Fuel for Thought – 21st Oct

21 Oct, 2011

Improved access to cross border gas capacity? The EU is again focusing on new rules to combat the ineffective use of cross border transmission capacity.  The European gas market would benefit greatly from stronger ‘use it or lose it’ style capacity regulations to tackle the overbooking of capacity by incumbents.  As we explored in a recent article, efficient use transmission capacity will become increasingly important as gas-fired power plant are required to provide flexibility response to the growing volumes of intermittent renewable capacity across Europe.

Little government action from UK Energy Bills summit: The UK government wants to be seen to be confronting the big six utilities, given the political importance of rising energy bills in a weakening economy.  But this week’s Energy Bills summit suggests that the government is not about to deliver any major structural changes to increase transparency and competition in energy supply.  The government is in a difficult position given it is relying on the ‘big six’ to deliver the lion’s share of the enormous infrastructure investment that the UK requires over the next few years.

The SSE power auctions stunt: SSE has announced it plans to auction 100% of its electricity supply in the day-ahead market from next year, simultaneously purchasing its daily demand requirement.  SSE claims this will help to support new entrant suppliers and even bring down prices, but it is difficult not to view this move as a publicity stunt.  The major obstacle to market entry is not day-ahead liquidity, but liquidity along the forward curve, given the big six utilities purchase or transfer power on a rolling basis over a 1 to 3 year horizon in the forward market. 

EU energy road map focused on renewables: The EU is close to publishing its 2050 Energy Road Map and as with other EU studies the emphasis appears to be firmly on delivering large scale renewable capacity.  While this is an important component of the decarbonisation effort, there seems to be a growing gap between ‘road map’ projections of renewable capacity and the policy implementation and infrastructure investment required to deliver it.  The EU could diversify the risk around delivery and cost of decarbonisation by placing a much greater focus on the contribution of energy efficiency and demand side response.

Picture of the Week:

 

Pylons of the future?  Entries in a competition, organised by the Royal Institute of British Architects, the Department of Energy and Climate Change and National Grid, to find a modern replacement for the traditional electricity pylon, the design of which has remained largely unchanged since the 1920s.  The winner announced this week was a more modest design by Danish engineering firm Bystrup.