Corrected: ECEM: Weak fundamentals leave bearish mark on Nordic elcertificates

24 March 2014 18:28 Source:ICIS

Corrected: The below article, originally published on 24 March 2014, incorrectly listed the monthly elcertificate issuance for February as 1.4m, as opposed to the correct figure of 1.5m. A corrected article follows.

The Nordic market for elcertificates endured substantial month-on-month losses in March with prices responding to weak fundamentals after a temporary boost by news of structural reform, according to market participants.

ICIS assessments revealed most elcertificates lost more than SKr20 month on month with the March ’15 shedding SKr22 compared to February’s value.

One source suggested a bearish factor could be the difficult economic climate that several companies find themselves in whereby they need to sell elcertificates to raise revenues, partially to offset the impact of a mild winter which has left wholesale electricity prices subdued.

Meanwhile, a source from Swedish brokerage SKM said buying activity tends to be weaker this time of year with compliance buying having dried up for this year.

A further factor was a large surplus of elcertificates in the market which participants have put at 11m. The market is still reeling from strong issuance levels seen over the winter months, particularly from wind power. Data from Norwegian grid operator Statnett shows more than 1.5m elcertificates were generated by wind in December followed by a further 1.2m in January. February was the first time in five months that wind earned less than 1m.

Consultation period

The strength of the bearish sentiment put prices below levels seen in January when reports of quota changes were encouraging the market to explore its upside potential, a possible sign that the bullish impact of structural reform has dissipated from the market.

Furthermore quota changes have not been enshrined into law yet with the proposal in the middle of a consultation period which limits the magnitude of the bullish sentiment in the first place.

Issuance proved to be slightly below expectations according to one source, with a month-on-month decline in evidence, falling to 1.5m in February. Christopher Rene

By Christopher Rene