| ©ICIS HEREN - Romania early mover in rush for free power EUAs |
| 2010-04-06 |
| Romania is one of the few countries that has already decided to apply for free EU allowances for its power sector in Phase III - a move that could give the country`s electricity majors windfall profits even after 2012. The trading directive allows countries to opt out of total auctioning for electricity companies after 2012, as long as their GDP is half the EU average, and they rely more than 30% on a single fossil fuel. A block of countries, spearheaded by Poland and Hungary, fought hard for this concession during the revision of the directive two years ago. So far, only Romania has confirmed it thinks it qualifies for the opt-out, according to an ICIS Heren poll. Hungary, Poland and Bulgaria the other big emitters in central and eastern Europe (CEE) - are still mulling their options. Slovakia will only apply the opt-out to its heat generation sector. Free allocation might have a big impact on the carbon strategies of CEE emitters, EU numbers suggest. For instance, under the directive, Romania could be allowed to give companies such as Hidroelectrica and its rivals a maximum 33m EU allowances (EUAs) gratis equivalent to 70% of emissions from the country`s power plants in 2005-2007. Romanian power plants emitted only 35.2m tonnes of carbon dioxide equivalent (tCO2e) in 2009, so, unless this number rises sharply over the next two years, they face having to buy just over 2m EUAs in the market as Phase III kicks off. Add to that a surplus of 8.9m EUAs in 2009, and it looks likely that Romanian power producers would remain net sellers of allowances early into Phase III. Romania could also chose to use an ex-ante "efficiency benchmark", based on a weighted average of emissions from the cleanest plants within their own fuel groups across Europe. Bucharest will now have to map out an investment plan, showing how the government plans to pour the money saved through free allocation back into low-carbon upgrades and diversification of energy supply. That is another condition laid down in the directive. Countries that opt out of 100% auctioning would have to invest the "market value" of the EUAs in clean technologies, as well as giving up revenues from the EU-wide auctions. There are no details in the directive of whether "market value" refers to any specific delivery period or exchange, or if countries are free to propose their own numbers. Work in progress A spokeswoman for the European Commission said Brussels was due to unveil its positions on the technical nitty-gritty in a guidance document in the second half of 2010: "This is work in progress the issues are under discussion with member states." At current ICIS Heren Year 2010 prices, 33m EUAs would be worth around �500m. Romania will start working on this plan soon, using benchmarks, according to Georgeta Terciu, an adviser with the transport ministry. Hungary with power sector emissions of 17.3m tCO2e in 2009 is also currently evaluating how many free EUAs it might ask for, if any. A decision is expected by the end of the year, a spokeswoman said. Countries have until September 2011 to submit their applications to the Commission. (THE ICIS HEREN REPORTS - EDCM 5.095 / 19 May 2010) |
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