Utility Week

Utility Week 5th December 2014

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

Issue link: https://fhpublishing.uberflip.com/i/425912

Contents of this Issue


Page 28 of 31

UTILITY WEEK | 5Th - 11Th DEcEmbEr 2014 | 29 Markets & Trading This week Carbon price buoyed by reform plans Positive outlook for market reform proposals sustains rise in carbon price to €7/metric tonne The price of carbon emissions allowances on the European Union Emissions Trading System (EU ETS) continued to reach new eight-month highs at the end of November as the positive out- look for market reform legisla- tion bolstered sentiment. The EU allowance (EUA) price hit highs of €7.21 (£5.72) per metric tonne of carbon emitted, despite a weaker energy complex led by heavy losses on the crude markets. Trad- ers say the carbon price has remained buoyant into early December, hovering around the €7 mark, with a resilient outlook for prices. "Demand remains healthy for EUAs; we do not con- sider prices to be overextended to the upside given the current political outlook for the passage of [reform] leg- islation through the committee amendments and to the EU parliament," said a carbon trader from CF Partners. The bellwether EUA contract dipped below the €7/tonne mark on 1 December aer heavy losses on the Brent crude market the week before, but recovered ground to close at €7.07/tonne. CF Partners said falling Brent prices "undoubtedly" brought soer pricing levels to the carbon market as a result of weaker sentiment across the energy complex, but added that the dip also came in anticipation of mar- ket volatility ahead of a key meeting in Brussels over the much-needed market reform. "We believe downside risk remains limited," the trader added, saying the reform proposals were likely to attract wide-ranging support. JA ELEcTrIcITY Peterhead retakes standby test… The Peterhead gas-fired power plant has repeated the winter standby test that it failed earlier in November, aer its previous issues "were rectified", SSE said. The plant was forced to repeat its mandatory monthly test to prove to National Grid that it could be relied upon to ramp up generation should winter demand exceed the UK's diminished supply margins. SSE said it successfully completed the latest test aer repairing one of the plant's three generating units and correcting a small fault with another. Peterhead generated just 160MW of the required 780MW in the first test because only one of the units was able to generate power. Repair work taking place at one of the other units and "a minor electrical" fault on a second unit reduced capacity. The monthly tests are required of all three plants that have been contracted by National Grid under the supple- mental balancing reserve (SBR) to provide back-up generation this winter. The decision to include Peterhead in the SBR has drawn criticism from power market participants who believe the plant is too old to provide reliable power generation. The other plants on the SBR reserve bench are Scottish Power's Ryehouse gas-fired power plant, which passed this month's test on 19 November, and RWE's Littlebrook plant. ELEcTrIcITY …as Littlebrook passes first time RWE's Littlebrook oil-fired power plant successfully com- pleted the first of its mandatory monthly standby tests last week, despite output faltering in the final hours. Data from National Grid on Friday morning showed Littlebrook's maximum output availability at 570MW. But just under an hour and a half before the scheduled end of the test, generation dipped unexpectedly. A spokeswoman for RWE told Utility Week the capacity "short- fall" was not a trip. Although she declined to comment on the cause of the shortfall, RWE transparency data indicates the cause as being related to the plant's boiler or heat recovery steam generator. A spokesman for National Grid added that the test was "broadly successful". It will be tested again in December when the next mandatory tests are to be carried out. Littlebrook contributed to normal grid balancing in late October before the SBR contract began on 1 November. In light of its recent use, the plant operator opted not to undertake a discre- tionary non-paid test. Traders see a resilient outlook for carbon prices Tricks of the trade Jillian Ambrose "This all but guarantees that heavy losses will continue" Why would one of the world's largest producers of crude oil opt to watch the price of its most valued commodity plummet? This is the question commen- tators have scrambled to answer in the days following Opec's decision to maintain global oil production levels where they are: well above flagging demand. This all but guarantees that the heavy losses sustained since the summer will continue, with some suggesting a floor of around $60/barrel in 2015. But the other interesting consequence of the five-year lows seen on Brent is a five- year low for the Russian rouble. The country's political and economic clout is intrinsically linked to its energy resources – a point made clear this year as sabre-rattling over European gas supply muddied the waters of the Ukraine crisis. With Russia now on its knees, perhaps the crude crash isn't such a terrible outcome for the US aer all. Although the link between gas and oil prices is nowhere near as strong as it once was, the fallout of the Brent crash has rippled out through the energy complex, resulting in not insub- stantial losses for gas and coal. And for what? Opec kingpin, Saudi Arabia's Ali Al-Naimi, seems happy enough to watch prices tumble, backing calls for production to hold so that the market can restore "equilibrium". To many, this can be loosely translated as "nipping the US shale oil revolu- tion in the bud". Why curtail supply and leave the door open for a newcomer when you can maintain market dominance?

Articles in this issue

Archives of this issue

view archives of Utility Week - Utility Week 5th December 2014