LONDON, May 25 (Reuters) – Limited reform of EU emissions trading may not achieve much in CO2 cuts as the falling competitiveness of cleaner technologies is driven more by plunging coal than carbon prices.

The financial crisis has slashed carbon prices to record lows by creating a glut of emissions permits.

The European Commission wants to boost prices by rationing the supply of EU allowances (EUAs) from next year.

The aim is to tilt investment in favour of lower carbon energy like gas, nuclear and carbon capture and storage (CCS), as well as to drive efficiencies by raising the cost of carbon emissions.

But raising carbon prices would also hike energy bills across the 27-country bloc as suppliers pass the higher electricity generating costs to power prices, a significant political risk.

Energy Commissioner Guenther Oettinger last week suggested that CO2 prices should double for the scheme to be more effective.

“A price of 6 to 8 euros is not a price signal for anything, not for investors and not for consumers,” he told Reuters, preferring a range of 12-18 euros.

LONDON (Reuters) – European Union backing for extra infrastructure finance may sound like a deliberate distraction from deadlock over much bigger euro bonds, but in fact it is a great idea – the trouble is the tiny sums involved and lack of detail.

The “project bonds” idea stems from a two-year-old, European Commission and European Investment Bank (EIB) plan to drive capital market investment in infrastructure.

That’s distinct from common euro bonds backed by all countries in the euro zone, which would pool sovereign risk and so protect struggling countries – and which is opposed by Germany.

The project bond idea got a fillip earlier this week, when the European Parliament and EU member states agreed the launch of a pilot phase, pending EIB board approval.

That paved the way for a mention by European Council President Herman Van Rompuy after Wednesday’s EU summit, as one way to lift torpid growth.

The aim is to prop up infrastructure finance.

An EU-funded bond would take the riskiest portion of the debt raised by an infrastructure project, and so the first losses, aiming to overcome the natural caution of institutional investors.

LONDON, May 22 (Reuters) – Britain has ended liberalised power market pricing, in a broad strategy announcement that poses questions over how qualified government ministers are to choose between energy technologies and to set prices.

Wholesale power and carbon markets have failed to find a clearing price for low-carbon power generation, recalling a comment by British economist Nick Stern in 2006 that climate change was the “greatest and widest-ranging market failure ever seen”.

Power markets are too volatile and carbon prices too low to drive investment in expensive, capital-intensive renewables, nuclear power and carbon capture and storage, and help Britain meet binding national CO2 targets.

The return to central price-setting is unavoidable for now, and evokes the UK state-owned Central Electricity Generating Board (CEGB), privatised in the 1990s.

This time power will be met by a commercial generation market where the government, until around 2020, will set the required amount and price for low-carbon power according to technology and leave delivery to the market.(The CEGB in addition owned the power plants, in a fully nationalised model).

A high-level draft published on Tuesday left out details of precise price support, however, and these are to be announced in the second half of 2013.

In the meantime, there’s a danger the shift is not only a step back in market delivery but in technology.

LONDON, May 18 (Reuters) – The costs of nuclear power are rising in developed countries, where fossil fuel and renewable energy prices are stable or falling, suggesting present proposals for a major programme of new investment are ill-advised.

Overall, the picture is one of uncertainty about nuclear costs, but a clear upward trajectory is evident in developed countries, urging a re-think on construction plans in Britain, the United States, France, Canada, Finland and Poland.

The picture is different in India and China where vast plans with economies of scale plus cheaper labour may favour the technology.

Capital costs make up the biggest part of nuclear costs and have been rising since lows in the 1970s when massive expansion programmes in the United States, France, Germany, Japan and Britain captured economies of scale.

Costs rises reflect increased regulation, project delays and skill shortages, plus more recently the impact of concerns from the Fukushima crisis.

The problem argues in favour of an alternative, more nimble energy model, at least in the industrialised world.

That could include a bigger focus on energy trading across more intelligent and internationally connected grids, and on efficiency in demand and fossil fuel supply.

LONDON, May 16 (Reuters) – A British government argument that its planned support for new nuclear power stops short of a subsidy, to satisfy EU regulators and a coalition pledge, only adds to the sense of a policy in trouble.

The planned UK nuclear build programme would be the biggest in the developed world, but is under threat after the exit of two backers.

The economics are not helped by delays and cost over-runs at projects elsewhere in Europe and by low wholesale power prices.

The awkwardness of trying to stand by a commitment to “no subsidy,” even while it accepts the technology needs support, risks boxing the government into a corner.

Its predicament illustrates how the technology is struggling to maintain a toehold outside emerging economies where costs are lower and there is vast unmet demand for electricity.

Whether the British programme proceeds will depend on cost, including the amount of price support, plus public acceptance of the technology and the government’s “no subsidy” position, in the aftermath of a Fukushima disaster which has entrenched opposition among the environment lobby, its supporters and other opponents of nuclear.

As Vincent de Rivaz, chief executive of one of the key backers EDF Energy, said on Tuesday: “2012 is the defining year” for the UK programme. It’s also a wider test case for the technology in the industrialised world.

LONDON, May 15 (Reuters) – Laying more cables to Europe will be an important complement to new power plants as Britain navigates the cheapest route to replace ageing generation assets and makes difficult choices between gas, wind or nuclear power.

The usefulness of more cross-border interconnectors applies equally to other European Union countries with high wholesale power prices, notably Italy.

Linking grids has other advantages in a Europe with growing renewable energy resources, widening potential power sources come wind or shine.

But for countries like Britain there is a more basic rationale: key forward wholesale power prices are presently trading at a premium of about 15 euros, or a third, above Germany’s, the European benchmark.

Italian wholesale power prices are about half again above German baseload.

The British premium results from older, less efficient fossil fuel power plants plus less renewable power: Germany’s growing wind and solar farms, for example, cream off demand at the more lucrative peak load rates (the sun shines more when people run air conditioning), cutting prices.

Britain, like many developed countries, is now mulling a strategic re-think with a fifth to a quarter of its generating capacity due to close in the next eight years.

LONDON, May 10 (Reuters) – Upstream solar companies are finally cutting prices under pressure from their customers’ fight for survival, with profit margins showing more fat to trim and potential relief to the struggling sector.

Margins are falling at top producers, but still have a long way to go when compared with the downstream end, in a gradual re-balancing across the value chain.

When potential efficiencies are added from excessive profits made by installers, the prospect is of continued price falls and a sharpening competitiveness for solar power.

Downstream manufacturers have featured a growing list of bankruptcies, debt restructurings and takeovers under pressure from global over-capacity and plunging prices and margins.

The rout is a result of cheap Chinese competition which has driven western governments to pare subsidies, spurring a vicious cycle of over-capacity and pricing pressure.

The sector faces serious, continuing headwinds: the world’s leading market last year, Italy, is expected to contract sharply to as little as 2 gigawatts of newly installed capacity in 2012, from 9.3 GW in 2011.

Until recently, the upstream end had survived the cull partly as a result of higher barriers to entry plus the benefit of long-term contracts negotiated when polysilicon was in short supply.

LONDON, May 9 (Reuters) – European consumer electricity bills will have to rise over the next decade.

Current wholesale prices are not sufficient to cover the capital and operating costs of building new gas, nuclear or renewable energy to replace the looming closure of a raft of coal and nuclear power plants.

The need for higher wholesale prices is not yet evident in the forward power curve, which remains flat or at most rising in line with interest rates.

That curve shows no sign of a looming gap in power generation, even though many gigawatts of coal-fired capacity must shut by 2015 to meet European Union pollution rules (the “Large combustion plant directive”), while ageing nuclear plants will shut over the next decade.

In Britain alone, a quarter of the present capacity is expected to be decommissioned by 2020, according to the grid operator, National Grid.

The flattish forward curve instead reflects the economics of unsubsidised coal, no longer an option given CO2 targets, and appears to assume the generation gap will not be met by the market, but by new or existing government programmes supporting reserve gas capacity, efficiency measures and renewable energy.

But given how far present wholesale prices trail the required incentive, such programmes must come at a big premium, implying electricity bills will rise as utilities pass this on.

LONDON, May 4 (Reuters) – Germany plans to phase out nuclear power and Japan may follow, but history shows that neither can make up the energy supply gap with efficiency alone.

That will push them towards fossil fuels, putting climate goals further under stress, illustrating that the world may not be able to avoid low-carbon nuclear.

Germany has already shut all its older nuclear power plants, and announced plans to close the rest by 2022.

Japan has shut almost all its nuclear power at least temporarily, pending safety checks, in the aftermath of the Fukushima disaster.

As a result, both countries have announced plans to boost efficiency and output of renewable energy.

However, economic and energy trends show that both countries will struggle to do anything more than stall rises in energy consumption using efficiency measures, meaning they will have to entirely replace any lost nuclear power.

Renewable energy contributes a rather small amount in both Japan and Germany, and it’s inevitable that a large chunk of lost nuclear will be replaced by cheaper fossil fuels.

LONDON, May 3 (Reuters) – Trends in global economic growth and rising CO2 emissions rule out optimism that climate targets can be met, even while the world gets to grip with energy security.

The continuing financial crisis and record high oil prices in 2008 haven’t driven a low-carbon revolution which green lobbyists and agencies including the United Nations urged three years ago.

In fact, the opposite seems to be happening.

The world may have found a sticking plaster, at least, to peak oil with rising production of offshore crude, onshore tight oil, shale gas and tar sands, but increased output of such fossil fuels conflicts with the goal of limiting climate change.

Renewable energy grew faster in percent consumption than any other energy source in 2010, but only from a lower base: in absolute terms, growth was dwarfed ten-fold each by coal and natural gas, and five-fold by oil, show data from the energy firm BP.

One way to consider a trend in cleaning up global economic growth is through the ratio of CO2 emissions to global GDP, which should fall over time as economies become more efficient.

But a long-run global decline in that so-called “carbon intensity” has slowed since 2007 across almost all regions - including the European Union, North America, OECD countries, non-OECD and globally.