Tata Steel Warns Carbon Tax Will Threaten Competitiveness

Posted on March 31, 2011 by Emma

Tata Steel, the giant steel manufacturer has said it wants to expand its steel production, which is used to make wind turbines, but is concerned that the new carbon tax will threaten its competitiveness by increasing its business electricity prices.

Tata Steel, which employs around 3,500 people in Wales has said that while it is keen to increase steel production for the manufacture of wind turbines, the new carbon tax, which is supposed to encourage investment in sources of renewable energy, may weaken its position in the market.

Tata Steel which has plants in Port Talbot and Llanelli, said that the new Carbon Price Mechanism could reduce its competitiveness. The Carbon Price Mechanism was introduced in the Budget last week and is designed to increase the number of renewable energy schemes. The new Carbon Floor Price (CFP) of £16 a tonne is supposed to encourage fossil fuel powered plants to invest in carbon capture and storage schemes or move towards a low carbon form of energy generation. However, as Utility Exchange reported earlier this week week, there are concerns that energy providers will simply pass this new tax on to customers in the form of higher electricity rates.

Tata Steel says the CFP could add as much as £20 million a year to its business energy bill by 2020 but wants to increase steel production to supply steel for wind turbine manufacturers. Ironically, wind turbine makers are the ones who should be benefitting from the extra income from the carbon tax. But if those manufacturing the parts for these sources of renewable energy have to increase prices because their manufacturing costs have increased then it appears to defeat the object. They will simply get their raw materials from overseas.

As the UK moves towards low carbon energy generation there’s going to be a vast increase in offshore wind farms in the next few years and this should benefit steel manufacturers such as Tata Steel. Steel is used in the manufacture of turbine foundations, blades and other things including bearings. This is why a spokesman for Tata said this industry was so important to them.

He said “It is growing and we do hope to capitalise on that. But if our initial competitiveness is undermined, the people who make renewable energy infrastructure are going to buy their steel from abroad”.

Because the UK is the first country to implement a Carbon Floor Price it puts Tata Steel at a disadvantage with its rivals, especially those in Europe.

But Tata doesn’t just have to cope with the Carbon Floor Price in 2013 – that same year the European Union will introduce the next part of its emissions trading scheme – so the firm will be hit twice.

It remains to be seen what effect the new Carbon Tax will have on electricity prices for business but companies are already concerned that they will have to pay more for their business utilities and will therefore have to increase their prices – making them less competitive.

New Tax Means Statoil Stops Work On North Sea Oil Projects

Posted on March 30, 2011 by Ollie

Statoil, the Norwegian oil company, has stopped work on its projects in the North Sea as a direct result of the new tax set to be imposed on oil companies, which was announced in last week’s Budget.

Statoil, one of the biggest oil companies in the world, has stopped work on two North Sea projects saying it will “pause and reflect” on the future of the two fields in the North Sea.

Other smaller oil companies, including Valiant Petroleum, have said they are re-assessing new projects as a result of the new tax introduced in the Budget last week.

There’s concern now that some major oil firms will retract plans to sell off North Sea oil fields which are close to the end of their lives. This means some oil fields could be abandoned with oil still underground.

Last week Utility Exchange reported that the economics director of Oil and Gas UK warned that the oil and gas tax will result in job losses and lost production. Malcolm Webb, the chief executive of Oil and Gas UK said thousands of jobs were being jeopardised by the increase in tax.

However, according to the Office for Budget Responsibility (OBR), the new tax will have “no significant effect” on the future investment and production of oil and gas producers in the North Sea. The chairman of the OBR, Robert Chote, said the assumption was built into its forecast.

Mr Chote said “We’re assuming that there’s no significant effect on the investment and production profile”.

Furthermore, Graham Parker, also from the OBR, said they had decided that the new tax was “very much a profits tax”. He added that oil and gas firms would continue with their plans, especially as oil prices are so high at the moment.

Statoil had been due to start producing oil from 2017 – the two oil fields of Mariner and Bressay hold around 640 million barrels of oil.

A Statoil spokesman said “The proposed tax change has significant impact on the project economics of Mariner. We have to pause and reflect to evaluate what impact this will have and consider how to proceed after this. This is a project about to be developed. With this tax increase, there is a substantial impact”.

The North Sea oil tax has been imposed to help pay for a cut in fuel duty although it’s been widely reported that on the day of the Budget many petrol stations increased prices by 1p a litre and then cut prices by 1p the following day. It meant that the Chancellor’s cut simply left petrol at the same price as before the Budget.

Ofgem Forces Gas & Electricity Providers To Give 30 Days Notice Of Price Increase

Posted on March 29, 2011 by Kathryn

New Ofgem rules will mean energy providers will have to give their customers 30 days notice before they increase electricity and gas prices.

Electricity and gas suppliers have been forced to ensure customers get 30 days notice of any price increases. Previously energy firms were allowed to write to customers as long as 65 days after a price rise. However, Ofgem has ordered energy companies to provide customers with prior warning of any increases to give them time to compare gas and electricity prices and switch to a new supplier.

The rules introduced by Ofgem will mean that energy firms will have to give customers advanced warning of any changes in price which will leave them worse off.

Energy companies have recently increased business gas prices, business electricity prices and domestic prices because, they say, of the rising cost of wholesale gas and electricity. However, last week Ofgem revealed they had found evidence that providers were increasing prices faster than they lowered them when wholesale prices dropped.

The senior partner for markets at Ofgem, Andrew Wright said, “Today’s changes will again show that we are serious about making sure suppliers play it straight with consumers. We believe that 30 days’ advance notification of price increases, coupled with our new proposals for more transparency and an end to complex tariffs, will give consumers more power to make informed switching choices”.

The new pricing regulations will come into effect from 28 April. Ofgem proposed these changes back in September and since then some energy suppliers have started to give customers more advanced notice of price rises.

British Gas said it gave customers 30 days notice when it increased prices at the beginning of December while Scottish & Southern said it gave customers 30 days notice when it announced price rises at the end of October.

Even if your energy company hasn’t increased prices it’s still advisable to compare business gas rates and electricity prices so that you can switch to a cheaper supplier especially if your business energy contract is due for renewal.

Guaranteed Carbon Price Mechanism Could Mean Higher Business Electricity Prices

Posted on March 28, 2011 by Emma

In the budget last week the Chancellor announced a guaranteed minimum price for carbon, making the U.K. the first country in the world to introduce a guaranteed carbon price mechanism but it could mean higher business electricity prices.

This new guaranteed “floor” price for carbon will start out at £16 a tonne in 2013 and increase to £30 a tonne by 2020. It’s argued that this carbon tax will benefit nuclear and renewable energy while customers will pay for it with higher business electricity bills.

The carbon price has been considered too low for some time now at around £13 or €15 per tonne. The hope is that by increasing the minimum price for carbon it will encourage investment and innovation in low carbon technology.

The Government hopes to raise £3.2bn by 2018 from this carbon tax which The Guardian says will be funded by a rise in electricity prices.

Fossil fuel powered electricity plants will start paying the tax in two years time and how much they pay will depend on how much carbon they release into the atmosphere. However, it’s suggested that the amount of tax they pay will be simply added to domestic and business electricity prices meaning consumers will have to pay higher energy bills. Nuclear power stations and sources of renewable energy generate very little carbon so they won’t pay much in the way of carbon tax but they will still benefit from higher electricity bills.

There has been some criticism of the carbon tax because the level has not been guaranteed with long-term contracts. The head of UK and EU policy at Climate Change Capital, Ben Caldecott, said “To highlight why low carbon investors might find it hard to trust this new tax based mechanism, just look at what else was announced today – scrapping the planned rise under the fuel duty escalator. The same could happen to planned rises in the carbon tax that sets the carbon price floor”.

Meanwhile there are concerns that electric prices could increase by as much as 10% by 2016 as a result of the carbon tax – this would result in another 110,000 households in fuel poverty. These figures have been worked out by Red point consultancy who also said that the carbon tax would mean windfall profits of around £1.3 billion for EDF Energy who own the majority of the UK’s nuclear reactors.

The chief executive of EDF Energy, Vincent de Rivaz said the increased minimum price for carbon was a step in the right direction. He said “The carbon price floor is important for all low carbon technologies as it restores the carbon price to what was originally intended”.

However critics of the Chancellor’s announcements said they didn’t go anywhere near to making this the “greenest ever government” something the Prime Minister said he would aim for when he came into office. The executive director of Greenpeace UK, John Sauven said “There’s almost nothing in this Budget to protect the environment and spark a clean-tech jobs boom”.

Areva & EDF Energy Nuclear Power Plans Will Create Over 100,000 UK Jobs

Posted on March 27, 2011 by Ollie

The biggest nuclear reactor manufacturer in the world, Areva, has announced that over 100,000 jobs will be created by building new nuclear power plants in Britain.

Areva, a French company, is building four reactors for EDF Energy which is set to construct new nuclear power plants in Britain. Two of the new reactors will be at Hinckley Point in Somerset and two at Sizewell in Suffolk. Areva said British companies will be involved in 80% of the work and therefore jobs will be created.

Areva looked at the implications of the building programme on British jobs and communities and reported that each plant will create around 20,000 construction jobs over a six year period. Fifty percent of these jobs will be directly related to the power station while the rest will be related indirectly.

According to a study carried out by Areva, the company will create around 40,000 jobs – a figure it may be able to increase to 100,000 if it wins the contract to build two nuclear power plants for Horizon Nuclear and NuGeneration. Horizon Nuclear is a joint project between RWE and E.ON while NuGeneration is a joint project between Iberdrola, Scottish & Southern Energy and GDF Suez.

Even if Areva doesn’t win the contract the likelihood is that someone else will so another construction company is likely to create a similar number of jobs.

Rolls-Royce has joined with Areva to develop some of the nuclear components and while this may not mean new jobs will be created it will help to secure jobs for the future.

Areva has already lined up around 60 companies in the UK to carry out much of the work involved in the construction process and says 90% of the construction work will be carried out by British firms.

However, after the recent events in Japan it remains to be seen whether these nuclear projects will carry on as planned. They are an important part of the energy mix if the UK is to ensure its energy security in the next ten years. Coal fired power stations are set to be decommissioned as are a number of nuclear power plants and it’s unlikely that there will be enough renewable energy to make up the short fall by then. Therefore it seems unlikely that the Government will back track on its nuclear plans.