The energy sector denounces that the CO ₂ market raises the price of electricity

The _CO2 emission allowance market is making its mark on energy costs and the efficiency of European industry. As explained by Ismael Romeo, CEO of SendeCO2, during the Energy conference organized by elEconomista, the pricing of emission rights is increasingly less influenced by market fundamentals and more by “political decisions of all kinds” and the speculation of a few agents, who are the ones who finally win the auctions.

For example, in Europe, 50% of the rights are auctioned and end up in the hands of 17 actors, which implies “that there are very important dominant positions” that have led to placing the rights at record levels.

Specifically, in January 2018 the emission rights were quoted at 8 euros and six months later they reached 25 euros. The ups and downs in this market that “is subject to political decisions and speculative issues” hit companies hard and “ruin their budgets.” “Companies do not endure these variations in prices,” Romeo said during the celebration of the table The challenges of wholesale markets.

In line with this speech, Belén de la Fuente, president of Armie, pointed out that the cost of _CO2 emission rights directly influences the price of energy. “If gas instead of being ten euros were at 30 euros, add 25 euros and we would be talking about prices of 65 euros that then drags the rest of the markets,” said the senior executive, who throughout her speech made it clear that the most important thing is to get a wholesale market “transparent, competent and liquid” that tends to be interconnected, something that currently does not go through the limitations

The danger of going too fast

As for the fluctuations in the price of electricity, which are influenced by the _CO2 market and for the generation and discharge capacity of renewables, Javier Esteban, president of GasIndustrial 4, drew attention to the danger of wanting to lead very quickly the reduction of emissions in Europe based on penalties, and “of moving away from the peloton because the industries would not support it”.

“We have prices that are different from those in Europe and we have to get closer. When prices are universalized, they tend to fall, but until then we have to graduate what we can do without harming the industry,” Esteban warned.

At this point, the president of Viesgo, Miguel Antoñanzas, spoke, before the debate began, of the importance of markets giving investment signals to achieve the decarbonization objectives. A complicated scenario since “there is a lot of volatility since very low prices coexist due to high penetration with scarcity prices and problems to pour electricity”. For example, in Germany you can see price ranges between 80 euros and -49 euros and in Ireland between 135 euros and zero in July.

But far from advocating a more regulated market, Ignacio Soneira, CEO of Axpo, says that, even if we are heading for a market of high volatility, if you want to regulate it to be more stable that will be “at the cost of subsidizing prices when they are lower.” At this point, you can always trade with coverage to avoid spikes. “Coping with daily price differences is a challenge,” he said.

For his part, Raúl Yunta, president of Mibgas, stressed that Spain has an opportunity to create an LNG market since we have “very profitable assets that we must exploit.” “We have an advantage which is the flexibility we can have with the LNG market and the ability to pay a real price for it,” Yunta said.

For Blanca Losada, president of Fortia Energía, “markets are elements of efficiency transmission” and the challenge is to look for mechanisms that “allow optimizing time and space.” “Greater clarity, order and transparency are needed to compete in local markets and abound in the design of forward markets,” he said.

Source: The Ecomonist