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Elering CEO: Lower emissions price means lower price of electricity

Estonian news - etea April 25, 2013

Baltic News Service, 25.04.2013

As analysts are predicting a decline for the price of carbon emission credits in the near term, a lower price of carbon credits would mean also lower price of electricity, CEO of the transmission system operator Taavi Veskimagi says.

Veskimagi said in his remarks to Aripaev that the price of carbon credits dropping by one euro per ton means for the Estonian oil shale fueled power plants in Narva a change in the price of electric power by approximately one euro per megawatt-hour. “A lower price of carbon credits means lower price of electricity in Estonia,” he said.

The current price level of carbon credits at three euros has significantly improved the competitive position of the Narva power plants on the Nordic-Baltic market, at least as far as hydro, wind and nuclear power plants are concerned which do not need to buy quotas, said Veskimagi.

Einari Kisel, senior fellow with the World Energy Council (WEC), told the newspaper that the present quota price accounts for up to one-tenth of the price of electricity. “It means that oil shale electricity is fully competitive in the Baltic region compared with earlier forecasts,” Kisel said.

A further reduction in the price of emission quotas could also bring down the price of electricity on the power exchange.

Since the European Parliament recently voted down a proposal of the Commission to temporarily remove a part of the emission credits from the market to reduce oversupply, analysts predict that the price of emission credits will continue to decline. Some analysts believe that the price could drop as low as one euro as a result of a speculative wave of selling in the coming few months.

“Changes in the price of carbon dioxide influence the price of electric energy sold in Estonia via the market price, but as a rule our power plants aren’t the ones that make the market price,” said Helen Tiits, head of the analysis department at the retail unit of Eesti Energia.

“How favorably priced, or how expensive, is carbon dioxide has an effect on the threshold that our power plants must climb to enter the market,” Tiits said. “When, for instance, the price of carbon dioxide is high and there’s a lot of hydro energy available in the Nordic countries at the same time, as a result of which the market price of electricity is lower, volumes at the Narva power plants will be reduced.”

 

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