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Industry news
BizzEnergy collapse is bleak news for UK energy market
Tuesday, November 04, 2008
The collapse this weekend of BizzEnergy, one of a handful of independent UK energy suppliers, is bleak news - and not only for the company's 170-odd employees.
It leaves the UK energy market even less competitive and even more dominated by the so-called Big Six suppliers - EDF, British Gas, Scottish Power, E.ON, RWE, npower and Scottish & Southern Energy.
BizzEnergy, whose business model involved buying power in the wholesale energy markets for resale to its network of 40,000 corporate customers, was fighting hard to crack into a tough industry dominated by giants, many of which enjoy near monopolies in their home markets.
It was also one of the most outspoken critics of the industry's structure and had appeared before a parliamentary select committee this year urging reform.
In the end, BizzEnergy, like Electricity for Business, another independent supplier that collapsed last month, failed to withstand a pernicious combination of extreme volatility in wholesale energy prices and tightening conditions in the credit markets.
Yesterday, the Big Six wasted no time in taking advantage of the insolvency to consolidate their grip on the industry. BizzEnergy's electricity customers were transferred to British Gas Business, an arm of Britain's biggest energy supplier, Centrica, in a deal worth £3.5 million that was overseen by KPMG, the administrator.
There was a certain irony in the timing of the announcement. BizzEnergy's collapse arrived in the same week that EDF is set to notify European regulators of its proposal to buy British Energy, the nuclear generator.
If approved, the deal will lead to the disappearance of yet another independent player and leave 80 per cent of Britain's wholesale power market in the control of the Big Six. Between them, they already control 99 per cent of the retail supply market.
Whatever merits the British Energy takeover may have, it is unlikely to encourage greater competition in the UK energy market.
Cynics will claim BizzEnergy was always doomed, that its business model wasn't robust enough to survive the downturn.
But it is hard not to sympathise with a small company trying to bring greater choice and an entreprenurial spirit to a highly concentrated industry.
This story was featured on the Times Website
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Businesses face energy switch as supplier folds
Monday, October 27, 2008
ALMOST 3,500 small businesses across Scotland face having their utility bills switched to a "supplier of last resort" after Electricity4Business was placed in administration, writes Hamish Rutherford.
Milton Keynes-based Electricity4Business had around 140 staff, supplying electricity to 40,000 small and medium-sized businesses across the UK. Administrators PricewaterhouseCoopers said the company had run into trouble "as a result of volatility in the energy market".
Ofgem, the energy regulator, has guaranteed that none of the businesses will face disconnection because of a supplier being placed in administration, with all customers transferred to a "supplier of last resort"
While there is no guarantee the firms will not face higher emergency tariffs under the scheme, all of the companies are free to change suppliers.
Energy broker Make It Cheaper advised the affected customers to take a meter reading, cancel direct debit payments and use an independent broker to explain which supplier can offer them the most favourable rates.
Earlier this year Electricity4Business warned that the proposed takeover of nuclear operator British Energy by EDF would cause competition in the UK electricity market to be reduced.
This story was featured on the Scotsman Website
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Water boss says supply is priority
Monday, October 20, 2008
Competition in the water industry should focus on preventing shortages rather than increasing consumer choice, says the chief executive of one of the UK’s biggest water companies.
Heavy users of water in England and Wales – such as hospitals and factories – have the right to switch supplier. But the way that access to the water network is priced has meant new entrants have been deterred from joining the industry and no switching has taken place.
The government, through the Cave Review, and Ofwat, the water regulator, are looking at ways to encourage competition, including potentially allowing households to choose who they buy water from. But Tony Wray of Severn Trent said in an interview with the Financial Times that focusing on consumer choice would be wrong. “We believe there is a place for competition but it needs to happen in a way that genuinely helps solve some of issues in the industry, not just so that customers have a choice of who retails their water.”
Mr Wray said competition should aim to solve the biggest problem facing the water industry today – “having an excess of water in the north west and a shortage in the south east”.
South-east England receives less rain than other parts of the country but also has a growing population, which is expected to lead to increasing shortages.
“This is the fundamental challenge for water in the UK. Climate change will cause a worsening imbalance between regions.”
Mr Wray said it was not necessary to build a “national grid” for water, which would be prohibitively expensive but there should be more pipelines connecting the regions and a market for trading water abstraction rights.
“By allowing trading of abstraction rights and more interconnectedness of our networks, it could allow water to move more effectively [around the country]. It would be a lot lower cost than building new reservoirs or desalination plants.”
Severn Trent’s region stretches from Wales to East Anglia and the company is already bringing water in from wetter western regions and exporting water to the drier east. However, Mr Wray said water networks in England and Wales were very localised and more connections should be built.
Competition should also be structured in a way that freed up access to privately owned boreholes, said Mr Wray. “Only about 50 per cent of the impounded water in the UK is in the ownership of water companies. You need to have a freer and more competitive way of accessing these resources.”
The other 50 per cent is in the hands of councils, private companies, and landowners, a legacy of the water industry’s fragmented past. “There’s a huge unexploited resource out there,” Mr Wray said.
This story was featured on the Financial Times website
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Tesco hits out at high energy cost and Ofgem
Monday, October 13, 2008
Consumers are being hit by excessively high gas and electricity prices, Tesco has said, as it criticised Ofgem, the regulator, for not going far enough with the inquiry into energy markets it published this week.
Tesco feels that companies are paying too much for their energy, and is trying to drive its costs down as it and other retailers compete to cut prices.
The connection between the three prices is typically very close, but as oil prices have plunged since the summer, electricity and gas have remained stubbornly high, although the price of gas has fallen recently.
Lucy Neville-Rolfe, Tesco’s director of corporate and legal affairs, said: “We find that energy prices go up very quickly with the price of oil but are very slow to come down when the oil price falls. This is very costly and bad news for consumers.”
Gas prices in Britain have become more closely linked to oil prices in recent years. The decline of domestic gas production and the construction of new pipelines from Norway and the Netherlands has tightened the link to the Continental market, where the cost of gas is generally set by long-term contracts based on oil.
The price of gas in turn sets the price of electricity, because gas is generally the marginal fuel for power generation, used only when the price of electricity is high enough.
However, since the price of oil peaked in July, that link appears to have broken down, Tesco believes. Oil has dropped 44 per cent, but UK gas for delivery in the first quarter of next year has dropped only 18 per cent, and electricity for 2009-10 has also fallen 18 per cent.
Short-term problems with coal-fired power stations shutting in order to be fitted with equipment to cut pollution have pushed up the price of electricity for November, although it fell sharply Thursday.
The bigger issue is that prices for British buyers remain relatively high compared with Continental levels for the next two years in the futures markets.
Jeremy Nicholson, of the Energy Intensive Users’ Group, an industry body, said that put British industry at a competitive disadvantage. “For gas we are paying the same as Continental countries in the summer, and more in the winter, and for electricity we are paying more throughout the year,” he said.
Energy companies said there was always a lag of about six months between movements in oil and gas prices, so gas today could still be influenced by the run-up in oil in the spring.
They also said there was a premium in the gas price because of the low level of gas storage, which gives Britain a much smaller buffer against supply interruptions than most continental countries.
Some industry experts have questioned whether the wholesale gas and electricity markets are working properly. Niall Trimble of the Energy Contract Company said: “There is not really enough trading in the gas futures market, making it difficult for buyers to hedge their energy cost risks.”
Ms Neville-Rolfe described Ofgem’s report this week on energy prices as “a missed opportunity”, because it did not look into wholesale markets.
This story was featured on The Financial Times Website
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Companies 'need green directors'
Monday, October 06, 2008
Businesses must change their attitude to environmental issues if the tide of ecological decline is to be halted.
That was the message from Valli Moosa, president of the International Union for the Conservation of Nature, opening the World Conservation Congress.
The former South African minister said all companies should have directors with environmental experience.
The 10-day IUCN congress in Barcelona will debate global environmental problems and potential solutions.
The organisation numbers almost all the world's governments, environment groups and business representatives among its members.
'Immoral markets'
Mr Moosa spoke frankly about his view that unfettered markets and businesses are largely responsible for the world's current environmental ills.
"Leading entrepreneurs and markets have certainly contributed to the growth of the global economy; yet while individuals may be moral, markets are not," he told delegates.
"The damage industries and commerce do to people and the environment is real, it is considerable, and it is unacceptable." But, he added, it was also unnecessary.
Businesses had a short-term interest in saving money through saving energy, and every boss had a different kind of interest in leaving the world an environmentally sound place for their children.
Every business, he said, should include at least one non-executive director with a working knowledge of environmental issues, just as they should include someone with a working knowledge of accountancy.
But while business practices must change, said Mr Moosa, governments too had a key role in bringing about change if our global society was to switch to a more sustainable path.
One vital task was to reach a binding deal on constraining greenhouse gas emissions, he said - a task that looks more difficult now that eastern European countries are challenging EU moves to cut emissions and deploy renewable energy, and with a report out last week suggesting that emissions globally are rising faster than ever.
Shrinking sceptics
The congress, which marks IUCN's 60th anniversary, takes place against the backdrop of increasing evidence that almost all global environmental indicators point downwards.
This was the picture starkly painted by the United Nations Environment Programme (Unep) last year in its five-yearly Global Environmental Outlook.
The report concluded that the current high rate of species loss, climate change, deforestation, overfishing, desertification and pollution, coupled with population growth, meant that future generations would inhabit a less healthy planet.
Tamas Marghescu, IUCN's director for Europe, agreed with the diagnosis.
"The potential area for nature and biodiversity is disappearing, the foundation of our sustainable life is disappearing," he told BBC News.
"So my conclusion is that the world is not going in a sustainable direction, and we need a new paradigm of sustainability."
He suggested that part of the solution could lie in adequately valuing the services that natural resources perform for humanity, such as processing out waste, regulating the Earth's temperature and providing fresh water.
Just as the Stern Review outlined the economic costs of not mitigating climate change, a major exercise under the aegis of the European Commission is attempting to quantify the costs of not stemming the loss of species, estimated to be running at between 100 and 1,000 times the natural rate.
Mr Moosa suggested that the number of people and institutions sceptical of humanity's role in environmental decline was shrinking.
Within the last two years, he related, the World Economic Forum had signalled its concern on climate change, and the US Pentagon warned that consequences of global warming would include the spread of disease, harsher storms and environmental refugees.
"It seems as though the former sceptics are mainstreaming what we have always known," he said.
This article was featured on the BBC News website.
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EU needs stable energy policy, EDF warns
Sunday, October 05, 2008
Europe's governments must work together to deliver a "visible and stable" European energy policy or they will fail to attract the investment they need to meet sharply rising demand, according to Pierre Gadonneix, president of the World Energy Council and chairman of French energy group EDF.
The International Energy Agency has estimated that energy consumption will rise by 60 per cent between now and 2030, and capacity will have to double to meet demand. But Mr Gadonneix's warning comes as Brussels struggles to stop its member states from picking apart its attempt to forge a common approach on energy policy and climate change, including the plan to auction carbon emission permits.
Last month, the German government dealt a severe blow to the proposal to force companies to pay for the carbon dioxide they emit by backing an almost total exemption for industry. Other European Union members such as France are also pushing for concessions for certain energy-intensive industries.
But it also comes as the energy industry faces soaring costs on the construction of power plants and, in particular, on nuclear reactors whose return is longer-term and is so far unproven.
Mr Gadonneix admitted EDF was facing higher than expected costs on the construction of its new-generation EPR 1600 MW reactor in Flamanville, France. The initial estimate was €3.3bn ($4.5bn) but "we have probably passed this number now, given that it is in 2005 euros".
He said that Europe’s governments needed to agree common rules, especially on carbon trading, if investors were to invest in new power stations.
This was key for energy producers and "must be done at international level, otherwise there will be a distortion of competition", Mr Gadonneix said.
The EDF boss, fresh from agreeing the nuclear industry’s biggest takeover with the proposed deal to acquire British Energy for €15.7bn, also said he expected further consolidation in the energy sector.
"The restructuring has not yet finished. Only very big groups can assure the financing of the investment needed," he said, adding that nuclear power in particular required scale.
"When you build a plant you commit financing for 60 years. That can only be done by very large groups."
This article was featured on the Financial Times website.
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National Grid in £17.5bn upgrade
Sunday, October 05, 2008
NATIONAL GRID will buck market conditions this week when it unveils a £17.5 billion capital-expenditure programme, one of the biggest in the UK corporate sector.
The debt-fuelled £3 billion-a-year plan, details of which will be given at an investor day on Tuesday, represents a £1.5 billion increase on a previous forecast that projected a total spend of £16 billion between 2006 and 2012.
Having already invested £5.4 billion in the past two years, the company now expects to spend £12 billion more to upgrade gas and electricity networks here and in the US up to 2012.
Chief executive Steve Holliday said the beefed-up programme reflected the need to overhaul the UK’s gas and electrical-distribution grid.
“You’ve got to go back to when the national grid was first constructed in the 1950s and 1960s for a comparison,” he said. “We’re seeing growth beyond anything experienced previously.”
About 80% of the outlay will be spent on the UK, with the rest going to National Grid’s assets in America. The tenuous state of the UK’s energy infrastructure was highlighted last week when wholesale power prices jumped after the company warned that maintenance of several power stations would mean an unusually thin margin between supply and expected demand this winter.
The company will also lay bare the heavy cost of the government’s ambitious energy plans that put new nuclear power stations and large offshore wind farms at its heart.
National Grid expects to spend between £5 billion and £9 billion - beyond the basic spending programme - over the next 20 years to hook up the new power sources to the grid. Much of this will go on bringing offshore wind farms onshore and managing the spikes and troughs of wind production.
Holliday expects little trouble in raising the billions the programme will require. About 95% of the company’s assets are regulated, meaning its returns are set by the regulator and grow in tandem with the value of its assets. Investors see it as a safe bet.
This article was features on The Times Online website.
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Power cuts feared in UK nuclear plants crisis
Sunday, October 05, 2008
Six out of 10 of the nation's atomic stations are operating below capacity, throwing their future into doubt. In theory, at least, Britain now has 10 operating nuclear power stations, stretching from Torness on the Firth of Forth to Dungeness on the south Kent coast. Each has two reactors, and ministers boast that they supply about one-fifth of the power that keeps the lights on.
The reality, as an Independent on Sunday investigation shows today, is very different. The majority of the power stations are in dire trouble, and their failure is leading to the most acute concern in years that the country may run short of electricity this winter.
Two of the 10 have been idle for almost a year, with both reactors out of action due to corrosion. Another two have had one of their reactors closed down for months. And yet another two are having to run both their reactors at less than three-quarters of their normal power for safety reasons.
And even that is not the end of it. Of the four that are still in good working condition, one is due to shut down permanently in two years' time, a second is partially closed for routine maintenance, and a third is facing safety questions following the discovery of flaws in similar reactors in Japan.
The meltdown of Britain's nuclear capacity is largely responsible for an alarming tightening of electricity supplies that is forecast to start at the beginning of November, as demand rises sharply for the winter, and to continue until at least the end of the month.
An independent nuclear analyst, John Large, said last night: "It's all in a pretty sad state. The reactors are starting to break up; they are becoming knackered. There comes a point when you simply have to turn the things off.
"We have been lucky for two years with mild winters, but if we have a cold snap then I can see the lights blinking off."
The National Grid insists there should be enough power even if there is a harsh winter, though it admits to "a lot of uncertainty" in its projections. But independent analysts warn of a real danger of shortages, saying the nuclear crisis is largely to blame.
Ed Mayo, the chief executive of Consumer Focus – the new official consumer body, which started work last week – said that supplies would be "tighter over the coming period than they have ever been".
Britain has a maximum of 70-75 gigawatts (gW) of electricity available from its own sources. Last week, he added, 18gW of that was out of action – partly because of the nuclear crisis (which he called "very serious"), partly because of lesser problems with coal- and oil-fired plants, and partly through routine maintenance, bringing the total down to 52-57gW. Yet in a cold snap demand could rise to 60-62gW.
In the meantime, scarcity was joining with increased fuel costs to drive up prices; the wholesale cost of electricity for November was treble what it had been at the start of the year, which, said Mr Hunter, "gives some idea of the panic over availability". Eventually, consumers would suffer through higher bills.
Jeremy Nicholson, director of the Energy Intensive Users Group, said: "In ordinary circumstances nuclear would be running flat out during the winter. That's the whole point of it – to supply that base load."
Instead, the shutdowns and reduced power were causing "anxiety", he added. "We are all crossing our fingers, but I can't say we are too optimistic."
The crisis will reinforce both sides of the debate. Proponents of nuclear power will say that it underlines the need to build a new generation of reactors to replace the ones that are now running into the ground. Opponents will say that it proves the inherent unreliability of the technology, and point to construction problems, delays and cost overruns in the only two nuclear power stations at present being built in Europe, in Finland and France.
The two UK power stations that are completely out of action are Hartlepool in the North-east and Heysham One in the North-west. Both have been closed for almost a year because wire used to secure caps that allow access to boilers has become corroded, and may have to be cut out of concrete and replaced.
One of the reactors at the Dungeness B power station has been shut since the end of March because of defects in welds. The second closed for routine maintenance in July. British Energy claims that both will be back in operation by the end of December, but independent experts are sceptical.
Yet another reactor, at the Oldbury power station on the Severn, has been closed since July, with almost 100 dampers installed against the risk of fire. The entire power station is due to close, at the end of its working life, in December.
Both reactors at nearby Hinkley Point B and at Hunterston B on the west coast of Scotland are running at 70 per cent power, at inspectors' insistence, after developing cracks in the graphite core of their reactors. In the worst-case scenario, the cracked graphite bricks could break up and distort the nuclear core, trapping the highly radioactive fuel, which could overheat and melt.
There's more. Wylfa, on Anglesey, one of the minority of power stations where both reactors are operating satisfactorily, is due to close down permanently in December 2010. And cracks have been discovered in the steam generator at Sizewell B, Britain's most modern nuclear power station, resulting in the replacement of a reactor pressure-vessel head.
Sizewell B also faces questions over its future performance following the discovery of cracks in welds in four similar reactors in Japan. Experts say that it is now of an age at which it is likely to require a major overhaul that could see it out of action for six months, further crippling the contribution nuclear power is supposed to make to keeping the lights on.
This article was featured on The Independent website.
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Ofwat probe on water price plans
Friday, October 03, 2008
Water firms in England and Wales are to have their pricing policies examined by Ofwat after revealing how much they aim to hike bills for five years from 2010.
The watchdog Ofwat has revealed that bills would increase by 9% more than inflation between 2010-2015.
The average bill will be £355, before inflation is considered, by 2015, as firms look to boost investment.
"My job is to ensure customers get a fair deal from the water industry," said Ofwat boss Regina Finn.
"We need to balance investment in the future with what customers are able to pay now," she added.
"We will analyse the water companies' proposals rigorously and challenge them to justify all investment. We will protect customers from any unnecessary price rises."
Water firms proposed these increases to help pay for an investment programme of £27bn in the industry over the five-year period.
Ofwat said the capital investment programme was roughly 37% more than the current 2005-10 period, in which companies' investments totalled slightly under £20bn.
This article was featured on the BBC News website.
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Major plans for tidal energy farm
Monday, September 29, 2008
A major tidal energy project is being planned for waters off the coast of Scotland and Northern Ireland.
Scottish Power has identified the Pentland Firth, Sound of Islay and Antrim coast to test sea turbines which could power thousands of homes.
It comes as Scotland's first minister, Alex Salmond, visits the far north and the Crown Estate opens up the Pentland Firth seabed for leasing to developers.
Mr Salmond said the firth could be seen as the "Saudi Arabia of marine energy".
Scottish Power has been working on the Lanstrom device, which is said to be the world's most advanced tidal turbine.
The Scottish and Irish sites would host up to 60 of the turbines - 20 at each site - generating 60 megawatts of power for up to 40,000 homes.
The company is expected to apply for planning permission next year.
The device, similar to an underwater wind turbine, has been tested in a Norwegian fjord.
Scottish Power insists there is no threat to marine life, but the Marine Conservation Society said it would want to look closely at the proposals and see a rigorous environmental impact assessment.
The director of Scottish Power's renewable arm, Keith Anderson, said: "The rapid technological advancement of tidal power has enabled us to progress plans for this substantial project which has the real potential to deliver significant environmental and economic benefits."
Speaking ahead of his visit to Caithness, Mr Salmond said: "The potential of the Pentland Firth is quite staggering.
"Well known for centuries amongst mariners as a rough and foreboding sea, I believe that its awesome power will soon come to be seen across the world as the centrepiece of global efforts to take green energy from waves and tides.
"The Crown Estate will play a crucial part in enabling developers to take the next step and turn tested, reliable technology into the next wave of generating stations, pumping out electricity for homes and business.
"A strong marine renewables sector will drive further investment, cut emissions and give us a new contribution to sustainable economic growth."
Generating power from the sea could also be key to supporting the far north economy as jobs are reduced at Dounreay, a former nuclear power complex.
The first minister will join 150 delegates and representatives from about 20 marine energy developers at the Caithness Regeneration Conference.
'Working together'
Creating work in the area has become increasingly important because of the decommissioning of Dounreay.
The Thurso conference - taking place for the second time - will discuss progress on an action plan drawn up to steer the region through the effects of the plant's wind down and eventual closure.
Highlands and Islands Enterprise (HIE), Highland Council, the Nuclear Decommissioning Authority, Scottish Government and local community are involved in the project.
Eann Sinclair, of Caithness and North Sutherland Regeneration Partnership, said: "Proposals are under way for projects such as the Pentland Firth Tidal Energy project and the development of Scrabster and Wick Harbours, as well as the creation of new jobs in the engineering sector."
This article was featured on the BBC News website, here.
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British Gas turns up heat on brokers
Sunday, September 21, 2008
[Business Cost Consultants are NOT brokers. We are "consultants" meaning that we do not take commissions from the energy suppliers.]
British Gas looks set to lift the lid on the secretive energy supply market to businesses by making it compulsory for brokers to declare the commission they are paid to woo customers.
British Gas looks set to lift the lid on the secretive energy supply market to businesses by making it compulsory for brokers to declare the commission they are paid to woo customers.
The move follows last week's revelation by Financial Mail that tens ofms of pounds a year are paid to 'independent' brokers by energy suppliers to draw in lucrative deals with small or medium-sized companies. These payments are rarely declared, leading to claims the market is effectively rigged.
British Gas says it stopped using brokers three months ago, though some in the market say agents for the company are still operating. The group says it will start using brokers again at the end of the year, on condition they tell customers how much commission they are paid.
'If this is correct it is a massive breakthrough that others will find hard not to follow,' one senior energy buyer told Financial Mail.
'Why is this industry so different from insurance and mortgages where, I believe, non-disclosed commissions are illegal?'
Worries that brokers sign business customers to the energy provider paying the highest commission, without-disclosing such payments, means there must be market clarity, British Gas said. 'Customers should know what they are paying,' said a spokesman. 'We encourage business users to ask and, if the broker will not disclose this, to question why.'
Attempts to introduce clarity are hampered by the lack of regulation in the market.
EDF Energy said only that it 'complies with all legal regulations regarding brokers' fees'. Total Gas & Power, Scottish & Southern Energy, and Biz Energy all declined to comment.
This article was featured on ThisIsMoney.co.uk.
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StatoilHydro Reports Small Gas Leak From Kvitebjørn Pipeline
Thursday, August 21, 2008
During a routine inspection, a small leak was discovered in the gas pipeline between the Kvitebjørn platform and the Kollsnes gas treatment facility outside Bergen.
In the autumn of 2007, this pipeline was dragged out of position by a ship's anchor. In January this year, the pipeline was qualified for temporary use pending a permanent repair. This summer it was decided to make the permanent repair in 2009.
The leak which has now been discovered is in the same place as the pipeline was damaged last autumn, around 10 kilometres from the platform.
StatoilHydro will now consider various repair solutions for the Kvitebjørn pipeline. On this basis, it will be decided when operation of the pipeline and the Kvitebjørn field can be resumed.
Turnaround operations are presently being carried out at Kvitebjørn and Kollsnes and the pressure in the pipeline has accordingly been reduced. The pipeline will now be further depressurized and emptied via flaring at Kollsnes.
The Visund platform also normally utilises the Kvitebjørn pipeline for gas export, but has reinjected gas during the turnaround at Kvitebjørn and Kollsnes. Oil production from Visund is being maintained, but at a somewhat lower level than usual.
StatoilHydro’s gas customers are not likely to be affected by the incident.
StatoilHydro has standby vessels patrolling the area in the vicinity of the leak.
This story was featured on the OilVoice website.
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The falling oil price is a lull in the storm
Thursday, August 21, 2008
By Nick Butler of The Financial Times
Little more than a month ago the suggestion that Russian troops would be engaged in a shooting war in Georgia leading to the closure of the Baku-Ceyhan pipeline would have triggered a dramatic rise in oil prices. A barrel of crude was already trading at more than $140 and the loss of another million barrels a day of supply could have pushed the figure on and up towards the $200 predicted by some banks and by the chief executive of Gazprom.
In fact prices are almost 20 per cent below their July peak. The fall has come despite a month of assertive Russian nationalism, whose victims to date include not just Mikheil Saakashvili, Georgia’s president, but also Robert Dudley, chief executive of TNK-BP, who has been forced into exile in an undisclosed central European location. Other problems also persist – including civil conflict in Nigeria and the failure of the Maliki government in Iraq to agree on the legal structure through which international companies can invest in new oil developments.
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Companies face crackdown on electricity greenwash
Wednesday, August 13, 2008
Dozens of companies face having to report embarrassing sharp increases in their carbon pollution under government plans to crack down on "greenwash".
The move could undermine the environmental claims of firms such as BT, which have invested heavily in so-called green electricity tariffs to cut their carbon footprints.
Under the proposed changes, companies using such green tariffs, which are also popular with eco-friendly domestic customers, will no longer be able to claim massive carbon savings by using power coming from renewable sources.
BT, which could be forced to double its reported carbon emissions and to scrap an ambitious target to cut carbon 80% by 2020 under the plan, is lobbying heavily against the move, and says other companies back its position. Johnson and Johnson, Vodafone and several banks including HSBC also buy green electricity tariffs.
Hilary Benn, environment secretary, said the change was to make the system more transparent and to ensure that such tariffs brought genuine environmental benefits. "It is increasingly difficult to demonstrate that buying a renewable electricity tariff is offering additional carbon emissions reductions," he said. "Businesses signed up to green tariffs based on the evidence available at the time, but their choices have been producing only limited additional renewable generation capacity."
Individual consumers opting for green tariffs may also "not have been generating the environmental benefits they anticipated", he added.
Green tariffs have become a popular way for firms and individuals to cut their carbon footprints. They exploit the 5% of UK grid electricity generated from clean hydroelectric and wind sources, which suppliers claim they can effectively ringfence and sell separately.
In 2005, the government said companies buying such renewable electricity tariffs could report them as producing zero emissions. It hoped that wide take-up of green tariffs would drive investment in further renewable sources.
But environmental campaigners and energy experts have long questioned the benefits of some green tariffs. Harry Morrison of the Carbon Trust, which advises companies on climate issues, says the market in them has been "a bit cowboy" and needs clearing up. He compared the use of green tariffs to the sale of carbon offsets, with concern over transparency, double counting and additionality – ie whether they cut carbon emissions over and above what would have happened anyway.
He said: "Many companies bought these tariffs in good faith but there are no guarantees that they actually save carbon. They didn't pay much of a premium for the carbon savings they could claim in their marketing statements, so they have basically been given a free ride."
Morrison said many companies were concerned about how the government's changes would affect their green credentials and corporate image. It could also cost them money. From 2010, thousands of UK companies will be forced to calculate, publish and reduce their emissions as part of a domestic carbon trading scheme. "They're worried about being ranked badly. Nobody wants to come bottom of a table of their peers," he said.
Richard Tarboton, energy and carbon programme director at BT, said: "This is a serious problem for a number of companies who have followed the government's guidelines and gone out and purchased green electricity, and are now being told that green source is no longer valid."
BT, one of the country's largest users of electricity, has used the zero-carbon rating given to green tariffs to claim it has reduced its emissions 58% over the last decade. Tarboton said the new rules would see its reported emissions double, and that the increase would pose "communication" problems for the firm.
He agreed that the existing scheme was flawed but said the suggested solution put too much responsibility on energy suppliers and let customers off the hook. BT says the answer is better labelling, with different tariffs given a carbon rating similar to electrical appliances such as dishwashers. It held a meeting of 30 companies this week to discuss the idea.
Defra, the environment department, which announced the changes to the company reporting guidelines in June, now says it will launch a consultation on the proposal. A spokesman denied this was down to corporate pressure and said the department had always planned to consult.
This article was featured on The Guardian website.
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Rejected EDF has more irons in fire
Monday, August 11, 2008
British Energy still hopes to strike a takeover deal with EDF, but the cash-rich French utility has a number of other options it could pursue if negotiations with the East-Kilbride-based nuclear power generator collapse.
Top executives at Paris-based Electricité de France, which is controlled by the French state, are looking at other ways to build on the company's global nuclear leadership and develop lucrative new businesses such as gas.
EDF was expected to announce a full cash £12bn offer for British Energy on August 1, after a marathon round of talks and winning the approval from the UK Government, which owns 35% of the Scottish-based nuclear power plant group.
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But two key institutional investors in British Energy - Invesco and M&G - unexpectedly rejected a bid valued at around 770p to 775p a share for being too low, sending EDF back to the negotiating table and threatening to derail a deal that may be crucial for the development of new British nuclear power stations and EDF's expansion plans.
Both companies are still talking, but City power industry analysts and market players believe EDF is unlikely to increase its offer and risk overpaying for British Energy, the owner of most of Britain's existing nuclear power plants and whose land around existing sites is viewed as the location for new developments. Many of British Energy's plants are old and have been plagued by breakdowns. The company has proved hard to value because of the volatile price of electricity, which has both soared and eased off during the months of negotiations.
"EDF doesn't seem ready to make an acquisition at any cost and this is rather good news for investors," said Jacques-Antoine Bretteil, a Paris-based fund manager at International Capital Gestion.
However, failing to close a deal with British Energy would not mark the end of EDF's ambitious plans to expand in Britain. The company already owns London Electricity and other power companies in southern England, and claims to be luring customers in Scotland away from Scottish & Southern Energy and Iberdrola-owned ScottishPower.
"British Energy would have been an ideal entry point for EDF, and EDF may have regrets about the deal not happening, but this doesn't at all slam the British nuclear door in their face," said Colette Lewiner, an energy sector expert at French management consultancy Capgemini.
"If a deal does not materialise, British Energy will be encouraged to strike partnerships on (new nuclear) sites, so it will just involve a different scenario for EDF," she added.
EDF is the world's biggest single producer of nuclear energy, and is France's biggest power provider with 25 million household customers.
French power tariffs, which are set by the state, are among the lowest in Europe because EDF produces relatively cheap electricity from its 58 nuclear reactors.
It could still be at the forefront of Britain's nuclear power renaissance, but this time by agreeing joint ventures or building new-generation reactors on its own land.
In May, the French group bought land next to two nuclear power plants in Britain. One is located at Hinkley Point in south-west England, and the other is at Wylfa in north Wales. EDF acquired the land in the hope that it can build new reactors on the sites and use the grid connections and infrastructure around existing reactors in adjacent areas.
But the UK is only one of four countries that EDF targets for its international development. It has ambitious nuclear plans in the United States, South Africa and China, where it will run two new-generation reactors with China Guangdong Nuclear Power Corporation.
EDF has set aside 35bn for investments between 2008 and 2010, and if the cash is not used for acquisitions, it will be spent on industrial projects to spur organic growth.
In its core nuclear power business, Lewiner said EDF has "many irons in the fire" with its international development, and plans to flesh out its French fleet of 58 reactors with one, or maybe two, new-generation European pressurised reactors.
"They will need money for these projects. Just in Britain, they must buy land and build reactors. We're talking about a few billion euros for each one, which is not trifling," she said.
EDF has projects to build a gas business at a time when the newly merged GDF Suez group can offer a one-stop shop for electricity and gas, threatening to poach EDF customers.
On Thursday, EDF received a boost from the French government when the finance ministry proposed allowing regulated power rates for households to rise by as much as 2% and natural-gas tariffs by an average of 5%.
The government also said electricity charges may climb by 2% for small companies, 6% for mid-sized businesses and 8% for large consumers. The increase in gas rates will be the same for all customers.
"The rise in electricity rates is closely correlated to current inflation and this is better than what the market had in mind," said Peter Wirtz, a Dusseldorf-based analyst at WestLB Equity Markets. "The government is paying more attention to what EDF needs."
EDF, which produces continuous electricity from its reactors in France, also needs to invest in gas-fired plants, which can be switched on and off fast to meet peak electricity demand.
The utility, which in June got the green light to build one of Europe's biggest liquefied natural gas terminals in the port of Dunkirk in northern France, may seek to secure gas imports from producers such as Qatar, or invest in gas fields.
EDF has so much cash that it could afford to spend nearly 5bn to finance a thrust in the gas sector, roughly the price of Belgian gas firm Distrigas, which the French group lost to Eni (Ente Nazionale Idrocarburi), Italy's national energy corporation, in a bidding process organised by Suez in June.
"Distrigas was definitely a very interesting asset that was on the market. Gas Natural is another one, but with Union Fenosa now they will probably become too big," said analyst Koen Dierckx, a broker at KBC Securities in Brussels, referring to Spanish-based Gas Natural's recent deal to buy a 45% stake in Union Fenosa from debt-laden builder ACS (Actividades de Construcción y Servicios).
"They may just try to grow the gas business organically with not so much of a focus on acquisitions at this time," Dierckx added.
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