Utility Week

UTILITY Week 17th October 2014

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28 | 17th - 23rd OctOber 2014 | UtILItY WeeK Markets & Trading Tricks of the trade Jillian Ambrose "In 2008, oil prices under- pinned many gas contracts" How times have changed for participants in the Brent crude market. This week the price of Brent scrapped fresh four-year lows of around $88 per barrel as weak economic data continues to quell demand while suppli- ers shrug off calls to curb their output. Apparently prices between $80 and $90 can be tolerated by the Saudis, while Kuwait's oil minister has indicated a possible floor of $76. So by the time this But rather than the panicked sell-off you might expect this week, the current crop of gas traders has offered a collective shrug: Brent's not the market driver it used to be. It's a bit of a pity, in light of current prices ,that oil-indexed gas contracts have made way for supply deals based on the market they're destined for. Always the way, isn't it? Just as you unshackle yourself from the tyranny of an overvalued commodity, it halves in price. column reaches a reader those fresh lows seem likely to be even lower still. No-one is suggesting that crude is the new carbon, but it stands in stark contrast to its previous heady heights. Flash back to mid-2008 when that same inky barrel would set you back in excess of $140. Granted this was a world where banks were still too big to fail, but the extent of Brent's fall from influence doesn't stop at market price. In 2008 the price of crude would have helped to set the price for many long-term gas supply contracts and therefore the wholesale market price too. This week Nuclear restarts on schedule, say reports Power prices soften as sources indicate edF energy's nuclear outages will end on time EDF Energy's string of nuclear plant outages will end on schedule this winter, according to reports, as ongoing investiga- tions show that two-thirds of the units under inspection have the all-clear. Market sources told Utility Week that power prices soened following the news reports, which has eased concern that further delays to the full return of the fleet might tighten supply margins and raise the risk of blackouts this winter. The operator lost 2.5GW of nuclear capacity over the summer aer a crack was found in a boiler at Hey- sham-1. As a safety precaution, all units of the same design were removed from service for safety inspections. EDF Energy initially gave a mid-October restart date for its Heysham-1 and Hartlepool plants, but later delayed the returns, saying it would instead opt for a "phased return" between the end of October and the end of December 2014. In addition to the nuclear outages, the UK lost SSE's fire-damaged Ferrybridge coal-fired power plant earlier this year, prompting National Grid to take extra meas- ures to guard against the increased risk of blackouts, and causing market prices to rise. Further delays to the nuclear fleet return could have pushed prices higher on the power market, and further losses are still expected should the inspections continue on schedule, UK power traders said. The outages will cause EDF Energy earnings losses of around £150 million for this year, said analysts. JA energY Carbon prices hold at around €6/mt The price of carbon allowances on the European Union's Emis- sions Trading System (EU ETS) has held around the €6 per metric tonne mark following last week's 6 per cent gains. A UK-based carbon trader told Utility Week that the market price for carbon emissions ral- lied higher on 8 October due to increased utility buying, breach- ing resistance levels of €5.75/mt to climb to highs of €6.09/mt by the end of the day. The rally continued into the following day's trade with next year's allowances reaching €6.15/mt. A note from trading firm CF Partners said the increase in price for EU allowances (EUAs) was initially prompted by large- scale utility buying. Higher prices then attracted buying from speculative players to boost pricing levels further. Analysts at Thomson Reuters Point Carbon attributed the initial gains to limited sup- ply. The amount of allowances entering the market fell almost 50 per cent as no auctions were scheduled in Germany or the UK, helping to li prices. "We expect EUA prices to take a breather following the large jump last week," Thomson Reuters Point Carbon said in a note on 14 October. energY European renewable policy must be market-based Eurelectric has urged policy- makers to develop renewable energy policy that is market- based, using the European Union Emissions Trading System (EU ETS) as the key driver. In a new report, the pan- European electricity association said aer 2020 a market-based approach should be taken to ensure cost-effective deployment of renewable energy technolo- gies, which progressively phases out the need for subsidies. "On the one hand, renewable generation must be made fit for the market; on the other hand, the market must be made fit for renewables," the group said in a statement. The report explained that policy should be approached with the EU ETS as main driver for mature low-carbon technolo- gies, with support for immature technologies made specifically through research, development and demonstration funding. "Public support should be primarily oriented towards new, high potential, immature low- carbon technologies that have not reached market readiness," the report said. However, policy should also address the fact that the markets need back-up capacity to secure the supply for customers. How Also out of action: SSE's Ferrybridge coal plant

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