LONDON - The EU's Emissions Trading Scheme (EU ETS) is starting to influence power companies' investment decisions toward cleaner energy production, a survey by research group New Energy Finance shows.
With the EU ETS starting to affect not just operating schedules but the plant mix itself in the European power sector we would expect carbon emissions to start to fall over the next 5-10 years, New Energy Finance said in its report.
Due to the EU ETS, carbon dioxide emissions from the power sector will be 24 percent below business-as-usual levels by 2020 but a strong carbon price will still be needed into the third phase of the EU ETS (2013-2020) and beyond, NEF said.
Under the EU ETS, power companies are forced to buy carbon permits to cover their carbon dioxide emissions. Prices have halved from near 30 euros last summer due to the economic slowdown.
Power companies have complained that prices are not high enough to make new nuclear and coal plants with expensive carbon capture technology economic.
In its survey, the research group got responses from 13 power companies such as E.ON, Veolia Environment Emissions Trading, Centrica and RWE
In total the 13 companies represent 54 percent of power sector emissions in the EU ETS.
The survey showed that 85 percent of power generators are factoring a carbon price into their investment decisions, with most running several future positive price scenarios.
Only two eastern European companies are running a zero price scenario.
Their answers were motivated as much by a lack of confidence in the EU's capacity to implement long-term policies as in the structure of the EU ETS itself, NEF said.
The survey showed that current prices, as well as projected future prices, are not enough to justify an immediate shift to low-carbon technologies.
Renewable energy subsidies and fuel prices were cited as stronger factors than carbon prices in decision making.
At the very least, carbon prices are making utilities shift their focus to include cleaner technologies such as combined-cycle gas turbines and higher efficiency coal in their future plant plans.
The price is having the most impact on the build rate of biomass co-firing capacity, the closure of old and inefficient coal, oil and lignite plants, investments in carbon capture and storage, the survey found.