Utility Week

UTILITY Week 19th February 2016

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Markets & Trading UTILITY WEEK | 19Th - 25Th FEbrUarY 2016 | 29 The growth of unconventional gas production, largely from shale, will have "major implica- tions over many years for mar- kets and prices", according to a report from the World Energy Council. Secretary general Christoph Frei said: "Unconventional gas is causing a shi in the dynamics of the natural gas market which will be felt for many decades Gas World Energy Council: shale is changing the structure of markets to come. Its spread around the world is being accelerated because it can make gas more affordable to consumers and reduce concerns about the security of supply." The report said a number of countries look likely to follow in the footsteps of the US, with China and Australia already making significant progress towards developing their unconventional gas resources. Argentina, Algeria, Mexico, Saudi Arabia, South Africa and Poland all look to be heading in the same direction, analysts said. Frei said: "So far, the surpris- ing resilience of the US shale gas market has led the way in the shale gas boom, and whilst other countries may not have the unique characteristics of the US, This week Businesses to be paid to adjust demand National Grid to pay business customers to use more energy at times of excess wind generation National Grid will pay business customers to use more energy at times of excess wind generation, under a new system developed by demand response aggregator Flexitricity. National Grid has signed up to the demand turn-up system Footroom, which is an auto- mated service that notifies connected businesses of an approaching increase in wind. Businesses can then increase demand and production while windfarm output is at its highest, receiving an additional payment from National Grid for doing so. This means National Grid can leave the wind generation running and avoid making controversial 'constraint payments', whereby windfarms are paid to close down when there is too much wind. National Grid said: "The purpose of demand turn-up is to increase demand on the system at times of high generation and low demand. Primarily it will be used overnight to balance wind and interconnector flows on top of nuclear baseload." In a further boost for demand-side response (DSR), Dong Energy has launched a service to balance its own generation, by offsetting drops in wind strength with business customer demand. The Danish firm, which is heavily involved in offshore wind, has invited its larger business customers to sign up to the scheme, which will involve adjusting their energy consumption when wind strength varies from forecast. Dong said its 'Renewable Balancing Reserve' has advantages over other DSR schemes. It requires no com- mitment as customers are able to choose whether or not to reduce their demand each time a request is sent, with- out any financial penalties for failing to respond. It also runs throughout the year, not just in the winter. SJ/TG Gas BP: gas to be world's second fuel by 2035 By 2035 gas will overtake coal as the world's second fuel, accord- ing to analysts at BP. Its energy outlook for 2016 has predicted that over the next two decades, growth in the use of coal will slow to just 0.5 per cent per year, while gas use will see yearly increases of 1.8 per cent. The report said oil will remain the world's most used source of energy, although its share in the energy mix will decrease significantly. Analysts predicted renewa- bles will be the fastest growing source of energy, with their use rising by 6.6 per cent per year. However fossil fuels are expected to "remain the dominant source of energy", still accounting for four-fihs of the energy supply. EmIssIoNs Carbon prices fall to a 22-month low Carbon prices plunged to a 22-month low last week, falling below €5 per tonne for the first time since March 2014. European Union allowances (EUAs) have been steadily declining in value since the end of last year, when they peaked at around €8.40 per tonne. Bloomberg New Energy Finance head of carbon and power Jonas Rooze told Utility Week there has been reduced demand from generators since the start of the year because of the mild winter: "They've proba- bly had too many allowances on their books for this winter, which they've ended up not needing because they haven't had to burn as much coal and gas." Rooze said the falling price of gas may also have led to lower demand for EUAs, by encourag- ing the displacement of more carbon-intensive coal generation. Gas SSE and Centrica set to benefit from rising spark spread SSE and Centrica look set to benefit aer UK spark spreads for winter 2016/17 delivery rose by 33 per cent in just one week, according to analysts at Macquarie Research. The spark spread – the dif- ference between gas and power prices – for delivery in winter 2016/17 reached £7/MWh earlier this week, a rise of £2/MWh. As the owner of two closing coal plants, and more than 5GW of combined cycle gas turbine capacity, SSE is expected to be a key winner if the increased spark spread is maintained. Macquarie calculated that every £1/MWh increase in the spark spread will boost SSE's earnings per share (EPS) by 1.5p, and that going coal-free will add another 4p. Centrica is also likely to do well with its predominantly gas-fuelled generation fleet. Macquarie predicted that every £1/MWh increase in the spark spread will lead to a 1.1p rise in the supplier's EPS. On line: Grid wants to avoid constraint payments they will learn how to become LNG [liquefied natural gas] producers or exporters, which will change the global dynamics of energy." The growth in LNG exports is likely to result in increased market liquidity and added bar- gaining power for consumers, as well as a move away from oil indexed gas contracts, according to analysts.

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