Introduction
This report analyses how the introduction of the EU Emissions Trading Scheme is influencing the
way in which energy utilities will have to structure their generation and supply businesses between
2005-10. The purpose of the report is to offer utilities a set of actionable recommendations aimed
at improving their efficiency and profitability in the new age of growing environmental pressures.
Scope of this report
- Geographic coverage includes EU25, with special focus on the six key liberalised markets:
Germany, France, the UK, Italy, Spain and the Netherlands.
- The scope of this study is the entire electricity value chain, although in-depth analysis
centres on the core stages of power generation and supply.
- The time frame covered includes the period between 2005-10, although some longer-term
implications of emissions quotas are also considered.
- Analysis in the report is based on Datamonitors proprietary analytical models describing both
the long-term and short-term power market equilibrium.
Research and analysis highlights
On current trends, CO2 emission caps would result in a 500TWh annual power production shortfall
in EU25 by 2010, with Italy likely to be particularly affected. As a result, member states will need
to radically change their generation portfolios to satisfy the growing demand while decreasing the
carbon content of power production.
Multiple strategies are available to utilities in how to pass on the costs of compliance with
emissions caps onto their customers. In each case, the optimal cost assignment mechanism will depend
on the structure of a utilitys generation portfolio, its customer base and the severity of
emissions reductions it is facing.
Carbon trading reinforces existing trends towards internationalisation of procurement and risk
management activities by utilities. In the longer term, emissions quotas and the growth of renewable
generation will require major investment in electricity networks.
Key reasons to read this report
- Detailed analysis of the impact carbon emissions capping and trading will have on Europes
electricity sector between 2005-10.
- Actionable recommendations to utilities on minimising the costs of compliance with emissions
quotas and on passing those costs onto their customers.
- Based on Datamonitors proprietary models that identify the short- and long-term optimum
solutions for coping with emissions quotas.
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