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The Green Deal - Is It Starting to Bite on Wholesale Energy Prices?

July 09, 2012 | Comments: 0 | Views: 186

Rumours are circulating that the government is to review its much-lauded 'Green Deal', after warnings that it could "waste" between £2-3billion. Not true say the government, with the DECC swiftly countering these claims by saying that the government remains "fully committed" to the policy. After a week of arguments, claim and counter-claim, it all boiled down to Ed Davey saying that climate change policies could actually bring an element of stability to global gas, coal and oil prices, cutting the volatility in current prices by as much as half by 2050. As nice as that would be, these figures are considered to be completely unsubstantiated and very much a 'finger in the air' statement. Industry watchers say that the well-meaning claim doesn't fully take into consideration the high costs associated with moving to low-carbon energy generation, and the fact that fossil fuels are currently a great deal cheaper than low-carbon or renewable supplies.

All this talk of Green Deals, carbon efficiency and even the perennial topic of carbon-capture doesn't seem to have had much effect on biomass energy prices though, with prices remaining firmly fixed at a three-month low. Longer term biomass contracts were stable at €135.8/t. Biomass prices have been falling since their peak in January and, thanks to a reduced demand throughout the summer, are set to continue to drop.

Lower carbon emissions versus renewables

It is a mark of just how blurred the Green Deal's objectives have become as Energy and Climate Change Secretary Ed Davey continues to flip-flop between supporting lower carbon emissions versus setting new renewables objectives. At the Reuters Global Energy and Environment Summit at the end of May, he said that reducing carbon emissions should be the "key target" for Europe. Lo and behold, a day later figures from the EU Commission showed a 2% drop in 2011 carbon emissions from installations that participated in the EU Emissions Trading Scheme. Yet all of this is taking place against a backdrop of a 29% rise in UK coal production in February, with deep mining increasing by 19% and surface mining up by an impressive 36%. It appears that energy suppliers don't put much store in the Green Deal and are yet to be convinced as to the sustainability (no pun intended) of the proposals.

Month-on-month coal imports were up 6%, perhaps fuelled by one of the wettest April's on record (an increase of 30.5% compared to the same time last year, when April 2011 brought far more clement and balmy weather).

European coal prices have been adversely affected by an over-supplied market, thanks to cheap US and Colombian imports. The result that coal plant supplied 37% of UK generation in April, compared to 20% from gas.

So while coal is still cheap and plentiful, thanks to American imports, it seems that Ed Davey's wish has come true and renewables have been moved to the back burner. However, this won't garner any public support and while Davey wants to "keep the lights on, bills down and the air clean", according to his statement to Parliament concerning the EMR Bill, he may have to concede that in the short term, coal is still very much king.

Graham Paul - Services Delivery Director (EDW Technology). EDW have a long history developing, implementing and supporting best-of-breed software solutions. Since 2000, their energy billing software - part of ERS (Energy Retail Suite) has enabled energy retailers with powerful and highly competitive IT systems, transforming customer experience, improving business efficiency, reducing costs and boosting profits.

Source: EzineArticles
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