The higher the price of carbon, the more a coal or gas fired station must pay when increasing its output. The higher the usage of fossil fuels, the more carbon dioxide emitted and the more carbon credits they must purchase.
This cost is then subsequently factored into the price of power.
The carbon markets are now by and large politically driven. The UK has set a carbon floor price of £16. What this means for UK companies is a separate price to that of the rest of Europe. With Europe paying roughly five Euros and the UK paying £16, this will make them uncompetitive in comparison to their European counterparts. The effects, bluntly, could be vast layoffs and potential closures.
Presently the EU continues with negotiations regarding ‘back loading’, the oversupply of credits in the market. Should the EU take the decision to remove a number of credits, thus reducing the supply, we will see for the first time in six months prices breach the five Euro mark, subsequently causing rises in Power prices across Europe.
Understanding the risk management of the EU carbon market and its effects on the price of power now forms part of the Total Energy Cost Management package that alfaenergy can provide.