Market Developments | News and Commentary

Headine:

EDF calls for level investment field for nuclear
EDF Energy has issued a veiled warning to the government that unless support is forthcoming, a new generation of nuclear reactors cannot be built in the UK, with chief executive Vincent de Rivaz arguing that a level energy investment playing field must be created in order to allow the nuclear industry to compete with other low-carbon generation.

There is little doubt that a new generation of nuclear reactors will form a significant chunk of the UK’s generation mix in the future, forming one part of a three-part portfolio that also includes renewables and “clean” gas and coal. With energy secretary Ed Miliband recently succumbing to the arguments put forward by the wind and coal sectors seeking more government support, perhaps EDF Energy believes the government is also open to persuasion on nuclear subsidies. Certainly there should be a level investment playing field, and ideally this would be provided by some form of low-carbon obligation. Such an obligation could be similarly structured to the Renewable Obligation, with banding levels determined by the emission output of the plant, which would require the government to set emission performance standards. The problem faced by EDF is that Miliband is a reluctant supporter of nuclear, but this problem will not be nearly as great as that faced by a likely Conservative government next spring; the party views new nuclear as a last resort. As such, EDF has around nine months to persuade Miliband of the benefits of nuclear subsidies, and the likelihood is that it will fail . . . but still go ahead with its nuclear programme.

UK News:

First UK CCS prototype goes online
Iberdrola subsidiary Scottish Power has commissioned a prototype carbon capture system at its Longannet coal-fired facility on the banks of the Firth of Forth in Scotland.

Retrofitting commercial-scale CCS technologies to existing installations opens up a huge potential market. There are over 50,000 fossil-fuel power stations in operation throughout the world, and by proving that CCS technology can be retrofitted to existing stations, early investment in research and development makes sense. Scottish Power seems to have stolen a march on E.ON, which effectively kick-started the CCS debate with its Kingsnorth application almost three years ago. The government says it is fully committed to a secure and sustainable energy future, but by deferring a decision on Kingsnorth, its actions do not match its words. And with the government weakened through backbench anger toward Brown, and with coal a delicate topic, it remains to be seen whether this government will be able to move its coal/CCS policy forward in the autumn, or whether any progress will have to wait until after a likely spring general election.


CRC could reduce renewable energy demand
SmartestEnergy, the UK’s largest purchaser and supplier of electricity from the independent generation sector, has warned that the government’s proposed Carbon Reduction Commitment (CRC) could stamp out demand for renewable energy from the business sector.

The CRC, which is due to come into effect next April, will initially target around 5,000 UK businesses that annually consume over 6,000 MWh of electricity. This will likely increase to cover around 20,000 companies in the future. Businesses affected by the CRC will be required to institute efficiency measures to reduce their emissions.

SmartestEnergy believes that while increasing energy efficiency is a vital step in reducing emissions, it must not be done in a way that hinders demand for renewable electricity, explaining “The government has previously claimed that the renewable energy sector plays a pivotal role in its ‘Green New Deal’, simultaneously addressing employment and emissions targets. Yet the CRC, as it stands, will act as a direct disincentive to companies considering purchasing renewable energy.”

The CRC is a classic example of this government’s climate policy overkill. There is now probably more bureaucracy in the climate sector than any other sector, with a number of initiatives being unintentionally contradictory. Business needs a single, simple incentive mechanism to increase green energy usage and to implement more energy usage efficiencies.

European News:

EnBW in lignite buyout
Germany’s EnBW is acquiring E.ON’s 50 percent share in the Lippendorf Block S coal-fired power station as well as its 8.3 percent share in the Bexbach coal-fired power station.

The new fossil-fuel power plant at the Maasvlakte power station in Rotterdam will be able to co-fire biomass and is being designed for subsequent retrofitting with carbon capture technology. Located near the North Sea and the Rotterdam harbour area, Alstom will provide a 1,110 MW steam turbine generator package for the new plant, which is expected to deliver a net efficiency of 46 percent. The new Maasvlakte power plant is to start commercial operation from 2013.
Coal is looking ever more attractive with its low price volatility and widespread domestic availability, and it is therefore not surprising to see interest in both new, more efficient new coal-fired stations and older established installations which provide the necessary baseload capacity.

Electricity:

Annual October 2009 and April 2010 contracts settled at £45.93/MWh and £49.50/MWh respectively.

Gas:

Annual October 2009 and April 2010 contracts settled at 49.98p/th and 56.43p/th respectively.

Water:

Water companies and responsible business
The water industry is again recognised in national corporate responsibility awards announced today by Business in the Community (BITC).
Seven water companies appear in the BITC Corporate Responsibility Index. Two appear at Platinum Plus level (where only seven companies in total are cited); none appears in a lower band than Gold; all water companies either maintain or increase their scores.
The spread of activities recognised underlines the breadth of water companies' involvement in their communities. In its Big Tick category - for organisations able to show significant impact and high-quality management of responsible practice reflected in society and their business - BiTC highlights water companies for:
• leadership and integration of responsible business practice
• improving the health and wellbeing of employees
• strategic and innovative action towards a low-carbon economy
• leadership and improved impact by embedding environmental strategy into core business
• raising the achievement of young people through sustainable partnerships with schools
• community programmes empowering local communities
• collaborative action having a positive impact on their community
• responsible marketing and innovation bringing a positive impact on society.
Barrie Clarke, Director of Communication said "The water industry provides high quality services to families and organisations as both consumers and citizens. Its clear commitment to responsible business rests on community engagement and a strong public service ethos. (www.water.org.uk)

Quote of the week:

Scottish Power chairman Ignacio Galán said “We believe that the UK can lead the world with CCS technology, creating new skills, jobs and opportunities for growth. There is the potential to create an industry on the same scale as North Sea oil, and we will invest in Scotland and the UK to help realise this potential.”