Utility Week

Utility Week 25th October

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Markets & Trading This week Coal industry says government enthusiasm for carbon capture and storage technology is waning Loss of coal generation 'drives price increases' The coal industry has hit out at the "conspiracy of silence" surrounding the effect on rising energy bills of phasing out coal power stations. The Association of Coal Importers has called for policy Infrastructure must be preserved for CCS intervention to prevent "premature closure" of coal plants and preserve a "critical mass" of infrastructure to supply future plants equipped with carbon capture and storage (CCS). Gas generation produces roughly half the carbon dioxide emissions at twice the cost of coal. Nigel Yaxley, managing director of the Association of Coal Importers, said: "There almost seems to be a conspiracy of silence among politicians about the reason for it [price rises] and to deflect blame onto the energy companies… "All three parties have essentially made a choice to sacrifice low energy prices for climate change policies." Coal generators must decide in January whether to "opt in" to Europe's Industrial Emissions Directive, which requires them to upgrade their equipment to reduce emissions of sulphur and nitrous oxides or close by 2023. A report by the Association of Coal Importers said government "could and should" use its proposed capacity market to "get best value from our existing coal infrastructure so that it is still here in years to come". In the long term, Yaxley argued the UK could meet its climate change obligations more cheaply using coal plant equipped with CCS. He said it was "scandalous" that the government "seems to be going lukewarm" on the technology. MD Electricity Elexon must focus on customers to expand Energy regulator Ofgem has warned that customer interests must be the top priority in Elexon's plans to extend beyond its statutory role in administering the balancing and settlement in Britain's power trading. Ofgem's senior partner Hannah Nixon said: "The key test will be whether the detailed arrangements operate in the best interests of consumers." Nixon was responding to an independent review of Elexon's governance that followed its bid to extend beyond its statutory role as administrator of the Balancing and Settlement Code (BSC). "We strongly agree with the review's conclusion that the voice of the consumer should be heard," she wrote. After consultation last year Ofgem concluded: "There may be benefits in facilitating the removal of structural obstacles to Elexon's diversification." The review, led by former Lloyd's Bank deputy chairman Bill Knight, proposed 20 amendments to Elexon's governance. These included removal of the licence conditions that restrict Elexon's expansion and the provision of funding to enable consumer representative Consumer Futures to "have input at working group level" in Elexon. "In an ideal world it is possible to imagine Elexon providing services in the energy field on a limited risk or even risk-free basis and earning fees which would defray the Balancing and Settlement Code parties' funding shares," said Knight. Energy Scots toughen up planning policy Scottish environment and climate change minister Paul Wheelhouse has said there are "no environmental permissions that would allow hydraulic fracturing (fracking) in Scotland at this time". The comments came as the Scottish Government said it would strengthen Scottish planning policy covering onshore unconventional oil and gas. The policy, due to come into force next year, is designed to reinforce environmental and community protection and community consultation guidance on planning applications for unconventional gas extraction. Proposals "should also provide an adequate buffer zone between sites and settlements". Environment and climate change minister Paul Wheelhouse said it was important that the views of local communities – and the impact on the environment – were given "due consideration" in the planning process. Open market Dr Andreas Stephen British households are rightly concerned about rising energy prices, but they show a remarkable reluctance to search for a better deal and switch providers. Energy switching by consumers is in decline and currently stands at just 14 per cent of households. Most do not even ask their current energy supplier if they are on the best tariff. With such a low propensity to switch, it is unsurprising that the dominant strategy for the big six energy companies is to stay "Consumers hold the key to a more competitive market" in line and react to each other's price increases. The size of the market up for grabs through the aggressive targeting of new customers is simply too small. More could be done to make comparing energy prices and switching easier. However, the biggest barriers are the perception that switching is difficult and the 28 | 25th -31st October 2013 | UTILITY WEEK lack of consumer enthusiasm for energy price comparison. So rather than announcing future interventions in the energy market, which could prove damaging in the long run and may raise prices in the immediate future, it is more sensible for politicians to focus on facilitating greater competi- tion. Switching must be made easier and consumers need to understand that they hold the key to a more competitive market. They should also encourage suppliers to target each other's customers more and incentivise the introduction of more efficient electrical and gas products. Dr Andreas Stephan, professor of competition law, University of East Anglia This is an extract from a blog on http://competitionpolicy. wordpress.com/

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