Cyprus last week handed out 2.2 million free EUAs to its power generators for 2014, making it just the second of eight eligible countries to do so ahead of the Apr. 30 EU ETS compliance deadline.
The small island nation, along with seven eastern European countries, has been approved to issue annually to its utilities a declining amount of free EUAs between 2013 and 2019 to help the member states avoid electricity price spikes and to modernise their power sectors.
In order to complete these so-called ‘derogation’ allocations, member states must submit a National Allocation Table (NAT) to the European Commission, showing that they have made, or have plans to make, the necessary infrastructure investments.
In an update on its website, the Commission said Cyprus handed out its quota of 2014 EUAs on Apr. 1 after submitting its NAT on Feb. 20. The Commission last year pre-validated the country’s annual NAT submission for the entire 2013-2020 period.
Last year, Cyprus’ generators received 2.5 million free allowances under the initiative.
The Czech Republic, the only other country to have issued free EUAs to its utilities for 2014, completed its allocation last September.
The remaining six nations, which include Poland, Romania and Bulgaria, have until the end of the month to hand out their quotas, which combined could be as high as 104.2 million units.
Failure to meet this deadline could force utilities in those countries to shell out millions of euros to buy any required permits at market, or trigger fines in excess of €100/tonne.
However, one trader said following last year’s experience, many firms have taken precautions to avoid being left short.
“The large utilities aren’t as worried as last year, as they have more of a stockpile this time around. If they don’t get them in time, they’ll surrender something else. However, for small- and medium-sized ones it’s an issue because they mainly buy spot instead of forward contracts, and only hold what they need,” he said.
Last year, Bulgaria, Cyprus, Estonia, Poland and Romania completed their 2013 allocations just days before the cut-off – while Lithuania missed the deadline by six months.