MorganEnergy

Prices in the Texas electricity market have been causing concern of late. According to this article in the Wall Street Journal, prices in the spot market exceeded $2,000/MWh at times on seven out of the past ten days, and on May 23rd briefly went above $4,000/MWh. Most of the supply in Texas is under long term contracts, so there should be no danger of a California-like collapse. However, the going is still tough for some retailers. Texas has fairly low entry requirements to the retail market, and already two small supply companies, National Power Co. Inc. and Pre-Buy Electric LLC, have defaulted on some contracts leading to 15,000 customers being transferred to other retailers under “supplier of last resort” agreements. Other supply companies are thought to be vulnerable. The situation is sufficiently serious for the Texas Public Utility Commission to hold an emergency meeting yesterday to find out what could be done to help vulnerable customers.

As yet no explanation has been provided for the price spikes. As the WSJ article notes, demand is nowhere near what is expected at the summer peak. Prices of this level could therefore be expected to continue, and even increase, for months to come.

With the UK’s electricity supply now back in proper working order, the search for someone to blame for the blackout has begun in earnest. The Times has a number of good articles here, here and here that sum up most of what we have heard from our contacts. The Register also has a well informed article on the subject.
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Further to our discussion of EU market liberalization, RWE has announced that it will follow E.ON‘s example and look to sell off its gas transportation network in order to settle the anti-trust case being brought against it.

Thousands of customers across the UK were without power yesterday as a result of a perfect storm of plant outages that left National Grid struggling to schedule sufficient generation. The problem began around noon when the grid operator issued a “High Risk of Demand Reduction” notice following the unexpected and almost simultaneous shutdown of both the Sizewell B nuclear plant (British Energy, 1180 MW) and the Longannet 1 coal-fired plant (Scottish Power, 576 MW).
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UCEI has issued a new working paper. “When to Pollute, When to Abate? Intertemporal Permit Use in the Los Angeles NOx Market” is by Stephen P Holland and Michael R Moore, and looks at intertemporal trading in the NOx market in Southern California. The abstract is as follows:

Intertemporal tradability allows an emissions market to reduce abatement costs. We study intertemporal trading of nitrogen oxides permits in the RECLAIM program in Southern California. A theoretical model captures the program’s key intertemporal features: two overlapping permit cycles, two compliance cycles for facilities, and tradable permits. We characterize the competitive equilibrium; show that it is cost effective; and demonstrate the firms’ incentive to delay abatement, i.e., to trade intertemporally. Using model extensions to explore market design issues, an arbitrage condition implies that the equilibrium is invariant to overlapping compliance cycles, but depends crucially on overlapping permit cycles. We empirically investigate intertemporal trading of permits using panel data on RECLAIM facilities for 1994-2006. Facilities undertake trading by using a considerable proportion of permits of the opposite cycle. We econometrically test two theoretical propositions – delayed abatement and trading across cycles – with a difference-in-differences estimator. The results neither contradict nor provide conclusive support of the theory.

A PDF of the paper is available here.

So, there is some action on this web site for the first time in years. Hopefully it will continue, and hopefully also some of the people who used to read it regularly will come back. Who knows, it might even garner some new readers. For those of you who have been promoted to return, there is some more background here. Beyond that, it is up to use to provide content to keep you entertained and informed. Watch this space. And if you feel like giving feedback, please do so.

Energy market liberalization in the EU has been a difficult process and is likely to remain so. While some countries, notably the UK, have gone full steam ahead into creating fully competitive markets within their own borders, other countries, in particular France and Germany, have concentrated on developing “national champions” that will be able to compete in the expected Europe-wide energy marketplace. It is no accident that most of the UK’s energy companies are now owned by large European firms.

But before that European marketplace can properly develop, the stranglehold of the national champions on their home territories has to be broken. Naturally, those companies see no reason to give up their privileged position, and have been happily cooperating with each other to divide up Europe between them. This has led the European Commission to open anti-trust proceedings – see for example this Forbes report on investigations into the behavior of E.ON, Gaz de France (GdF) and RWE in Europe’s gas markets.
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The June 2008 issue of EEnergy Informer has been released. The contents list is as follows:

• Solar Energy Growing Up Fast
• Britain To Chart Its Electricity Future, Soon or Sooner
• Juneau Responds To Price Jolt
• Why Too Much Of A Good Thing Could Be Bad
• Wind: 20% by 2030?
• Plug-in Hybrids: Making Utilities More Important than Oil Companies
• Will We Be Using Yesterday’s Technology in 2050?
• Rockefellers vs. Exxon
• Fortune 500: The Big And Mighty
• Book Reviews: An Appeal to Reason: A Cool Look at Global Warming, by Nigel Lawson; Gusher of Lies: The Dangerous Delusions of Energy Independence, by Robert Bryce

The article on the intermittency problem in renewable generation is available for free, as are the book reviews. All other articles currently require a subscription to the paper edition of the magazine. To subscribe to EEnergy Informer click here.

So British Energy has been put up for auction, and they got only one bidder. Ah well, that’s better than when the UK’s electricity industry was first privatized. Then no one wanted to buy the nuclear plant.

But what to do? For that lone bidder is not a safe and reliable British company, but rather a dastardly Frenchman! Well, Electricite de France (EdF) does know rather a lot about running nuclear power stations. It is not surprising that they are interested. But the British public, quite understandably, is nervous about selling such high profile resources to Johnny Foreigner.
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The May 2008 issue of EEnergy Informer has been released. The contents list is as follows:

• Has Bush Really Changed His Mind on Climate Change?
• Blackouts Or Nukes? Which Do You Prefer?
• Want More Wind? Build More Transmission Lines
• Wind: Second Only To Natural Gas
• California Pushing Boundaries to Breaking Point
• Bottlenecks Aggravate Rising Construction Costs
• Quality and Delivery Slips With Rising Demand For Wind Turbines
• Alternative Energy: No Longer A PR Gimmick
• Energy Efficiency Has Ways To Go
• If You Want To Pay More, You Don’t Need Coal
• Special Supplement: Competitive Electricity Markets

The article on the grown of wind generation is available for free. All other articles currently require a subscription to the paper edition of the magazine. To subscribe to EEnergy Informer click here.