ICF International Warns European Carbon Prices Could Exceed €70 and Wholesale Power Prices Could Double by 2020
Study Projects Impact of ‘Missing’ Renewable Targets on Power Sector and Carbon Dioxide Prices
April 2, 2009 -
In its recently released European Power and Carbon Markets Outlook (European Outlook), ICF International (NASDAQ:ICFI), a global leader in energy and environmental analysis, projects a sevenfold increase in the price of carbon dioxide (CO2) allowances by 2020, as compared to February 2009 levels, if the European Union (EU) is to meet its goal of reducing emissions by 30 percent between 1990 and 2020.
European Outlook examines the interrelated dynamics of the European power and carbon markets in light of the EU energy and climate legislative package voted in December 2008 and the current economic crisis. It is designed to help utilities, industrials, financial institutions, and other market participants make strategic operational and investment decisions based on long-term carbon and power market views. The study provides a comprehensive, integrated view of EU carbon prices, emissions, and sources of abatement. It also captures wholesale electricity prices, build mix, future capacity, and generation by region, between 2009 and 2030.
Reaching the ambitious target of procuring 20 percent of the EU’s energy from renewable sources by 2020 will require investment in higher cost renewable energy, as well as investment in supporting energy infrastructure in order to move the energy to market. ICF’s analysis shows that if the renewables target is missed, a portion of the costs of meeting CO2 targets will shift from renewable subsidies to electricity prices. Indeed, meeting 2020 targets will require substantial investments in gas-fired capacity, and later in carbon capture and storage. The cost of these investments, once factored into electricity prices, will cause them to double between 2010 and 2020.
“Participants in the EU ETS carry significant future exposure to whether or not renewable targets are met,” commented Neil Cornelius, head of ICF’s European energy markets. “In the case of the power sector, there is a very material impact on the viability of non-renewable investments and assets, so this goes to the heart of portfolio decisions.”
“EU ETS participants should look beyond the current economic and credit crisis and adopt a long-term carbon market strategy that anticipates a sharp rise in demand for emission reductions over the next five years,” adds Diane Simiu, carbon analyst. “Anyone going for the ‘dash-for-cash’ approach is in for a rude awakening when the carbon market picks up.”
Further information on ICF’s European Power and Carbon Outlook 2009-2030 is now available at http://www.icfi.com/europeanpower.
About ICF International
ICF International (NASDAQ:ICFI) partners with government and commercial clients to deliver professional services and technology solutions in the energy and climate change; environment and infrastructure; health, human services, and social programs; and homeland security and defense 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 research and analysis through implementation and improvement. Since 1969, ICF has been serving government at all levels, major corporations, and multilateral institutions. More than 3,500 employees serve these clients worldwide. ICF’s Web site is www.icfi.com.
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