Dr. Jan Haizmann is CEO of the Zero Emissions Traders Alliance, known as ZETA,, a new organsation based in Dubai with an eye to educate markets on the green energy transition.
Dr.Haizmann is an attorney and energy markets specialist with long experience in the regulatory and legal affairs, as well as commercial functions, of large wholesale commodities trading firms. Previously based in Belgium and the UK, he has recently relocated to Dubai.
Since 2005, he has been an independent consultant advising clients on legal and regulatory aspects of energy trading. He has held various executive functions within the European Federation of Energy Traders (EFET) and the European Energy Exchange (EEX).
The European Commission has engaged him to lead various technical assistance projects related to the structuring of transparent energy markets. He has advised on the development of modern energy commodity markets in Ukraine, Turkey, and Azerbaijan.
DN met with Jan last week to gain insights on his work to develop zero emissions energy commodity markets in the GCC-region and beyond.
DN The Zero Emissions Traders Alliance – ZETA – was recently established with staff in Dubai. What is its origin?
JH ZETA is an initiative of Dii Desert Energy, an independent think tank and international industry initiative advocating for clean energy systems in MENA. The role of ZETA is complementary, to develop clean energy markets in MENA and, thus, globally.
While ZETA is a member of the Dii-family, it is fully independent in terms of finance and corporate membership.
DN You have recently located in the GCC region. What challenges do you see here for energy markets?
JH In the GCC region, neither markets for electricity nor carbon exist yet. There are no national or regional markets with transparent price discovery, such as exist in Europe, Australia, the USA and elsewhere.
No green certificates are traded in the GCC, because the “green” quality of RES is not recognized.
It is ZETA’s mission to change this situation, because in reality the green quality of sustainable energy production should have a price to incentivize companies to invest more in it.
Ultimately, energy markets, in particular carbon markets, will need to come to UAE and neighboring GCC states, simply because their zero carbon targets cannot be met without a market mechanism.
DN In Europe, there is physical trading of electricity, natural gas, and carbon as commodities. Why is this kind of market essential for energy transition?
JH The GCC region is a leader in sustainable power generation. But the long-term off-take agreements at fixed price, which banks require for these projects, have commercial risks pertaining to them.
Unless these agreements can be hedged in a market, they will not protect the investor in terms of price volatility. Commodity markets provide for a transparent price discovery and offer hedging options over a long period of time.
Without hedging options available in the region, sustainable projects will run into financial difficulties over time.
Ultimately, we need to scale up the decarbonization of our economies, in UAE, in GCC and globally. Scaling up can only be delivered by the market.
DN You’re talking about trading of commodities and also the trading of certificates carrying the green attributes of these commodities.
JH ZETA promotes creating price transparency for all zero-emission electrons and molecules, including hydrogen.
In term of certificates, European stakeholders have successfully set up the Guarantee of Origin system, which is a certificate that is given in view of the RES-generation of electricity for example. Similar certificates are currently being developed for biomethane and hydrogen.
Therefore ZETA will assist its members in dealing with a transition, from trading fossil fuels and electrons, to trading low-carbon and renewable energy carriers and related certificates and guarantees of origin. We are proposing a suitable market framework and transaction tools for this, including standard contracts.
DN How will this trading get started?
JH In its start-up phase, ZETA will be actively involved in regional and international discussions about markets for physical energy carriers and potential markets in tradable certificates with carbon abatement and renewable attributes.
Our vision is to encourage the first emerging ‘low or zero carbon content’ and ‘green’ commodity traders to bring producers into contact with off-takers, including retail suppliers and large consumers, and facilitate their assembling of wholesale portfolios and positions.
ZETA also aims to help connect GCC or MENA trading venues to equivalent markets for trading low or zero carbon and/or green products.
DN You are currently leading discussions about creating a ‘clean energy hub’ – is this a trading platform?
JH The ZETA Clean Energy Hub round-tables focus on conceptualizing trade with sustainable molecules and electrons over a market platform.
A Clean Energy Hub is a marketplace, where you trade either the physical or virtual products. For example, physical volumes of hydrogen, or H2-certificates that express the green quality of the underlying product.
Clean energy hubs deliver a price discovery for green hydrogen and other sustainable fuels. Creating a price for green hydrogen is what the HyExchange project in the Netherlands and HyBeX project in Belgium are about. They plan for H2- shipments to be auctioned, or part of shipments, that will be traded to create a price benchmark.
DN Does this trading require a special platform or can it occur on existing commodity exchanges?
JH You ask, why do we need a clean energy hub for this? We have already energy and gas hubs, which could just add another product. But it’s not easy. Because the green qualities of sustainable products are regulated. It’s a more complex way of trading of green hydrogen for example.
You need to make sure it qualifies under the rather complex European regulations in RED II and RED III, which very strictly define the greenness or the sustainability of that energy.
DN Will ZETA be creating the standard contracts and products for green hydrogen/ammonia trading in MENA?
JH Yes. But before starting a standardized contract, market conditions must be established, as these market conditions are reflected in the contracts.
ZETA can assist in creating effective regulatory frameworks to make these markets work.
DN What are your next steps in terms of growth?
JH As ZETA is a new initiative, not yet a year in existence, the secretariat needs to focus on membership-building. Our main activity now is to work with companies that are prepared to put their resources into this industry initiative.
DN How will you work with the companies?
JH ZETA will seek contacts with producers and suppliers, exchanges and other participants in energy value chains in MENA, with a view to partnering to establish or adapt low or zero carbon and green products.
Net zero and green molecules will probably be tackled first, to be followed at a later stage by net zero and green electrons. As a first step, ZETA shall reach out to partners to help build an OTC (over the counter) market for transactions in green certificates in the GCC countries.
DN In addition to your member companies, what other entities will you work with in the region?
JH Market facilitators such as OTC platforms, brokerage platforms, or exchanges will be engaged to work out with ZETA member companies the feasibility of pilot schemes for CO2 abatement rights, green certificates based on voluntary schemes, physically settled commodities (e.g. green hydrogen, ammonia, green fuel certificates, RES-power, and others) and respective certificates.
ZETA will engage with early movers to work out priorities for products already sold OTC today, which should bring about more variety of products in terms of maturity and settlement.
DN Also governments?
JH Cooperation with regional Governments and their representatives shall be to raise awareness about the benefits of wholesale markets towards delivering on carbon neutrality.
ZETA will take the lead in terms of market design and market regulation to incentivize the emergence of market instruments for carbon neutrality.
The strategy is to create regional, rather than national markets. Fully fungible regional products for zero emission physical commodities and ancillary certificates only work if the adopted standards are mutually accepted in the neighboring states and in the countries where the commodities are mainly delivered to.
DN ZETA is focused on MENA. Will it eventually become global, based in Dubai with members worldwide?
JH Yes. ZETA is promoting zero emission markets globally but our initial focus is on this region.
If we think in the regional context, we can see a situation where this region can industrialize itself based on zero emission industrial production. An excellent example is demand for green steel. Why not produce green steel in the UAE and export green hydrogen extensively to Europe?
DN What are your current activities?
JH We started our educational sessions right after our foundation was set up in September last year, focusing on value created by transparent energy markets.
Our next Clean Energy Hub Workshop will be on 15th April in Abu Dhabi, with an explanation of the mechanics of market platforms.
