European Power Companies Responding to Carbon Pricing – Survey

The European Emissions Trading Scheme is starting to change the way Eurpoean power companies make investment decisions, shifting resources towards cleaner generating technologies, according to a recent survey by New Energy Finance,

Based on responses from 13 power companies that account for over 50% of European power sector CO2 emissions, the research identifies four key findings:

  • Five years after the start of the EU ETS, carbon prices are being fully integrated into investment decisions in the European power sector. All power generators contacted in the survey factor a carbon price into their investment decisions, with most running several future price scenarios.
  • 85% of European power companies only consider a future with a positive carbon price. For these companies, a “zero carbon price” scenario simply does not feature in their investment decisions. The 15% of firms that said they did run a zero carbon price scenario were based in Eastern Europe, and their responses more reflected a lack of familiarity with EU institutions and policy making than the EU ETS itself.
  • Although the carbon price (current and projected) is not sufficient in isolation to justify an immediate wholesale shift to lower CO2 emitting technologies–fuel prices, power prices and direct government support for renewable are also important–the carbon price is making power companies alter their investment focus to include more lower carbon technologies, such as combined-cycle gas turbines and high efficiency coal, in their future plant mix.
  • Specifically however the EU ETS is having a clear impact on: The build-rate of biomass co-firing capacity; the closure of older, dirtier, oil, coal and lignite plants covered by the large combustion plant directive; investments in carbon capture and storage (CCS)–although direct government support also plays a role in CCS decisions, the EU ETS is the most important consideration.

“We have known for some time that the EU ETS is having a real effect on operational decisions in European power companies, but this is the first time we have been able to show how it is affecting capital investment decisions," Guy Turner, director of carbon market research at New Energy Finance, said. "The answer is clearly that European power generators see that the EU ETS is here to stay and that it is starting to affect how they make multi-billion euro investments in new generation capacity. By 2020 the European generating fleet will be materially cleaner than it is today.”

In Related News…

The Annual Energy Outlook 2010 reference case released by the U.S. Energy Information Administration projects total primary energy consumption to grow by 14% between 2008 and 2035, as the fossil fuel share of total U.S. energy consumption falls from 84% to 78%. Total U.S. consumption of liquid fuels, including both fossil liquids and biofuels, grows from 19 million barrels per day in 2008 to 22 million barrels per day in 2035; biofuels account for all of the growth. The renewable share of electricity generation grows from 9% of generation in 2008 to 17% of generation in 2035. CO2 emissions from energy are projected to grow at 0.3% per year; total energy-related CO2 emissions grow from 5,814 million metric tons in 2008 to 6,320 million metric tons in 2035, although per capita emissions fall by 0.6% per year. 

Read the full report at the link below.

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