UK electricity reform, Australian carbon pricing, Macarthur Coal
In this week’s podcast: We talk to former speaker of the California state assembly and founder of G24 Innovations, Bob Hertzberg, about the UK’s white paper on reforming the electricity market; we look at Australian prime minister, Julia Gillard’s announcement on carbon pricing; and, we discuss the possible takeover of mining company Macarthur Coal by US-based Peabody Energy.
Presented by David Blair with Pilita Clark and William MacNamara.
Produced by LJ Filotrani
Over the next decade, Britain is expected to spend some £200bn on overhauling its entire energy infrastructure. Chris Huhne, the energy secretary, tries to justify this colossal price tag by pointing to the future opportunities presented by “green growth”. He reckons the UK can reap a huge dividend by becoming a leader in renewable energy technologies, allowing us to penetrate new export markets in emerging economies.
But an energy conference organised by the Financial Times in London threw several buckets of cold water over Huhne’s optimistic theory.
While the lack of a coherent national energy policy is nothing new for the US, Standard & Poor’s ratings service says in a new report that Washington’s current inability to definitively establish long-lasting energy policies and regulations distinguishes today’s situation from earlier eras. I quote:
Making resource decisions and committing a utility’s balance sheet to support those decisions has never been more complicated or littered with more potential pitfalls, and diminishing credit quality is a result.
Clear policy direction and consistent application by all branches of government of the various policies, ideally with maximum flexibility and abundant time for implementation, would benefit utility bondholders by promoting credit stability.
The UK has decided to put forward 12 projects for consideration by the European Investment Bank for its New Entrants Reserve, the €4.5bn pot to spend on CCS and “innovative renewable projects”.
There are seven CCS projects and five renewable ones.
George Osborne reiterated today the UK government’s “determination to be the greenest government ever”. But given what we already knew, most of the new information contained in Wednesday’s Budget seems to be set against that agenda.
Let’s take the measures one-by-one:
1) CCS support. We already knew that £1bn was pledged for round one. The new information in the Budget is that round two will be funded largely by the carbon floor price.
But as Mr Osborne himself admitted, this won’t be enough (at least at the level it has been set) on its own. Further money will be required from general taxation, which leaves second round CCS projects fighting alongside everything else for a rapidly diminishing pool of government spending.
The debate about what might happen to spot natural gas prices as a result of the Japanese nuclear crisis rumbles on. The latest view comes from IHS Cera, and differentiates between what might happen in 2011 and in 2012-2014.
As others have, IHS Cera begins its calculations (which aren’t available online) with the effects of the smaller 2007 quake, which knocked out 8.2GW of nuclear power and sent gas prices up to $20/mBtu. But its analysts point out that world LNG capacity is expected to have increased by half between 2007 and 2012, which should provide enough slack to keep a lid on prices.
But the fact is, LNG is already being diverted from the UK and elsewhere in Europe, and so we already know Japan’s needs cannot solely be accounted for by additional capacity. Instead, Europe will have to rely more on pipeline gas.
Will the glut of natural gas be a good thing for the environment? The gas industry insists it could be if we invest in the infrastructure to use it, as it would displace coal, which produces more CO2 when burned.
Environmentalists, however, say that investing in gas would simply lay the groundwork for a whole new generation of hydrocarbon-producing power plants, and set the goal of sharply reducing emissions back years.