Utility Week

Utility Week 4th October 2013

Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government

Issue link: https://fhpublishing.uberflip.com/i/184245

Contents of this Issue


Page 16 of 31

Finance & Investment This week Electricity Market Reform could result in b iomass schemes becoming 'uninvestable' Biomass investment at risk under EMR Biomass and waste-to-energy projects could become "uninvestable" under the government's new support framework for renewables, experts are warning. The Energy Bill going through Parliament introduces a guaranteed power price for each renewable technology, topping Piling on pressure: costs not stable under EMR up the wholesale market price as required, through contracts for difference (CfDs). A report by law firm Brodies for Scottish Renewables found that while some investment risks are reduced under the CfD regime, others are increased. Keith Patterson, renewable energy expert at Brodies, explained: "Projects with a fuel input such as biomass or waste-toenergy are more at risk because, while the reforms introduce stable revenues, they don't introduce stable costs. If that cost base varies and you are not able to respond to it, that potentially makes these projects uninvestable." The Renewable Energy Association (REA) has proposed linking support levels to the Argus Biomass Markets index. In its consultation response to the government's Electricity Market Reform draft delivery plan, the REA also warned the withdrawal of all support from dedicated biomass power plants could put off investors. Biomass combined heat and power (CHP) plants are supported under the regime, but face a "precipitous cliff edge" in revenue if, for example, a heat customer goes bust and leaves only power output. The trade body said to get significant biomass CHP deployment, the guaranteed "strike price" would need to be around £140/MWh – £20/MWh more than the government's draft price. Stock watch The share prices of the big six energy companies plummeted in response to Ed Miliband's proposed price freeze, announced on 24 September. Analysts predicted that the share prices of the UK-listed companies, Centrica and SSE, would now move up and down with opinion polls, according to the likelihood of a Labour victory in 2015. Centrica's largest shareholder, Investec, dubbed Miliband's policy "economic vandalism". Pan-utility Climate change risk blindness 'will cause next global crash' Blindness to the risk of climate change "will lead to an inevitable global crash", a leading energy researcher has warned. In his book The Energy of Nations, published last week, Jeremy Leggett said big energy was about to repeat the behaviour of the financial sector which caused the economic downturn. The day before the nter I governmental Panel on Climate Change published a scientific assessment of climate change risk, Leggett urged government and business to nurture clean energy. He has become the latest to warn of a "carbon bubble" in the markets: the idea that fossil fuel is overvalued because it cannot all be burned if governments are to meet their carbon targets. "Brain scientists tell us we have a very worrying collective tendency for blindness to the kind of risks that can crash economies, and imperil civilisations," Leggett said. "The financial crisis suggests they are right." Energy Tariff freeze would affect credit ratings An energy tariff freeze would hurt the credit rating of all UK Centrica share price, 18 September – 1 October utilities involved in supply, Moody's has warned. The big six would be hardest hit by Labour's proposal to halt price rises for 20 months if elected in 2015, the ratings agency said on Monday. Labour leader Ed Miliband's estimate that the freeze would cost the sector £4.5 billion "seems reasonable", the analysts said, meaning supply firms would be likely to start making a loss. "Given that network charges and renewable subsidies increase annually with inflation, the cost base of suppliers is expected to rise accordingly, and with tariff caps in place, profit margins will quickly erode." Energy Scotland 'could not afford' to go it alone The Scottish Government will be unable to finance its own energy industry if it gains independence in next year's referendum, according to the UK energy minister Michael Fallon. Speaking at the Conservative Party conference, Fallon said Scotland's renewable, nuclear and potential shale industries would suffer: "The UK as a whole pays £500 million a year towards renewable energy in Scotland: 40 per cent of total UK funding for renewables. A separate Scotland could not afford that scale of support." sse share price, 18 September – 1 October 1580p 404p 1560p 396p 1540p 388p 1520p 380p 1500p 1480p 372p 1460p 1440p 364p Date 18 23 24 27 30 Date 18 23 24 27 30 UTILITY WEEK | 4th - 10th October 2013 | 17

Articles in this issue

Archives of this issue

view archives of Utility Week - Utility Week 4th October 2013