German utility RWE reported Tuesday that it cut its EU-based emissions by 3% last year, adding that it had hedged a higher proportion of its future lignite and nuclear power compared to a year ago but a lower percentage of its hard coal and gas-fired power output.
The figures, coupled with low generation profit margins for many utilities across Europe, point to lower demand for carbon from the EU’s biggest emitter.
In its full-year 2015 earnings report, RWE said its operations covered by the EU ETS emitted 149.5 million tonnes of CO2 in 2015, down 4.6 million tonnes from the previous year.
As a result, the company said its EU carbon unit shortage shrunk to 143.9 million tonnes last year from 148.3 million in 2014.
That took into account the 5.6 million free CO2 allowances it received for free from governments in 2015, which was down slightly from 5.8 million in 2014.
The utility didn’t disclose quantitative figures for its carbon allowance holdings, but it said they were worth €323 million at the end of 2015, up from €244 million a year earlier.
RWE’s overall conventional power generation in EU ETS-regulated countries rose 2.8% to 196.6 TWh, with lignite and gas leading the way higher.
Production from gas-fired generation in those countries climbed 14% to 38.6 TWh, while lignite rose 0.8% to 77.8 TWh.
Meanwhile, RWE’s hard coal output fell 3.7% to 46.5 TWh, renewables jumped 12.9% to 9.7 TWh, and nuclear was steady at 31.7 TWh.
The carbon intensity of RWE’s power fell to 0.708 tonnes of CO2 per MWh, down from 0.745 tonnes last year and bringing the company closer to meeting its goal of 0.62 tonnes/MWh by 2020.
The company has generation assets across most of western and eastern Europe, and is the second largest supplier of electricity on the continent.
HEDGING
RWE said that as of the end of 2015, it had hedged more than 90% of both its outright power generation (lignite and nuclear) and its spread-based output (hard coal and gas) for 2016.
That was up from Y+1 hedging figures of >90% and >70%, respectively, as reported in the company’s full-year 2014 earnings.
For Y+2 electricity sales, RWE said its hedged percentages for outright and spread-based output were >80% and <10%, compared to >60% and >20% the year before.
And for Y+3, it said it had hedged >40% of outright and <10% of spread-based, which was up slightly from end-2014’s respective >30% and <10%.
The year-end data showed that over the final quarter of 2015, RWE had increased only its percentage of spread-based power hedged for 2016 by around 10% compared to Q3, while all other figures remained steady.
RWE’s hedging figures may have also been affected by an adjustment of expected forward power sales, which may have been downgraded due to lower anticipated demand from smarting industrials, warmer winter temperatures, or Europe’s economic malaise.
As the main buyers of EUAs, the purchase patterns of major utilities can have a major bearing on carbon prices.
Many utilities in western Europe sell most of their electricity one-to-three years in advance, simultaneously buying the required carbon and fuel to lock in profits.
A year ago RWE reported that it had changed accounting practices and, in light of the annual Apr. 30 deadline for handing in permits under the EU ETS, said it had started to buy the bulk of its EU carbon requirements for delivery in March instead of December.
By Mike Szabo – mike@carbon-pulse.com
