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UTILITY Week 24 10 2014

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28 | 24th - 30th OctOber 2014 | UtILItY WeeK Markets & Trading This week UK backs 2017 reform of carbon market UK says market stability reserve should come in four years before the proposed start date of 2021 The UK government said on Monday that it is backing the call for fast-tracked reforms to the European Union's carbon market to come into force by 2017. The UK's position paper says the introduction of the market stability reserve (MSR) should take place four years ahead of the current proposed start date of 2021 in order to correct the chronic oversupply of emissions allowances in the market. The 2 billion allowance surplus has undermined the functioning of the market, resulting in a system which does not send the right price signals to low-carbon investors, the government said. The UK will follow the lead of Germany, which also backs a 2017 start date for the MSR, to coincide with the end of the "backloading" of allowances. Under current plans, the backloaded allowances would be allowed to return to the market in 2019, with the MSR coming into force two years later. But the UK has called for the permits to be kept out of the market, either through cancelling them or placing them directly into the reserve from 2017. The MSR will allow a reserve of carbon permits that will increase or reduce the system supply in response to levels of demand, allowing the market to operate effec- tively as external circumstances change. UK energy secretary Ed Davey said: "Europe has the opportunity to show the world how we can cut emis- sions while creating investment, jobs and growth – but only if we reform the system, and reform it fast." JA eLectrIcItY National Grid opens balancing tender National Grid has opened the first round of its tender for demand-side balancing con- tracts for the winter of 2015/16. The transmission system operator will offer large energy users contracts to act as "bal- ancing tools" for the UK's elec- tricity system by reducing their grid demand. In the first round, which ends on 5 December, National Grid will offer contracts totalling 900MW, before the sec- ond tender runs over the spring of 2015 for a further 900MW. Demand-side contracts offered for next winter total more than five times those offered for the coming winter. Winter 2015/16 had previously been predicted to bring a "capac- ity crunch" due to the shutdown of older generating plant before new low-carbon investment is deployed. However, recent high- stake outages of nuclear, coal and gas-fired power plants have slashed supply margins for this winter, bringing the capacity crunch a year earlier. eLectrIcItY Returning nuclear plants constrained EDF Energy's Hartlepool and Heysham nuclear power plants will not return to full service when they resume operations later this winter, with full capa- city only expected by 2016, a company spokesman said. EDF said early last month that it plans a "phased return" of the Heysham and Hartlepool nuclear units between the end of October and the end of Decem- ber 2014, but added last Friday that the units would only return to between 75 and 80 per cent of their full capacity. The constrained supply will knock a further 240MW off the UK's total available capacity for this winter, following a string of unplanned outages. eLectrIcItY UK 'has a 6.5 per cent supply margin' The UK has a 6.5 per cent generation margin despite the loss of Didcot B power station due to fire damage, according to Baroness Verma. The parliamentary undersec- retary of state for the Department of Energy and Climate Change told the House of Lords on Mon- day that the supply margin would remain above the 4 per cent reli- ability margin this winter. She added that National Grid has around 3GW of "additional tools" to boost supply when margins are very tight at times of peak winter demand. In addi- tion, mutual assistance arrange- ments with the Netherlands and France are in the process of being "extended". Undermined: investors not receiving right signals Tricks of the trade Jillian Ambrose "Didcot is another blow, but it is just a 700MW loss" You could be forgiven for think- ing that the dramatic Didcot shutdown this week resulted in similarly explosive moves on the UK's electricity market. Aer all, every major news outlet issued the now familiar battle cry against impending blackouts. Aer a summer of unplanned outages at some of the UK's big- gest generating assets, the Didcot blaze is surely the final straw? Well, yes and no. Given the meagre amount of spare capacity available to the ing their hands over winter capacity following the nuclear outage news in balmy August, but the market reaction to the news was logically more significant than seen in the past week given that the Heysham and Hartlepool units combined represent more than four times the capacity of Didcot. Further evidence, if we needed it, that the reaction of a market is quite oen more rational than that of public opinion. UK grid this winter, every mega- watt counts. But while the loss of Didcot is another blow to already hard-hit capacity margins, it is just a 700MW loss. Baroness Worthing- ton may have had a point when she said there's no need for the "hysterical headlines" over the loss of a plant. And the markets back her up. In the days following the blaze, the word most used to describe wholesale power prices was "muted". Pric- ing levels resisted the downward pull of bearish gas prices, yes, but they remained steady com- pared to the week before, with no sign of a rally in sight. By contrast, few were wring-

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