European
Power Sector and Russian Allowances Predicted to Have Pivotal
Roles in Dampening Price
London,
UK, 12 May 2005 - Constraints on greenhouse
gas (GHG) emissions imposed on the European power
sector will have significant commercial implications
for utilities and fuel suppliers alike during the
upcoming Kyoto Protocol compliance period. Today,
at Carbon Expo 2005 in Cologne, ICF Consulting
launches its report, "The
Price of Carbon in 2008-2012: Scenarios for Investment
Appraisal," to help clients develop robust
estimates for the price of carbon dioxide (CO2) and
to support their power plant financing needs. |
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The beginning of the European Union (EU)
Emissions Trading Scheme has seen prices for EU Allowances
(EUA) fluctuate between a low of €6 and a high of €18/tonne
of CO2. One of the key risk management challenges
faced by industry analysts is to understand how market
factors are likely to drive the price of CO2 in
the first Kyoto Protocol budget period of 2008-2012 and
what price to incorporate into investment appraisal decisions.
Understanding these drivers is critical since revenue forecasts
in that period are very much material to any planned new
power plant investments.
"Several commentators have predicted prices in excess
of €25/tonne of CO2 during the first budget
period of Kyoto. Our analysis of the fundamentals suggests
that this represents a crisis scenario only," says Abyd
Karmali, an ICF Consulting Senior Vice President who leads
the firm’s climate
change services in Europe. "We
considered several scenarios that reflect alternative perspectives
on fuel prices, the implied emissions abatement available
in the European power sector, the introduction into the
carbon markets of surplus Assigned Amount Units (AAUs)
from Eastern Europe, Ukraine, and Russia, and the timing
of delivery of project-based Clean Development Mechanism
(CDM) and Joint Implementation (JI) carbon credits. In
none of the scenarios does the price exceed €20/tonne
of CO2, and in fact, our base case scenario
suggests a much lower equilibrium price with a narrower
band of price volatility compared to what we have seen
thus far," says
Karmali.
"In the analysis, ICF Consulting identified several
country-specific opportunities for European power generators.
Power prices are heavily influenced by the price of carbon.
A key insight is that in some countries the level of carbon
prices necessary to encourage new combined cycle gas turbine
(CCGT) development is much higher than in others," says
Kim Keats Martinez, Managing Consultant in ICF
Consulting’s
London office. "We expect niche opportunities
for generators to create significant value to emerge in
a cascading type of way across Europe. This reflects the
fact that different countries' power markets will differ
markedly in their sensitivity to carbon prices and that
actions taken by power generators in one country to respond
will have ripple effects in neighbouring countries. This
is one case when it will definitely be first-mover advantage."
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ICF International (Nasdaq: ICFI) partners with government and commercial clients to deliver consulting services and technology solutions in the energy, environment, transportation, social programs, defense, and homeland security markets. The firm combines passion for its work with industry expertise and innovative analytics to produce compelling results throughout the entire program life cycle, from analysis and design through implementation and improvement. Since 1969, ICF has been serving government at all levels, major corporations, and multilateral institutions. More than 1,800 employees serve these clients worldwide. ICF’s Web site is http://www.icfi.com.
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For Immediate Release
United Kingdom Contact: Abyd
Karmali
Tel: 44 (0) 20.7092.3005
United States Contact: Douglas
Beck
Tel: 1.703.934.3820
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