McKinseyClimate Change in Utilities.ppt
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1、E,120,Climate change,for Europes utilities,Enrique de Leyva and Per A.Lekander,Power producers should pay close attention to a European,Commission proposal to curb greenhouse gas emissions.It could,have paradoxical effects.,uropes plan to control the greenhouse gases responsible for globalwarming wi
2、ll probably lead to higher energy prices for both con-,sumers and businesses and greatly accelerate the shift from coal(including,1,121JAMES KACZMAN,lignite)to gas as the primary fuel used in power plants.These are the main,conclusions to be drawn from a McKinsey model of mainland Europes1,energy ma
3、rket as it would emerge under a European Commission scheme to,cap the emissions of power and heavy-industrial plants.But the model also,generated a paradoxical nding:unless utility regulators intervene,many,power producersincluding some of the fossil-fuel-burning generators that,emit the largest amo
4、unts of carbon dioxide(CO2),the greenhouse gas that,the European Union is trying to controlcould receive unexpected nancial,gains under the scheme.,The proposal as it stands would lead utilities to invest in new gas plants and,to write off obsolete coal plants.But in many cases,the cost would be mor
5、e,than covered by increased operating prots arising from a forecast 40 per-,cent rise in wholesale electricity prices.Europes power regulators have never,given utilities a free ride,however,and are unlikely to do so now,when the,The modeled region includes Austria,the Benelux countries,France,German
6、y,Italy,the four Nordic,countries,and Switzerland.,122,0,0,207,45,39,28,20,20,21,16,12,10,3,1,1,T H E M c K I N S E Y Q U A R T E R LY 2 0 0 3 N UM BE R 1,EXHIBIT 1,whole point is to curb,Kyoto calling,emissions.If,as the,model suggests,some,Change in emissions levels,19902001,Change in emissions le
7、vels requiredto meet 200812 target1,power plants would,1990 baseline emissions,millions of metric tons of CO2,gain from the currentproposal,modications,50%40%30%20%10%,10%20%30%40%,to the schemesched-,uled to take effect in,Germany,303,January 2005almost,United Kingdom,certainly lie ahead.,Italy,137
8、,Spain,64,Given the far-reaching,NetherlandsFranceGreeceDenmarkBelgiumFinlandPortugalAustriaIreland,strategic implicationsof the plan,Europeanpower generators andheavy energy users haveso far given its detailssurprisingly shortshrift.Yet those detailswill determine which,Sweden,(and how many)coal-,L
9、uxembourg,and oil-burning plants,should be closed in,As agreed upon in the EU burden-sharing agreement of 1998.,favor of new gas-red,Source:European Environment Agency(EEA);McKinsey analysis,ones,how and when,the remaining coal,and oil plants can be run most protably,and the amount of additional gas
10、,Europe will need.What is more,higher electricity prices could force heavy,energy users to consider new conservation methods,alternative energy,sources,or other cost savingsall of which would affect producers.,The McKinsey models projected higher electricity prices might be partly,offset by the incr
11、easing efficiency of existing plants and by reductions in,transmission and distribution charges over the seven-year(200512)dura-,tion of the plan.In any event,the model makes the expected cost of CO2,regulation more transparent to all parties.Whatever nal regulations emerge,from Brussels,the Europea
12、n power generation business is likely to change,fundamentally.,Trading CO2 to meet Kyoto targets,The stimulus behind the plan was the 1997 Kyoto Protocol,an international,agreement intended to reduce the greenhouse gas emissions of developed,economies,during the years from 2008 to 2012,by at least 5
13、 percent from,123,1,2,2,3,C L I M AT E C H A N G E F O R E U R O P E S U T I L I T I E S,How does a cap-and-trade scheme work?,The European Commission proposal is an exam-,To date,these schemes have achieved their tar-,ple of a cap-and-trade scheme for meeting,gets more cheaply than expected.The cos
14、t of,greenhouse gas emissions targets.If the cap,reducing SO2 emissions under the US scheme,itself is politically acceptable,allowing emissions,for example,was forecast at from$700 to,rights to be traded is perhaps the most cost-,$1,500 a ton,yet the final market price of rights,effective way to mee
15、t it even if the ultimate cost,reflected a reduction cost of$350 a ton.2 The,isnt known at the outset.(By comparison,if a,option to trade encourages companies to explore,tax were placed on carbon emissions,their cost,innovations that might reduce their emissions.If,would be known but there would be
16、no guarantee,a company can cut its emissions for a cost lower,that the cap would be met.),than the market price for emissions rights,it has,an incentive to do so and to sell its excess rights.,This theory has been tested in a number of,Since other companies can then buy them,their,schemes for managi
17、ng scarce environmental,market price falls to the cheapest cost of reduc-,resources,notably the schemes for reducing,ing emissions.The broader the scheme,the,sulfur dioxide(SO2)emissions from US coal,greater the incentive to innovate and the lower,plants,1 for managing blue-fin tuna stocks in the,th
18、e probable cost.,South Pacific,for reducing CO2 emissions in,Title IV of the US Clean Air Act Amendments of,Danish power plants,for promoting renewable,1990 to control sulfur dioxide and nitrous oxide,energy technologies in the United Kingdom andItaly,and for reducing CO2 emissions in the,emissions
19、creating acid rain.See A.Denny Ellerman,Paul L.Joskow,RichardSchmalensee,Juan-Pablo Montero,and Eliza-,plants of BP and Royal Dutch/Shell,companies in,beth M.Bailey,Markets for Clean Air:The US AcidRain Program,New York:Cambridge University,which business units trade their emissions rights.,Press,20
20、00,pp.25696.,their aggregate 1990 levels.Regardless of the protocols legal status,2 the,European Union is pressing ahead to meet its own Kyoto target:emissions,8 percent below the levels of 1990(Exhibit 1).,To that end,the European Commission has proposed a so-called cap-and-,trade scheme(see sideba
21、r,“How does a cap-and-trade scheme work?”)that,would be mandatory for more than 5,000 energy and industrial plants,3,accounting for about 46 percent of total EU emissions.The scheme sets an,annual limit on the aggregate amount of greenhouse gases those plants may,emit.Every year,the total emissions
22、of each of them would be calculated,For the protocol to come into force,it must be ratified by more than 55 countries,including those,responsible for 55 percent of the emissions of developed countries.The United States,which,accounts for 36 percent of these emissions,hasnt ratified the protocol,thou
23、gh 97 countries have.,Power plants that have a capacity of more than 20 megawatts,as well as aluminum,cement,ceram-,ics,chemicals,coal,glass,petroleum-refining,and steel businesses.However,the other main CO2-,emitting sectorsagriculture,residential heating,and transportare excluded.,124,1,2,T H E M
24、c K I N S E Y Q U A R T E R LY 2 0 0 3 N UM BE R 1,EXHIBIT 2,Modeling Europes energy markets,Key inputs,Model,Key outputs,Generation capacities at plant level,Hourly simulation of prices over,Market prices for region/country,Real transmission capacities Existing-and new-plant costs(capital,fuel,oper
25、ations andmaintenance,shutdown,start-up),15-year period Assessment of pricing strategies,new builds,plant shutdowns thatwould optimize players,as well as for selected individualplants or companies Transmission utilization andconstraints,Ownership of plants Pricing strategies in case ofconcentrated m
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