Utility Carbon Reduction Strategies to Drive Commercial Success

Table of Contents

• DATAMONITOR VIEW
  • CATALYST
  • SUMMARY
• ANALYSIS
  • Regulations to reduce carbon emissions span the entire energy value chain, with an impact on consumers and retailers, but mostly electricity generators
    • Regulation, competition and consumer demand are driving power retailers and generators to develop carbon reduction strategies
    • Current EC support for 100% auctioning of allowances for the power sector from 2013 would hit Europe' s largest utilities hard
    • In the next decade, greater demand for power and higher carbon prices will lead to prohibitively high compliance costs for utilities
  • The most appropriate long-term carbon abatement strategy varies from utility to utility and country to country in line with the generator' s current mix and the relative cost of abatement
    • In the UK, coal power generation accounts for a comparatively large share of each generators' mix, except for Centrica and BE
    • In the UK, generators with low coal dependency will favor a switch to more energy-efficient generation; others will focus more on CCS
    • Large coal-dependant and carbon-intensive power generation bases are widespread in Germany
    • The prime carbon mitigation strategy for coal-intensive German utilities will focus on CCS and renewable power generation
  • European utilities increasingly rely on emerging technologies with considerable, wide-ranging and improving abatement potential
    • Since the turn of the century, different mitigation strategies across the major European utilities have yielded very different results
    • Today, power utility carbon abatement strategies can rely on three main building blocks underpinned by emerging technologies
    • Six abatement options could decrease power sector emissions by up to 35% by 2030, at a marginal cost of less than &euro40/tCO2e
    • Power generation technologies at different degrees of commercial maturity currently present varying marginal abatement potentials
• APPENDIX
  • Glossary
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
• List of Figures
  • Figure 1: Three main drivers are forcing power retailers and power generators to develop long-term successful carbon mitigation strategies
  • Figure 2: By 2013, Europe' s largest utilities could face annual carbon compliance costs ranging from &euro90m to &euro5.5bn*, if unhedged
  • Figure 3: A 2017 carbon allowance compliance cost forecast* shows that utilities must develop robust carbon reduction strategies or face significant profit erosion and competitive displacement
  • Figure 4: CCS and other more efficient power generating technologies do not necessarily deliver the greatest marginal abatement potential
  • Figure 5: Retailers with a comparatively low carbon intensity will derive higher marginal abatement through ' softer' strategies focusing on demand side management (DSM)
  • Figure 7: Large historical coal-fired generation bases in Germany put utilities at the ' dirty' end of the carbon intensity spectrum
  • Figure 7: German power generators will derive higher marginal abatement through the use of large-scale capital-intensive technology deployment strategies (e.g. CCS and energy efficiency)
  • Figure 8: carbon intensity of power generation is expected to evolve differently Across the major European utilities owing to differing power generation profiles
  • Figure 9: Carbon mitigation strategies vary with the utility' s position within the value chain, its relative exposure to current and future carbon regulation, and the options and technologies at its disposal to facilitate the transition to a lower carbon intensity at the lowest marginal cost.
  • Figure 10: For utilities, there are six main abatement options with a marginal cost below &euro40 per tonne