Utility Week

UTILITY Week 4th September 2015

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Markets & Trading UTILITY WEEK | 4TH - 10TH SEPTEMBER 2015 | 21 Scottish Renewables has revealed that Scotland is embrac- ing home-grown energy with 600,000 solar panels installed, but warns that subsidy cuts are already punishing the sector. Scotland has 42,000 solar schemes, 2,557 small wind pro- jects, 204 hydroelectric schemes and three anaerobic digesters powering homes, businesses and community buildings. RENEWABLES Subsidy cuts threaten Scots home-grown projects Scottish Renewables' policy manager Stephanie Clark warned that cuts already planned for subsidies are having a detrimental impact. "Major changes planned for the feed-in tariff (FIT) scheme would make many projects unviable," she said. "Within the next month we're expecting further cost-cutting proposals to be announced." A consultation on the changes closed on 19 August. The Department of Energy and Climate Change is set to report on the expected cuts in mid- September. Clark added: "Small-scale renewables can continue to thrive in the UK, but the sector urgently needs confirmation that it has the backing of the government." This week Profits from gas-fired power could double Month-to-date average for this winter's profits has already risen by more than 86 per cent UK generators could see their profits from gas-fired power plants for the coming winter reach twice as high as market conditions suggested at the end of last year. Price data from market experts at Icis shows that power generated in winter 2014/15 from gas plants was valued at an aver- age of £2.41/MWh in October 2014 when the market first began trading significant volumes of both power and gas for the coming season. But the August month-to-date average for this win- ter's gas-fired power profits has already climbed by more than 86 per cent to £4.50/MWh, Icis price data shows. The calculation for gas-fired generation earnings is known as a 'spark spread' when measuring the difference between the price of buying gas and selling power gener- ated by a plant of standard efficiency. And a 'clean spark spread' includes the cost of offsetting carbon emissions. Icis reported the highest ever clean spark spread for winter 2015 on 7 August at £4.54/MWh, just £2.33 higher than the equivalent measure for coal-fired power genera- tion, which usually offers a significantly cheaper option to the market. Since then, the profits for gas-fired power have crept higher still to reach a fresh record of £4.56/ MWh on 19 August, Icis data shows. This could mean that UK generators use an increased amount of gas-fired power to meet the coming winter demand, with a lower share of the energy mix held by coal generating units. Icis added that generators plan- ning to close their coal plants by the end of the winter, including Scottish Power's Longannet plant, will have extra incentive to run the units to extract as much value as possible before they close. JA EMISSIONS Short-term carbon hits a 2.5-year high The price paid by energy com- panies for carbon emissions through the short-term Euro- pean carbon market reached a two-and-a-half-year high on 17 August, according to price reporters at Platts. The value of spot EU allow- ances on the Emissions Trading System reached €8.26/tonne of carbon emitted, its highest level since early 2012 and almost 14 per cent higher than the year-to-date average, the price reporting agency said. Analysts at RBC Capital said the upward trajectory of carbon will prove "generally positive" for low-carbon investors as it will help to support stronger European power price signals. "Carbon prices have been boosted by a range of sources this year: agreement to introduce the Market Stability Reserve to hold surplus allowances in 2019 and the European Commis- sion's publication of dra reform proposals in July that aim to tighten the market aer 2020," the analysts added. ENERGY Germany's power prices at 11-year low German power prices have extended their long-term losses to hit an 11-year low on the wholesale power market, accord- ing to energy price reporters. Market experts at Platts said the benchmark forward price for next-year delivery has slipped below the €31/MWh mark for the first time since 2004, and could have fallen even lower without support from rising carbon prices through the EU's Emis- sions Trading System. RWE and Eon, Germany's dominant energy companies and parent companies to two of the UK's big six, posted heavy losses in their first-half financial reports, in large part due to lower wholesale prices. RWE said its 11 per cent operating losses to €2 billion for H1 were mostly as a result of continued decline in profit margins from its conventional generation fleet. Eon reported losses sig- nificantly below expectations of 29 per cent from its generation earnings, prompting the com- pany to call on the German gov- ernment to offer clear support for conventional power plants. GAS Project Nexus delayed by a year The implementation of industry code modifications for the gas market known as Project Nexus has been delayed by one year until October 2016, Ofgem has announced. The regulator has delayed the implementation to allow "robust systems testing and market trials" to take place. The project aims to overhaul the existing GB gas settlement arrangements to make them fit for purpose in a future gas mar- ket, including supporting the rollout of advanced and smart metering. The Project Nexus Steering Group (PNSG) was advised by the independent project assur- ance manager PwC in May that the original implementation date was no longer viable due to insufficient time for systems test- ing ahead of market trials for gas transporters and shipping. Ofgem has also added a series of milestones to the imple- mentation plan aer concerns were raised about its visibility. Longannet: extra incentive to run before closure

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