for it or do I have to pay money for it? Is there already value transaction? If I have produced it or is it just.
[00:22:46.470] - Alexandra
No, producing does not bring you anything, it brings you costs because you have to pay the registry for a small fee.
[00:22:52.550] - Torsten
All right. I have to pay a fee to get it registered.
[00:22:55.990] - Torsten
You know, it's a service you want to register. And registry in Dessau also needs some money, but it's a very, very small fee.
[00:23:04.150] - Torsten
OK, is it a fixed fee? Or it depends on the?
[00:23:08.450] - Alexandra
It's a fixed fee. You can look that up in their website. You get basically usually the account cost per year, a very small amount of money. And then per each transaction that you make, if you transfer that, I think you also pay very small. OK, but that's that's the cost of it. But of course, you generate revenue from that, otherwise you would not do it right.
[00:23:29.270] - Torsten
So, of course, now if that guy in Switzerland wants to have that German, wind megawatt, he is going to give me money or where does he transfer the money to?
[00:23:43.410] - Alexandra
That depends on how you or I know and it also and we have to be a bit clean here. German wind usually you get in Germany, you have really a special case. I'm sorry for that Torsten.
[00:23:58.520] - Torsten
Then where should I move to so it becomes more simple?
[00:24:01.550] - Alexandra
Yeah. Yeah. Let's assume you have a, you are allowed to issue German wind. I don't, I will not elaborate on that speciality here in the German market.
[00:24:14.000] - Torsten
Let's simplify Germany.
[00:24:16.280] - Alexandra
Let's simplify Germany. Say they're German wind and someone wants to have that stuff in Switzerland. OK, and you as a producer, you have different ways to sell that stuff. You can, um, you can. Let's say there is a Swiss utility, a Swiss electricity supplier, they can buy that stuff from you directly, they can call you. They say, hey do you have some wind left? GO? And then you sell it to them, OK. That's how it works.
[00:24:49.590] - Torsten
OK, then I call the Umweltbundesamt and say, please issue those five GOs to them or?
[00:24:56.570] - Alexandra
They would not pick up the phone, unfortunately. How this works, thanks to databases, is that the guy in Switzerland, he has an account too in his registry and he transfers that certificate from Germany to Switzerland. So that works online. And then in Switzerland for his customer, he he cancels this. So he takes it out of the loop.
[00:25:19.950] - Torsten
Sorry, hang on, it takes. Yeah, it's transferred from Germany to Switzerland, so he's got five GOs more than before, right?
[00:25:28.730] - Alexandra
Right, exactly. But if he has, because the Swiss electricity supplier wants to use it for his customer. Right?
[00:25:36.710] - Torsten
OK, if he resells it like if he is the utility, the Swiss utility sells it, five megawatt hours, so five GOS to his customers, then he has to take it out of his registry.
[00:25:50.650] - Alexandra
He has to cancel. That's the terminology, he has to cancel it - redeem it. That means so the purpose of that, then they are fixed to this customer. And that's why this customer, maybe a Swiss guy like you, Torsten in Switzerland, wants to use green electricity and then he has it with the GO he has this green electricity and is taken out of the loop. Why? Because let's say in Germany there is Torsten in Germany and he also wants that same from the wind farm. But this is not here. Cheating is not allowed. That's why you cannot use the certificate for one client here and for one client there. That's impossible. You only can use it once. And that's a very important rule.
[00:26:34.420] - Torsten
OK. Now, so this only works in in a market where there needs to be physical. So it works within Europe and it works within Europe because the whole of Europe is connected with a. What do you call them, electricity grid, because it's all connected in in a single grid, right? Or could you have the case where there's a, I don't know, a small island in Norway produces electricity like hell and it doesn't feed it into the European grid, and you could still generate those GOs over there and then?
[00:27:19.050] - Alexandra
Yeah OK. You're smart because we do have that the thing. So actually when it comes to my personal opinion. When do those kind of certificates make sense? Not only, we have the electricity market, we also have, for instance, the natural gas market, we have the same we have a gas grid. So every time you have a commodity, basically you feed into the pool where you cannot distinguish if it's dirty, if it's clean, then it makes it that you need the tracking system. This accounting system, the "guarantee of origin" so that the consumer is not cheating knows what electricity consumes. That's your right. Right? You want to know, you have to know. And so then it makes sense. But the EU says: OK, every member state has to have the GO system OK. And then we have the special case of Iceland. And in Iceland we do not have a grid connection to the continent.
[00:28:23.470] - Torsten
All right. So, OK.
[00:28:26.220] - Alexandra
And but there in in this guarantees of origin system and here comes already something that happens quite a lot in this market, that there is some controversial world views. Clash you, of course, you can say Iceland. They import stuff. It might not be electricity, but there are boats with other commodities going back and forth and they are produced with electricity. So it's not an totally autark system, but from an electricity perspective, there is no interconnector and Iceland does issue guarantees of origin and those guarantees of origin you are allowed to use in countries. But here comes the thing, in some countries they say no, Austria, my home country, they say no, Iceland, we don't take there is no connection that's against our law, basically. And and what happens then with this Icelandic GOs is that there is the price of guarantees of origin usually depends on supply and demand. It depends on where does the GO come from. So what's the country of origin? And it depends on. The country of origin, technology and so forth, but what happens then with Icelandic GOs is those are usually the cheapest because many countries don't want them. You want to buy them?
[00:29:57.060] - Torsten
Little demand, little demand, low price.
[00:29:59.730] - Alexandra
Exactly. And that's that's one of the interesting market dynamics that you see here. I mean, I've been in Iceland. I know many of the producers there and they are doing a fantastic job. But that's the controversy. However, you want to see that yeah.
[00:30:17.500] - Torsten
Interesting. And in a way, I mean, since the GO is like an it's an extra cost, right? So for the green electricity, you it's an extra certificate, extra costs and all those fees involved as people involved. And so it makes actually the green electricity more expensive is it correct? Right, I mean, it's on top of the?
[00:30:44.600] - Alexandra
Um Jein. Um...
[00:30:48.470] - Torsten
Yes-no?
[00:30:50.120] - Alexandra
Yeah, I am so. Usually, if it's let's say you have the situation where it costs as a producer, let's say you have a coal power plant, you can produce electricity very cheaply. OK, with the coal, let's assume there are let's assume no taxes and stuff. And you just buy the coal cheap from wherever you dig it out of the ground. And it cost much more actually to develop a proper let's say a solar farm or let's say the costs for the fossil generation actually let's say it's cheaper. I don't know what's the current price?
[00:31:28.890] - Torsten
It is not anymore, but maybe that's where they come from.
[00:31:35.210] - Alexandra
And so you sort of as a producer, then you sort of think, how do you get the costs back, right? And that's one of the thinkings you actually you have you actually generate more value for society, right? You generate the good stuff and you want to be able to market it. If you just sell the electricity for the normal power prices in the market, you just get electricity prices. So you have to be competitive with the fossil prices. Then how? That's why we had all these feed-in tariffs, right?
[00:32:10.610] - Torsten
To incentivice the market, to get it started.
[00:32:14.130] - Alexandra
Yeah, exactly. And then of course, the to be able to market the green attribute the greenness of your electricity, you need the guarantee of origin. And this is now when the feed-in tariff runs runs out also in Germany and I feed-in tariff era is is over. Yeah. How can you really how do you generate value for you as a producer. You make a long term power purchase agreement and you and it's a green power purchase agreement if you want to sell this green. This needs obviously to contain guarantees of origin because that's the only way it's it's green by law, by EU law, not physical. Yeah.
[00:33:01.310] - Torsten
Yeah. Cool. So, um. Another thing that comes to my mind, because it's I mean, the GO is that it's a one megawatt hour, right? So it's you count the electrons, the the watt hours at the power plant. Right. So no? OK. So because I was thinking power plant and then you have transmission losses, then what? I mean, even three, four, five percent, let's say it's even 0,5 percent, which is a little loss means that somehow there's a small margin where it's unclear what's going to what happened to the produce GO, right? The GOs should actually also be reduced because if you have to transport it a long way. You have to include the transmission losses, but but you go...
[00:33:56.430] - Alexandra
No, no, no, no, that's a smart point that you made as I realized that. So what? It's actually the electricity that you feed into the grid. OK, so that it's the grid electricity that that is that gets the GO. So it's not, if you, transmission losses to my understanding and not taken into account.
[00:34:21.420] - Torsten
All right. Because it's actually I think it can be depending on the site, it can be a two digit percentage rate of of transmission loss, which means then. Somehow there's a gap in the system. I don't know if there's...
[00:34:38.480] - Alexandra
There are many other gaps so the system, if you look, this is not even one of the main problems and the, the thing is at the moment, the situation and it always looked the last time I checked the graph, it always looked like this. You have, if you look at the yearly basis, you compare how many GOs are generated and compare it with how many are used. So are cancelled and what you see is that always more are generated than cancelled. You have a huge oversupply due to different factors. We might discuss them. They don't know. But because we have this, we are not we are not there yet. And I when it comes to probably the understanding also in the system, has some some flaws I would say we have flaws, but it's a moving target all the time improved. But not every there are not not, I mean, there are so many companies that don't, they don't run on green electricity, so many households, they don't even know that they can switch their electricity supplier. So there is a, it's not. Used that much. OK, so maybe five hundred fifty terawatt hours per year or so.
[00:36:00.390] - Torsten
So what's the percentage of the GOs which is which is sold, used on a yearly basis? Do you have a rough figure? Is it 50 percent, 90 percent or 95?
[00:36:14.490] - Alexandra
Nah, let me think. We have about generated GOs per year. We have about 600 terawatt hours. OK, and used we are about a five hundred and fifty. OK, so we are 50 terawatt hours at least long I think. OK, so and this is a lot because in that's Germany every year Germany consumes about. Easily 100 over 100 terawatt hours of GOs. So basically, Germany, Germany is already the biggest consumer and 50 terawatt hours is quite a lot if you look at it like that, which country consumes that much.
[00:37:03.720] - Torsten
Um, interesting. So who's the the typical user of those GOs? Is it like, for example, me who's using I'm for example, I'm a customer of Naturstrom. Do you know them? They've been around for some time now.
[00:37:20.490] - Alexandra
Yes. Yes, I do know them there.
[00:37:22.600] - Torsten
So do they also use that GO system or do they have their own system? So is every green electricity, let's say in sold, does it always work with GO or are there other schemes?
[00:37:39.300] - Alexandra
No, it's only GOs so Naturstrom and Lichtblick and you name them, they have to. That's by not the physical law, but the legal law they know. And it can be it depends really. I don't know the situation in Naturstrom, but it can be for instance, maybe they have, let's say, they have their own assets let's say they have their own hydro power plant. Right.
[00:38:04.800] - Torsten
They have a lot of own assets.
[00:38:07.100] - Alexandra
Yeah. But still, they have to this power plant needs to generate GOs and they have to cancel GOs on your behalf because you're consuming that electricity. So you're not. Yeah, they have to do it.
[00:38:20.700] - Torsten
All right. So they produce them and cancel them themselves. So they they do, it goes forth and back and I guess they can't guarantee, I do get electricity 24/7. So I assume they also need to buy, electricity for the for winter day night for nighttime's, so they at least they compensate the, the lack of electricity at certain points in time with those GOs, right? So for them, it's also because otherwise they wouldn't couldn't sell me green electricity 24/7 for the whole year.
[00:39:00.840] - Alexandra
Yeah, I mean...
[00:39:02.590] - Torsten
Because they don't have storage, as far as I know.
[00:39:05.040] - Alexandra
You're probably a very special person, but Naturstrom does not think about you like this. For Naturstrom they have a, let's say, a pool of many, many thousands of households. And what they do, I think, please Naturstrom correct me if I'm wrong. What they do is they average, they know about all of their household. They know what how much they're consuming on an annual basis, let's say, on a quarterly basis. And then they will cancel this amount of guarantees of origin. They don't think about how much electricity do you use at night or during midday or when you're...
[00:39:43.170] - Torsten
So that's not relevant. OK. Right. Good. And, um. So the EU implemented that GO scheme to promote green electricity and they basically they created that scheme for. The GO to see that extra value to create that extra. The value in green energy?
[00:40:09.850] - Alexandra
No, they created in order to give the consumer a choice, in order to give the Torsten in Switzerland a choice and to give Torsten in Germany a choice, because, you should be able to choose your electricity supply or the tariff that you have according to different parameters. Is it green? Do you want to have the cheap dirty or do you have the cheap green or do you have the premium green? Right. You should have the choice. And that's why the tracking system was created in order to enable the consumer to see on the bill that you have on your annual bill it needs to be disclosed by EU law that you have all the transparency about the electricity that you consume, and that was the purpose of the guarantees of origin. It was not to create extra revenue. For that they had feed-tariffs.
[00:41:03.940] - Torsten
Right. Ok, so it's just for the, let's say, liberalisation of the electricity market, is it also used for not only for the greenness of the electricity, but also for the you know, I'm buying. You know, I could have, my neighbor, for example, he uses he he's with a Munich based electricity company. Obviously he doesn't get electricity from Munich or from those plants around Munich. Is it also base for that scheme that it's not only about the greenness, but also just the origin, like the physical origin? Or is it only used for the trading of those of the greenness?
[00:41:45.090] - Alexandra
Yeah, yeah, good question. It's also, one information that's also on that thing is the country of origin and the location. OK, you know the asset if you want to know it, ok. OK, so that means. There is, and that's why prices from different countries are a bit different. So actually, German hydro always trades at a premium, is a little bit more expensive than Norwegian Hydro because Germany likes to have their own stuff. You like to have your stuff. And the most expensive is in the Netherlands. They always much more expensive than the rest because they even want it more. They want it really local, really local dutch wind, and dutch wind and solar, they really love, and you can sell this tariff even more expensive. There are some other factors in the Netherlands that also push a bit their renewables production or those, use when it comes to GOs. But there is a local factor, a local flavor on that.
[00:42:51.330] - Torsten
Yeah, interesting. So what's the typical price for GO? Let's talk about the let's stick to the what's the cheapest? I mean, you talked about the Iceland GO, which is very cheap. And let's go then go to the Germany and the Netherlands since we talked about these. You have some rough, rough figures?
[00:43:12.100]
I them detailed as well. But when it comes to price it is a bit depressing. Look, what happened actually. Let's say there, we have this benchmark product benchmark, is Nordic hydro, Norwegian hydro, because it's just the most it, in all the GOs that are there. It's the most common one because the Norwegians have a lot of hydro production, OK? And that means this is the most liquid, most traded product. And so that's the benchmark. And if you look just at the benchmark price now, I elaborate a bit what the difference is later. Look at the benchmark. What happened since in the last 10 years, maybe 15 years, what happens? Prices were really bad and really low. So we are we are thinking ten to twenty five or ten to twenty three cents euro cents per megawatt hour. OK, nothing. And this is really important to know if you, I don't know what's the average, the average consumption of the household is a three megawatt hour per year or something, like that. And that means the average household needs to be green you need three GOs per year. And if it costs 10 cents it actually costs you 30 cents on the wholesale markets, we're talking wholesale market prices. That's really different, in theory. If you if you would have access to the wholesale market as a whole household, you can be green for nothing. OK, then we had low, low prices. And then what happened? It happened Fukushima. OK, so we had the big explosion nuclear thing in Japan. And this is when Merkel said we are leaving nuclear. And then this, of course, everyone was much more. All of a sudden people have become more aware about the electricity they consume. And then you can see a nice little spike here, it lasted about for a year until people forgot about it again. So and then what happened? Many years of flat, low price curve. And then what we saw end of 2017, beginning 2018, that the prices went crazy, actually. In 2018 we had prices of two euros per megawatt hour for the benchmark product and we had eight euros per megawatt hour for Dutch wind. So Holland wind...
[00:45:50.350] - Torsten
It's the best wind!
[00:45:51.130] - Alexandra
It's the wind on this planet, these beautiful offshore wind farms, I mean pretty. And anyways then we had this big price increase because there was also reasons for that. A couple of reasons, but probably it was this very hot summer, if you can remember. So there was really little hydro production in Norway. So supply, I told you, prices, supply, demand, supply went down and prices went up. We had the two euros benchmark product, and since then it fell and fell and fell and fell, and we now I think at 15 cents, again, per the megawatt hour and it's unbelievable. Yes.
[00:46:33.750] - Torsten
What are the implications of this? It's.
[00:46:38.280] - Alexandra
That the producers are not happy right now.
[00:46:40.900] - Torsten
The producers are not happy about it... so there's little incentive now to produce in a green, electricity in a green way. That's what it means, right?
[00:46:49.320] - Alexandra
Yeah, it's a bit difficult, I would say, because the thing is, feed-in tariff is running out now. Yeah. So people even though you just said renewables become much, much more competitive and you're really there at the moment when it comes to the electricity market, you have the technology and you can produce it. But electricity in general is extremely cheap at the moment. Also due to Corona, of course, because there is just much less demand if all the, I don't know car manufacturers shut their operations down. And what do you have there? If you're in Germany, you got wind feed-in tariff for 20 years, right. And you are like, let's say you have the windmill that was built 20 years ago. It has not the latest technology of today. So you have to think, and now your feed-in tariff runs out and you would love to see prices of GOs for five euros because that's what you actually need in order to compensate for the lack of your feed in tariff. And now the prices are 15 cents. So what you're doing as a producer, you probably or as an asset owner. You're probably thinking, should I, what should I do with my asset now? And that has many implications. So the best scenario for renewables actually would be that the system gets a bit, a bit more polished so that it works better, so that the prices the market gets more mature. It's more traded and that there is some additional revenue for asset owners, for producers of renewable energy, because it is good to consume renewables, because we all, we don't want to have what we have now or 20 years back. We don't want to get the dirty stuff. We want to get the clean stuff.
[00:48:40.350] - Torsten
I mean, one advantage of those old solar wind farms is that they have been fully depreciated, right. So you don't have that CAPEX. So you really run on, you have the O&M. But the wind and the sun shines for free right. So that's the good part. But OK, so incentive is low. What are, would be, do you have ideas how the system could be polished? You used the term optimized...
[00:49:14.860] - Alexandra
Um yeah, many, many, many. Some are more political. Some are less political. So we just had this conference two days ago talking with the industry experts. And of course, we had our, we would make our own market survey every year. So we see the industry, what they think. And there comes like standardization, harmonization, full disclosure. I don't go into the details. It takes too long to explain. But what happens actually. The law comes from the EU, right. And in the member states, Germany, Switzerland, Sweden, Austria and such, they all, they all have their little differences. It makes it a bit hard. So it should be more harmonized, for instance, but much more concretely, actually. And that's the political political thing and it's my personal opinion here. What needs to happen? We we talked about Iceland. We talked about a bit about Norway. So we have the situation. Imagine Norway that's I mean, now I'm very close to the city, I am sitting here in Osla, so I see what happens. So the thing is, you, as a normal person in Norway, you walk, you drive into the forest, you drive into the mountains, and what you see is one hydro power plant after the other. And then your electricity guy supplier tells you... [internet connection issues]
[00:51:18.100] - Torsten
So we are back. You were just cut Alexandra and you were just talking about the Norwegian guy who drives into the mountains and sees all the hydropower plants. And then...
[00:51:29.210] - Alexandra
And then he knows that from the law of physics, he gets the electricity right is electricity is very perfectly green. And the thing is, why should he switch to a green electricity tariff when if the tariff that he already gets is per se green? Right. And there we have this typical Norwegian problem. What happens then is that there is no intrinsic or not much. It's growing, but it's not much. There is a low intrinsic demand from the Norwegians to cancel to use GOs. So what happens is that they export it and where do they export it to? To Germany. Because the German guy, he drives to the country and he sees a mix, he sees there are different sources of electricity. So for him, it makes sense to buy to switch to a green supplier, for instance, Naturstram. But it does not make sense for the Norwegians. So there we have one big, I would say, probably one of the most crucial flaws in the in that system, because, of course, the European Union, they have targets together. You knwo we want to build the renewables together and some countries lagging behind and some are more advanced and such. But in general, we have our targets to be the first carbon neutral continent, actually, in 2050. So there is a reason why, but it is as it is. But in fact, in the market reality it does, there are some things that don't work quite well, and this one is the Norwegian example. How to improve it is the question. There are many approaches for that. What you can think of, I would personally probably, my personal way of improving that would be. I would. Cancel GOs for the European electricity consumption, so then everyone in Norway can say that they are green. The companies can say that they are green. The households can say they are green by EU law. And then what is not needed and what is exported to other, can be exported to other countries, because otherwise something like this ideological double claiming happens because the Norwegian company that gets the physical electricity from hydropower plant. They know that it's, it's green, but on the book, it's not green, so. So that could be an improvement of the system.
[00:53:58.270] - Torsten
So, by by nature, it's green. But let's say on an economics legal basis, it's not green. Right. And that we have a disconnect between and for humans. If you're not an expert and if you have not listened to the show, then you just don't know, right? I mean, it's too complicated. I didn't know. I didn't know. And so it's it's it's. Yeah, it's interesting. So you you mentioned the EU green deal. Right. And there's another concept, it is different, but the CO2 price is, right. For example, this is now in discussion, at least in Germany. I don't know about other countries, that I think you have to pay. I don't know, something like 20 euros per tonne of CO2 or something for if you use that right. So this would make. Let's say coal, electricity, more expensive, like it's a more like a penalty, right? It's a and that sounds like a different scheme than the GO system right.
[00:55:00.850] - Alexandra
Yeah, yeah the carbon, there are also carbon certificates. So the carbon scheme is very, is different from the GO scheme. So GO and there are many angles to approach that.
[00:55:15.940] - Torsten
So there are also CO2 certificates? So we have. All right.
[00:55:21.720] - Alexandra
Don't go there!
[00:55:23.690] - Torsten
Don't go there? How do they how do they interact with the GOs?
[00:55:29.200] - Alexandra
Good question, but I can maybe set that there are many levels here and it's extremely complex, but it's maybe from one angle, from the corporate angle Corporation, your a big company, your Google Torsten.
[00:55:46.150] - Torsten
I'm Google. Excellent.
[00:55:48.390] - Alexandra
And so when it comes to reducing your carbon emissions as a corporation, what possibilities do you have? You have and where do GOs come into this picture? So you have different types of emissions. You have scope one emissions. We have scope two emissions. You have scope three emissions. So, yeah, I know... I know as scope one would be, let's say that's the direct emissions, if you have, I don't know as Google you don't have that, but let's assume you have a small small coal power plant and there it comes to direct inside my factory, right on my campus. I don't know where you have that in your dirty Google and then you have the carbon stuff and the emissions going out, that's direct emissions and there is scope two emissions.
[00:56:41.950] - Torsten
It could be for example, Google could have a diesel generator on the server bank as a backup. Right. So if they have to turn that on.
[00:56:52.390] - Alexandra
We don't, this thought experiment really is very flawed and that's my fault. But the scope two emissions, they're important for Google because they're big time electricity consumer. Right. And the scope two emissions in order, that's the indirect emissions that come from your purchase of your electricity. OK, so if Google would be dirty, which they are not at all, they would buy cheapest possible electricity from coal, power, whatever, and don't care. But what they're actually doing is power purchase agreements, green power purchase agreements. They're they're building assets. And they they of course, in this process, they're canceling guarantees of origin. So one part of your emissions basically can be reduced, can be set to zero even by engaging in the in the GO markets, in using green electricity. And that's that's that's one part. I mean, guarantees of origin will be there also for your gas consumption in case you're your car producer or your chemical company and you're using a lot of natural gas from next year onwards, there will be even guarantees of origin for bio gas. That means you can then substitute your natural gas with the clean stuff. So that's all sort of plays into the emissions. And you need the GO system, the certificate system, to really prove and track so that nothing can go wrong. And you really actually this continent is in fact decarbonizing and not doing something crazy. So, yeah, but this is such a big topic. So we could talk another five hours about it
[00:58:38.060] - Torsten
And scope three? Just the header what is scope three?
[00:58:42.370] - Alexandra
Ah the scope three! Yeah, the Google the program as they're sitting in the, whatever, offices or now in the Home Office, but if they were in their offices without corona, then they would need to come to work and use the car and use and transport and all of emissions that are really hard to sort of out of control of a normal employer. Right. So it's other emissions, but you can do some nice little offsetting there with some other voluntary carbon certificates but that's a whole.
[00:59:19.240] - Torsten
Ok, just to get it. Good. So, um, so we GOs the guarantees of origin. We have CO2 certificates, which we don't want to start the big discussion now. But that's another scheme we have in place for, let's say, help the help to go green. And then we now in discussion is the the CO2 pricing, is that correct? These are three different independent schemes, right.
[00:59:49.810] - Alexandra
The CO2 pricing, I mean, there is the so-called EU ETS scheme. It's obligatory a amendatory carbon market. So if you're actually purchasing carbon emission allowances and there is trade in these allowances and that's an obligatory market, then you have the voluntary carbon market, then you have the green certificate market. So, yeah, just to say carbon price going up, it's not that easy. And I'm also I have to say I'm not the expert on the carbon field.
[01:00:23.820] - Torsten
OK. Wow.
[01:00:27.060] - Alexandra
So it's very big, and if you are a company for you with the green deal, this will get extremely, become extremely, extremely important because you will have to report from next year onwards end of next year. Your, in your annual statement. In your annual report, you will have to report your sustainability actions. And now there will be a big shift from companies that have to actually start really, really dive into that subject matter and to understand their emissions and what is in line with taxonomy, what is in line with green deal? What does it mean to be sustainable, to be sustainable? And this, as we already touched, we only touched upon one, one tiny little aspect of that. And it's gigantic and it's complex. And but the fun part of this is if we are through this in 2050, the world will not look anymore as it looks today. So this is really the fascinating part of it.
[01:01:36.460] - Torsten
Cool. Cool. Hey. Thanks a lot for this, let's say, initial introduction to the call to all these schemes. I personally learned a lot and we haven't talked a lot about Greenfact, which I appreciate a lot that you took the chance to give as a general lecture. But do talk about Greenfact, what do you what what do you how do you make money? Or what's your what's your business model in that area?
[01:02:11.210] - Alexandra
The business model, I would say we are. We have maybe two different things, three different things. One is we have a website, a platform with price information, particularly guarantees of origin, some other certificates, but we don't go there as well. But why is it important? Because let's say utilities, electricity suppliers, companies, bigger companies that use that stuff or that really actively engaged in the market since there is not much price transparency? We actually provided price transparency. So we show them what it really costs and why?
[01:02:53.230] - Torsten
So this is business intelligence and how do you get your information? How do you get the numbers from those transactions?
[01:03:01.030] - Alexandra
We have eight partners, so that means we have one big broker company and some other smaller ones that team up with us and they give us their prices and we report on the prices. So that means either we have a connection to their system or they report that they buy an Excel sheet. And then we we post it basically on a daily basis. So you can see you can log in and then you can see prices there and you can see market news and such.
[01:03:33.130] - Torsten
So how big is Greenfact? How many people work for Greenfact?
[01:03:36.680] - Alexandra
We are six people, yeah.
[01:03:40.810] - Torsten
And your customers are basically big, what utilities, or end consumers like big companies who need to have the, who want to go green? Like is Google a customer of yours?
[01:03:52.750] - Alexandra
No, I wish I had Google.
[01:03:57.190] - Torsten
They just announced they want to go take the next step, right. So they basically are in a way, Carbon Neutral, but I guess they they understood the scheme and now they understood they are. Sort of green now they want to take the next actions.
[01:04:11.510] - Alexandra
They really know what they are doing this so big, I mean, I and they have this power purchase agreement, long term agreements. I don't know if they really. But if if it's the case Google, if you need to look into the market on a daily basis, let me know. I can help you. But they're, our standard clients, are energy market participants on the producers. We have utilities, electricity suppliers. We have traders in the market and service providers. So everyone was engaged with the market on a very, very regular basis. And also bigger companies, car companies, some of them, and chemical companies that are really, that are high on the sustainability, you know, that really have an aggressive agenda there. They know that they are not competitive anymore. If they don't, if they are not green, if they don't do their homework. And so that's the part of the transparency pricing. But we obviously from when it comes to consulting, if there is a company or a utility or a producer and they need the data, they want to understand one particular market and what what are the drivers there? And because I already touched upon it, this field is so big, rules are a bit different in every country. And to understand sometimes, you know, it requires resources. We write bespoked reports, we give workshops, we teach them that stuff so they don't have to learn everything by themselves because as we discussed it, it takes sometimes years. And then we, of course, we dive into new markets right now. And I'm really, really excited of everything that is bio gas at the moment, biofuels. Because I, what the interesting thing about the sector, we're talking about decarbonisation towards 2050. The thing is, there is one sector that has still emissions above 1990 levels and that's the transport sector. So this is really high on the agenda when it comes to decarbonising this continent. So we have, we will see a total shift from natural gas consumption to bio gas consumption. And then we all of a sudden talking about bio methane. We're talking about hydrogen and all the green gases. And what do they need? They need a nice guarantees of origin system for that. It will come next year. This is what I will be busy with in the next 10 years, probably.
[01:06:44.990] - Torsten
Yeah, with a high level of complexity and the legislation and international, and so many countries involved, it looks like you're not going to run out of business. Fantastic! Alexander. As you mentioned, we could keep on going, I must say, I'm brain dead. It took me, it was so challenging to to dive into this scheme. So I guess we should stop here before I fall apart.
[01:07:27.220] - Alexandra
I'm sorry. I'm sorry for killing you.
[01:07:30.820] - Torsten
We can do this. We can repeat it at some other point. And yeah, let me digest that. And I would hope maybe you're interested in coming back onto the show. And there's so much dynamics in the sector. And I can tell I can feel I can understand that this area we talked about is super fundamental to bring the energy transition forward. Right. Because this is where the economics, the value transaction, the money transaction occurs. Final question, in a way, we touched it already, right, but what do you think what really needs to happen to try, let's say, at least to really accelerate the transition? Right. And you talked about 2050 and many say this is way too slow. Right. With the complexity and with a number of, let's say, only talk about Europe. Right. I mean, this is actually the topic should be the whole world, but only about Europe. This is so complex because so there's so much legislation obviously involved. How can we accelerate it? Right. And maybe an. Help the whole world go green.
[01:08:44.770] - Alexandra
Hmm. Oh, it's big. There are many things that you can do this morning, what I thought about I was thinking about just 2050 thing and I was thinking. That there, you know, I was never a green person or anything. Never in my life, now I am, because I thought these do gooders and they're just talking and posting stuff on Facebook and I don't care and they don't do anything. What I think what what will happen from also the people in the sector from the people that are coming, all the young people, they are coming like new people in my team and such. What what what happens and what I can see and what needs to happen in the next year is those people, even if they have a green agenda, what what do they need to they need to come into the markets. They need to understand how it's functioning and you saw it's complex. They need to understand why it is, as it is, all the factors they need to have the vision until 2030, 40, 50. I mean, it takes some time what and how they want it. And then along this way, when they are morphing the old stuff into the new stuff, the world will be completely different in a couple of years. And they have to generate a value. They will create jobs, a lot of jobs from engineering jobs to market jobs to podcast jobs, I don't know. So a lot of jobs and a lot of value will be created. A lot of money will change hands and will be in the sector. So so a deep understanding of the problems that we have. And and then from there, you create the new thing the exciting thing and yeah.
[01:10:51.150] - Torsten
Wonderful, final words. This is also the reason why we do this podcast, just to show also many people who are interested in doing something good, something sustainable, something something green, that there's plenty of job opportunities. Right. There's plenty of problems and problems means there's there's opportunities for solutions and business. Excellent ending. Alexander, thanks a lot. That was super interesting and all the best for you in your home country and all the best for for Greenfact. Right.
[01:11:27.510] - Alexandra
Thank you it was very nice. Thank you.
[01:11:31.760] - Torsten
Thanks, Alexandra.
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