EPRG Conference Presentations

Arguing that carbon costs would threaten their competitiveness, a vast majority of the manufacturing sectors, accounting for 95% of all industrial carbon emissions, receive exemptions from the EU Emission Trading System (ETS). However, competitiveness is a whole economy issue and therefore it is crucial to understand the EU-wide costs and benefits of carbon leakage exemptions. Modelling a range of carbon prices and auctioning rates, FTI-CL Energy found that phasing out special treatment for energy-intensive industries could benefit the European economy as a whole and result in a net increase in European GDP and jobs. The benefits of saved subsidies and a more efficient EU ETS outweigh the sizeable negative direct effects on the profitability of specific industrial sectors such as steel and cement.

This presentation explores the potential impact of smart meters on the retail market, and assessed the issue from four perspectives, including technology, Government/regulators, customers and suppliers. Firstly, as the mass deployment of smart meters gathers pace, the challenges of delivering even the basic functionality of smart meters are being underplayed. Secondly, in order to recover the costs of the UK Government’s deployment plan, energy tariffs may need to be raised. FTI-CL Energy expert, Alaric Marsden argued the importance of minimising the tariff rise and monitoring roll-out costs. Thirdly, whilst customer needs are changing rapidly, smart metering must first ‘do no harm’. And lastly, energy companies face a range of opportunities and risks from smart metering as new entrants who are better able to commercialise smart data disintermediate them and customers potentially face spiraling costs without seeing enough of the benefits.

This presentation explores the issues associated with the coordination of European capacity mechanisms. FTI-CL Energy expert, Fabien Roques described recent reforms to implement capacity mechanisms and highlighted the different issues and local specificities in the different member states. Some countries need more dependable capacity, others need flexibility to support renewables, and others are over-supplied by all measures. This implies that a “one-size-fits-all” approach is unlikely to work and can only be envisaged on a regional basis. Fabien outlined the different steps to drive some convergence in capacity mechanisms design across countries. He then described the recent European state aid guidelines on capacity mechanisms and highlighted the need for interconnection capacity. The presentation concluded by mapping alternative approaches for cross border participation in capacity mechanisms, as well as the practicalities associated with foreign generators’ reservation of interconnection capacity.