Discussing Energy Economics on the Internet

California Sets Rules for Tradeable RECs

Posted in California,Renewables by Cheryl Morgan on the October 30th, 2008

The California PUC has issued a ruling by Administrative Law Judge Anne Simon on the subject of setting up a market in Renewable Energy Credits. There is an overview of the decision on Platts, and the full ruling can be found here.

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FERC Gets Busy

Posted in Demand Management,Regulation,USA Federal by Cheryl Morgan on the October 28th, 2008

October has been a busy month for FERC, with a lot of major rulings on electricity market operation being issued. Part of the activity has been regarding the role of the demand side, and Michael Giberson at Knowledge Problem has a long post addressing the various issues. Other rules, summarized by Tracy Davis at Energy Legal Blog, touch more directly on market power issues.

Something that is likely to result in a good deal of head scratching around California is that FERC now believes that long term contracts are a good thing. If only someone had been able to explain that to California legislators before things got ugly.

FERC has also insisted that market monitoring departments be responsible directly to RTO/ISO boards, not to management. Hopefully that will put an end to any silliness about market monitors being muzzled because their findings reflect badly on the market they are monitoring. FERC has even given market monitors the power to report directly to them if they believe that an RTO or ISO is guilty of misconduct.

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USA ♥ Nukes?

Posted in Nuclear,USA Federal by Cheryl Morgan on the October 28th, 2008

Most governments are now coming around to the idea that new nuclear generation is inevitable, but what will their electorates (if they have them) say? In the USA at least it appears that nukes may be welcomed with open arms. Dr. Fereidoon Sioshansi has an article at EU Energy Policy that suggests support for new nuclear build in the USA could be as high as 74%.

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Some Energy With That, Ma’am?

Posted in Retail,UK by Cheryl Morgan on the October 15th, 2008

Several UK papers are reporting (here, here and here) the story that Marks & Spencer are to go into the energy retail business. This probably means little outside of the UK, unless you happen to know ex-pat British women who insist on going back home to buy their underwear (M&S undies are legendary), but it is an interesting development.

M&S is one of the few retail chains in the UK that has made a success of selling premium product. They consistently get away with charging more for their clothes and food on the grounds that they provide better quality. And their electricity deal with Scottish & Southern Energy explicitly sources the power from hydroelectric stations. As I noted last week, Ofgem has found the UK consumers are overwhelmingly focused on price when they buy electricity. The idea of paying more for “green” power simply doesn’t appeal to them. But if any retail company can make a success of selling a premium energy product it will be Marks & Spencer.

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The Stimulation Chart

Posted in USA Federal by Cheryl Morgan on the October 14th, 2008

Earlier this month President Bush signed the Energy Improvement and Extension Act which provides economic stimulus to a range of renewable energy, alternative fuel, clean power and energy efficiency schemes. Want to know where there handouts went? Energy Legal Blog has the full details.

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EU Moves Forward On ETS II

Posted in Emissions Trading,Europe by Cheryl Morgan on the October 8th, 2008

Yesterday the European Union took a major decision on the future of its Emissions Trading System (ETS). The big issue has been the question of whether companies would have to pay for their permit allocations in future, or whether they would continue to have them handed out for free. Karsten Neuhoff made a strong case for auctions, and it seems that the EU agreed with him, because broadly speaking that is what they opted for.

Reactions have been mixed. The Times thinks this is a disaster for the UK energy industry and suggests that electricity costs will rise steeply. Sandbag is broadly optimistic. And Deutsche Welle is furious that we have to wait until 2013 for the auctions to take place.

Of course it could all be moot, as the decision has to be ratified by both the European Parliament and member states. Doubtless much lobby will take place between now and then.

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Sources of Pollution

Posted in China,Emissions Trading,Papers by Cheryl Morgan on the October 8th, 2008

The generally accepted wisdom in the West tends to be that China is industrializing on the cheap, and spewing out vast quantities of pollution from poorly built power stations. A new study from MIT takes aim at that idea. New Chinese power stations, they say, are often very modern and efficient. What they lack is not technology, but economic incentives. Because China has no emissions markets, power station owners choose to burn the cheapest coal that they can find, regardless of how much pollution this generates. And although their power stations come with expensive gadgets like smokestack scrubbers, they don’t use them because that costs money. The full paper is available here.

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Ofgem Moves on Retail Prices

Posted in Retail,UK by Cheryl Morgan on the October 6th, 2008

Since February of this year the UK energy regulator, Ofgem, has been conducting an inquiry into the prices charged to retail customers. Their report was released today. The text is available online here. Ofgem has not found any evidence of price fixing by retailers, but it has raised a number of concerns about the market. Here are a few highlights.

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Gloom and Doom Round-Up

Posted in Investment,Renewables by Cheryl Morgan on the October 3rd, 2008

At EU Energy Policy Fereidoon P. Sioshansi talks about how the turmoil in financial markets might affect the energy industry. The article is mainly about the sudden collapse of Constellation, but other companies may also get into difficulties. Reliant is already making noises that sound a bit like a sports coach saying that he has the full backing of the owners.

Meanwhile Forbes looks at how the collapse in investment will affect the renewables industry.

To make matters worse, the collapse of investment bank Lehman Brothers has become a liability for many solar energy companies. In recent years, Lehman had become a principal underwriter for solar energy companies raising money or financing debt to build factories and solar farms.

Double Plus Ungood would appear to be an appropriate comment.

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Here We Go Again

Posted in Europe,Nuclear,UK by Cheryl Morgan on the October 1st, 2008

As expected, regulatory authorities in both the UK and EC will be taking an interest in the purchase of British Energy by EdF. Interestingly EdF has announced that any deal with Centrica, who are supposed to be taking a 25% stake in the deal, will have to be put off until after regulatory approval is granted. Presumably EdF is much more worried about Centrica’s potential dominance of the UK retail market than about its own potential dominance of the UK generation market.

Now wait for British MPs to tell Gordon Brown that the deal can’t go to Brussels unless some UK ownership is involved.

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