Free EUA delay may not force some utilities to market

A delay in receiving free carbon emissions allowances will not force companies to immediately buy from the market as some European utilities already have enough carbon permits to cover their needs.

Utilities in Bulgaria, Cyprus, the Czech Republic, Estonia, Hungary, Lithuania, Poland and Romania are entitled to free EU emissions allowances (EUAs) to help modernise their electricity sectors.

However, while some of the countries are yet to hand out their allowances for 2014, according to the latest European Commission update, the delay may not affect the market.

“It has no influence,” a spokeswoman from Czech-headquartered utility CEZ said on Friday.

CEZ said it does not expect to receive the free EUAs for its activities in Poland by the 30 April compliance deadline. “[For the] last two years, the commission failed to comply with the deadline although we met all the requirements in requested dates,” the spokeswoman said.

Delay repeat

There was also an EU-wide delay in the distribution of 2013 emissions allowances for the power sector, which forced some utilities such as Lithuania’s Lietuvos Energija to go to market to cover their requirements (see EDCM 7 November 2014).

However, the purchase meant that when the free allowances were eventually received, Lietuvos Energija had sufficient carbon permits to cover requirements for the next year. This reduced the need for the company to buy permits in the future, a factor which could weigh on EUA prices if repeated across the sector.

“Lietuvos energijos gamyba is long in EUAs and has sufficient quantity before the upcoming compliance deadline,” a spokeswoman from the Lithuanian utility said on Friday. “We have not been buying any allowances recently, neither intend to buy any before the compliance deadline”.

Go-ahead delay

The Polish government said last week that it is waiting for the go-ahead from the commission so that Warsaw can finalise national legislation to hand out the free EUAs to utilities.

“Poland is waiting for the commission evaluation of the report on investments made in modernising electricity generation,” the spokeswoman said. “We are expecting a quick commission decision in this regard.”

The commission did not respond to ICIS’ requests for comment. Saloni Sardana and Ben Lee