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On this page you will find industry news about electricity, renewable energy, gas, water, fixed and mobile telecoms, and other stories. Our news is updated once per month. We cover items such as developing technologies, price changes in the utility markets, takeovers and company collapses, changes in tariffs, the results of investigations by the regulators and market trends.
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Industry news
Striking a balance between urgency, climate change and energy security
Monday, May 25, 2009
Britain's power infrastructure is on the brink of what may be its biggest transformation. Underinvestment in the network for decades mean that a big overhaul is long overdue, but the changes are being accelerated by a string of other influences.
Tough new European Union pollution rules mean that nine of Britain's biggest coal and oil-fired power stations are due to be retired from service in 2015, while a string of other ageing nuclear stations built in the 1960s and 1970s are being decommissioned at the same time. Together, these plants represent about 25 per cent of UK power-generating capacity. They are the steady workhorses of Britain's energy system that have churned out heat and light to millions of homes for decades.
To avoid future supply disruptions and blackouts, they need to be replaced urgently — yet in an era of growing alarm over climate change and energy security, there is much debate over what should take their place. The industry has pledged to build a fleet of new nuclear power stations, but the first of these will not be ready before 2017, at the earliest.
At the same time, Britain has signed up to an ambitious EU plan to generate 35 per cent of its electricity from renewable energy, such as wind and wave power, by 2020 — a dramatic increase from today's figure of less than 5per cent.
Many in the industry doubt that this target is achievable, given the funding and planning wrangles faced by the wind developers and the complexity of linking schemes to the National Grid. Nevertheless, the Government is pushing hard for as many of these schemes to be built as possible.
Meanwhile, a host of new gas-fired power stations is also on the way. The share of Britain's electricity produced by burning gas has already risen from 2 per cent in 1992 to 35 per cent. The figure is expected to rise further, with gas-fired plants under construction at Pembroke in West Wales, the Isle of Grain in Kent and Langage, outside Plymouth.
Cheap and relatively quick to build, they may emit carbon but tend not to stoke the public ire against new coal plants. However, they do raise other problems. With domestic supplies of North Sea gas being depleted fast, the UK is becoming increasingly reliant on imports of the fuel from countries such as Russia, Qatar and Algeria, a trend that has raised concern about UK energy security.
This was featured on the Business Times Website.
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Global electricity use forecast to fall
Thursday, May 21, 2009
Global electricity consumption will fall this year for the first time since 1945, according to the International Energy Agency.
The watchdog for developed energy consuming countries will tell energy ministers from the Group of Eight leading economies on Sunday that electricity demand will fall 3.5 per cent in 2009.
n China, where power use is seen as a more reliable barometer of economic activity than official economic measures, consumption will be more than 2 per cent lower than 2008. Russia will see a fall of almost 10 per cent, while countries in the Organisation for Economic Co-operation and Development will see a fall of almost 5 per cent.
Three-quarters of the global decline in consumption is accounted for by industrial rather than household demand, reflecting the fall in demand from China’s manufacturing-heavy economy. Consumption in India, by contrast, is expected to increase 1 per cent.
“This shows how deep a recession we are in,” said Fatih Birol, IEA chief economist. “Oil demand has declined in the past due to oil price shocks, financial crises – but electricity consumption has never decreased.”
In a report published last year, before the extent of the financial crisis was clear, the IEA forecast that electricity consumption would rise 32.5 per cent between 2006 and 2015. World electricity demand grew almost a quarter between 2000 and 2006. In 2007 it rose 4.7 per cent and in 2008, the year the crisis set in, it grew 2.5 per cent.
“It’s a good barometer of economic activity,” said David Rosenberg, chief economist at Gluskin Sheff. “It’s very cyclical and often early.”
Global oil demand, which is more sensitive to consumer sentiment than electricity, has fallen several times since the second world war. The IEA this month forecast oil consumption would be 3 per cent lower in 2009 than 2008, the ninth consecutive lowering of its forecast for this year.
The agency will also tell ministers that its calculation of the stimulus spending required from G20 nations on renewable energy was inadequate and should rise by a factor of six if greenhouse gas emissions targets set by the United Nations were to be met.
The IEA will also warn that a fall in investment in oil production could lead to a supply squeeze in 2012. The agency said about 2m barrels per day in capacity were cancelled, and another 4.2m bpdwere delayed by at least 18 months.
This story was featured on the Financial Times Website.
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New cuts on the way as Vodafone’s profit plunges
Wednesday, May 20, 2009
Vodafone is planning fresh cost cuts as nearly £6 billion of writedowns and the effects of recession led to its full-year profits being more than halved.
The group, which has already cut 500 jobs in Britain, took a hit of £3.4 billion on its Spanish business and a fresh £500 million hit in Turkey as it struggled with the downturn and intense competition.
Service revenue across the group’s European markets fell 1.7 per cent as consumers and businesses sought to rein in their spending on calls, text messaging and use of their phones abroad amid the recession.
The company insisted further UK job cuts were “not on the horizon” and said it would look to squeeze savings from areas such as IT and distribution as it tries to meet a £1 billion cost-cutting target — and possibly exceed it.
In the UK, where the group lost 450,000 customers in the three months to the end of March, turn-around plans include relaunching its contract offering in Carphone Warehouse stores. Carphone’s share price was hammered in 2006 when Vodafone transferred its business to Phones 4 U.
Vodafone expects no let-up in the “challenging” environment. It prepared investors for possible losses in the year ahead, adding that profits for 2010 would be flat at best at £11 billion to £11.8 billion.
Analysts noted the group was facing “widespread pressure”, with the rate of service revenue growth falling in every major market, including Britain, Germany, Italy and Spain. And despite the promise of further cost cuts, investors sent the shares down by 5¾p, or 4.5 per cent, to 121.7p.
Vodafone has suffered in Spain in part from the make-up of its customer base, including huge numbers of migrants who left the country to return home when the property bubble burst.
In Turkey, which Vodafone entered in 2005 through the $4.55 billion (£2.94 billion) acquisition of Telsim, it has been hit in part by fierce competition from Turkcell, the leading operator. The deal was criticised at the time by investors, who said that Vodafone had overpaid massively.
The steep writedowns contributed to a 53.5 per cent plunge in profits to £3.08 billion for the year to March 31, from £6.6 billion in the previous year.
Michael Kovacocy, a Daiwa analyst, said: “With Spain — one of the company’s most profitable franchises — now impaired and further stagnation and decline in Europe in store, the case for future consensus downgrades has probably increased.”
But Vittorio Colao, who succeeded Arun Sarin as Vodafone’s chief executive nine months ago, insisted the business had performed well, softening the impact of the slump and making “good progress” in cutting costs. The Italian reaffirmed his pledge to focus on operational performance and tight financial discipline, rather than big spending on acquisitions. He was, he said, “a delivery person”.
But Mr Colao raised the possibility of a tie-up in the UK, where the group is an “active supporter” of market consolidation. He said it was duty-bound to consider any opportunities.
Analysts believe T-Mobile and 3, the fourth- and fifth-ranked operators, are potential merger or acquisition targets for bigger rivals.
This story was featured on the Financial Times Website.
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Green feed-in tariff needs to maximise solar power
Thursday, May 14, 2009
MPs and others are now starting to recognise the potential of solar power technology in the UK, but we are still only scratching the surface
April 2010 could be a major milestone in the UK's attempts to deliver a low-carbon economy. Assuming all goes well, that is the date when the government will introduce new "feed-in tariffs", where a price premium is paid to homeowners, schools and businesses for every unit of electricity they generate from small-scale renewable technologies, such as solar photovoltaics (PV), wind and micro hydro power.
All of these technologies have immense potential in the UK. However, there is still a very real danger the government will lose its bottle and go for a tariff that will at best make a very marginal difference to uptake. If that happens, it will be a massive lost opportunity at a time when the government needs all the help it can get in meeting its 2020 renewable energy targets.
For solar PV, the government has already come a long way from its dismissive treatment of the technology in the 2008 Renewable Energy Strategy consultation, and with good reason. Under the level playing field of the government's own grants programme, for example, solar PV has been the technology of customer choice, accounting for 70% of completed projects to date.
But currently, we are only scratching the surface of the potential of this technology in the UK. The absolute resource potential of solar PV is 460 terrawatt hours each year, more than current total demand for electricity in the UK. That message is beginning to get through to MPs and others, helped by the launch of the "We Support Solar" campaign, which is backed by the Federation of Master Builders, Friends of the Earth, RSPB, and more than 220 MPs.
MPs and others now recognise one of the prizes of a well-structured and properly implemented feed-in tariff will be green jobs, and lots of them. Our own modelling, which reflects assumptions made by the government's own independent consultants, shows that by 2020 the tariff could create more than 100,000 solar PV services and installation jobs.
So how are we going to ensure that the feed-in tariff really does maximise the jobs potential in solar PV, but also in the other small-scale renewable electricity technologies? Here's how we think the UK feed-in-tariff should operate.
The government must keep it simple. The tariff should be structured to pay for generation not export to the national grid, to encourage the broadest range of take-up in small-scale renewable energy, from homeowners to investors. They must ensure it's easy for people with small green energy systems to connect to the grid.
Secondly, the tariff needs to encourage investment. That means setting the price for each unit of green electricity generated high enough to allow suitable returns for investors. We also need support for low- or zero-interest loans, to help people get beyond the up-front cost of many small-scale renewable technologies.
Lastly, the UK's feed-in tariff must create green jobs. The tariff should be structured to encourage microgeneration on buildings. For example, solar PV on buildings is more job-intensive than mounting PV on the ground and involves a broad range of skills from the construction industry (roofers, surveyors and consultants). In hand with this job creation, government should subsidise the re-training of electricians, roofers, engineers and others whose jobs are now lost or under threat from the construction industry's decline.
This story was featured on the Gaurdian Website.
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EDF considers selling UK distribution network
Sunday, May 03, 2009
EDF, France’s state-controlled utility, is considering the benefits of selling its regulated electricity distribution business in the UK as it seeks disposals to help it cut the debt built after a year of costly foreign acquisitions.
The question of whether EDF, which will spearhead Britain’s nuclear revival after its recent €15bn ($20bn) takeover of British Energy, should sell the UK’s largest distribution network was raised at a recent board meeting.
No decision has been taken. However, the reflection is part of a wider strategic review of the nuclear power operator’s industrial future as it faces unprecedented investment requirements in France and abroad to meet the challenges of the nuclear revival.
People close to EDF’s board said management was considering whether to focus purely on power generation internationally.
The recent acquisitions of British Energy and of 50 per cent of the nuclear assets of US partner Constellation for $4.5bn have strained group finances and EDF is already planning €5bn in disposals. Net debt was almost €25bn last year, nudging the record €27bn from 2002, and compared with equity of €23.1bn.
In addition, EDF has said it wants to build 10 new generation reactors, the first of which is already 20 per cent over budget at €4bn. Though it will be able to share costs with partners – rival GDF Suez will have a third of France’s second so-called EPR reactor – returns take years to materialise.
One person close to the group said: “They are having a real internal debate. It is driven by capital constraints because they have bitten off more than they can chew.”
Politically it would be much easier for EDF to consider selling UK distribution as this might allay concerns at home that its international expansion could harm French investment.
But EDF’s UK management is strongly opposed to selling the network, which transports power from high voltage lines to 7.8m homes and businesses in the southeast and east of England.
The division contributed 75 per cent of the UK arm’s €1.2bn earnings last year and its assets are estimated to be worth about £3bn.
It is also unlikely that such an important decision would be taken before the government decides whether to keep Pierre Gadonneix, chief executive, beyond his November retirement date.
Analysts suggested, however, that quitting the regulated UK businesses would make sense and could help to damp fears over the need for another capital increase.
Adam Dickens, utilities analyst at HSBC said: “RWE has never invested in UK regulated activities and it has still achieved consistent profits”.
The problem would be to find a buyer, he said, with utilities around Europe looking to shed non-core activities.
This story was featured on the Financial Times Website.
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