Fuel for thought – 9th Dec

09 Dec, 2011

UK renewable investment downturn:  The data emerging around volumes of renewable capacity delivered in 2011 illustrates a substantial downturn compared to the last two years.  Although it is tempting to conclude that the focus of UK generation developers has shifted to investment in gas fired capacity, there is little evidence of new CCGT projects progressing from the planning to the construction phase given the challenging investment and market spread environment.  The evidence is mounting that the UK faces stagnation in generation capacity investment as the result of EMR policy uncertainty, weak forward market spreads and constraints around access to capital.

Shale gas in Eastern Europe:  One of the key uncertainties the European gas market faces over the next decade is the impact of the evolution of shale gas production.  Some of the most promising shale gas reserves are located in Eastern Europe, wedged between the pillars of European supply (Russia) and demand (Germany).  The impact of Russia as an obstacle to shale gas, on top of environmental concerns, should not be underestimated.  Gazprom is mounting an increasingly focused campaign against the development of shale gas and the access of producers to its pipeline network into Europe.

Solar industry consolidation: After boom times in recent years the solar industry has faced a tough 2011, with government subsidies slashed and plummeting prices of manufactured solar equipment.  After the explosive growth of a relatively large number of small solar manufacturers, the industry is ripe for a period of consolidation.  China’s presence in the industry is likely to expand, both through organic growth supported by their competitive cost base and through acquisition of struggling competitors. 

Carbon and CER market struggles: Weakness in EU ETS carbon prices has been compounded by a strong supply of CER credits that are flooding into the market ahead of a regulatory move to ban industrial gas credits by 2013.  A European recession next year threatens to further undermine the emissions reduction price signal from the EUA and CER markets.  The ETS is in desperate need of some clear messaging around changes to the regulatory landscape over the transition into Phase 3.

 

Picture of the Week:

The extreme winds in Scotland and the north of England this week proved too much for a number of wind turbines.  This stunning image shows a turbine at the 24 MW Ardrossan Wind Farm in North Ayrshire bursting into flames after a catastrophic failure on Thursday.  It follows an incident earlier in the day when a turbine was felled by strong winds in the Borders.  According to local police, the turbine’s brake system failure had failed, causing it to “freewheel”.