Utility Week

Utility Week 6th February 2015

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

Issue link: https://fhpublishing.uberflip.com/i/457279

Contents of this Issue


Page 27 of 31

28 | 6th - 12th February 2015 | utILIty WeeK Markets & Trading This week EU market reform to boost carbon price Planned changes to eu carbon market could quadruple price of allowances to €24/mt by 2030 Plans to reform the European Union's carbon market could see the price of emissions allow- ances climb to an average of €13 per metric tonne before the end of the decade, and as high as €24/mt from 2021 to 2030. The prevailing €7/mt market rate for emitting carbon offers little market incentive to decar- bonise, but plans to remove a 900 million allowance glut, currently weighing on pricing levels, through a market stability reserve from 2018 could help to give a clearer price signal. Analysts at Thomson Reuters' Point Carbon team expect the carbon price will rise gradually from now on as a result of the assumed market reform, which is cur- rently being debated by policy makers in Brussels. "The design of the market stability reserve is the sin- gle most important factor driving our price expectations until 2030," said senior carbon analyst Emil Dimantchev. "A steadily increasing carbon price will provide pre- dictability to investors… If you know prices are on their way up, as a market participant, you are more likely to account for the European Union Emissions Trading System in business decisions," he added. Most experts agree that a price above €40/mt is necessary to encourage switching from coal to gas, while proving a more economic case for investment in low- carbon technologies. But whether policy makers will actually deliver the upward price trajectory is still far from guaranteed, the analysts add. JA energy Ofgem urged to drop profit estimates Ofgem's monthly report on esti- mated energy company profits is "wildly exaggerated" and should be abandoned, according to trade association Energy UK. The group said independent research undertaken by eco- nomic consultancy Nera shows that Ofgem's monthly supply market indicator (SMI), based on prevailing wholesale market trends, has consistently reported inaccurate and misleading esti- mates of energy company profits for the past four years. In some cases estimates have been flawed by as much as 200 per cent, the research shows. "The report shows that the SMI takes no account of what energy companies have to pay out in financing costs, interest or tax, but gives the mislead- ing impression that there are massive profits to be made," said Energy UK chief executive Lawrence Slade. "It's high time the SMI was abandoned." energy UK solar capacity rises by 3.1 per cent Overall UK photovoltaic capac- ity increased by 3.1 per cent in December last year. The latest figures from the Department of Energy and Climate Change show that solar capacity stood at nearly 5GW across more than 650,000 installations at the end of December 2014. The data also reveals a 4.4 per cent rise in solar capacity to 4,388MW at the end of 2014 Q3, compared with 4,204MW at the end of Q2. Capacity commis- sioned and accredited under the Renewables Obligation in Q3 was 1,503MW, up 5.3 per cent from Q2. energy Wind power hits 14 per cent mark Electricity generated by wind turbines set multiple records over January, with the average output over the month contrib- uting 14 per cent to the total generation mix, according to RenewableUK. Wind power set records for average output over half-hourly, weekly and monthly timescales, the trade body said, citing National Grid data. The month began with half- hourly wind power achieving a record stake of the total genera- tion mix at 31 per cent on Friday 2 January, when overall demand would still have been low, fol- lowing the holiday period and ahead of a weekend. In the following week, wind power exceeded its previous average weekly record to reach 1.119TWh of electricity gener- ated. Total installed capacity has reached 12GW, including on- and off-shore projects. A higher price would encourage decarbonisation Tricks of the trade Jillian Ambrose "A safety net of 2-5 per cent certainly didn't feel safe" Well, here we are. Aer months of feverish speculation over whether the UK is prepared to cope with winter, the cold has well and truly set in. As temperatures have slid down, energy demand levels have been climbing steadily higher to reach their peak this week at around 54GW. But far from flickering lights and loom- ing blackouts, the UK is comfort- ably getting by with forecast surplus capacity of between 7-8GW at its tightest – a margin few chosen to collect consumer- funded handouts to keep their plant out of the market and ready to react. And with wholesale prices at their lowest winter levels in years, the seldom-used plants have probably done quite well for themselves. At £250/MWh for a monthly test run, their opera- tors could hardly complain. And neither could National Grid. Aer all, it's better to be safe than sorry three months before an election. of around 14 per cent, which is reassuringly more healthy than the 5-10 per cent supply margin predicted by Ofgem last June. Since then, of course, a spate of unplanned and unlucky nuclear outages looked set to erode those conservative mar- gins even further. A safety net of 2-5 per cent certainly didn't feel very safe, and National Grid was quite right to bring in the big guns: in this case, lucrative contracts designed to keep a reserve bench of capacity on standby should the worst come to the worst. SSE's Peterhead, Scottish- Power's Rye House and RWE's Littlebrook plants are the lucky

Articles in this issue

Archives of this issue

view archives of Utility Week - Utility Week 6th February 2015