22 December 2003: ILEX welcomes the ministerial announcements extending the Renewables Obligation (RO) to 15.4% in 2015/16 and accepting the proposed technical changes to the RO. We are pleased to note that government has accepted in full ILEX's recommendations on the extension of co-firing to assist in the promotion of energy crops. ILEX was commissioned by the Department of Trade and Industry (DTI) to assess the impact that changes to the RO's co-firing rules could have on the promotion of energy crops, the growth of renewable generation and the wider wholesale market for electricity.

Our report was published alongside the Technical Changes consultation in August 2003 and is available from the following DTI website:

www2.dti.gov.uk/energy/consultations/consult_closed.shtml

Regulatory Impact Assessment of the potential sale of LDZs

18 December 2003: ILEX was commissioned by Ofgem to perform a Regulatory Impact Assessment associated with National Grid Transco plc (NGT)'s proposal for the sale of one or more of its gas Distribution Networks (DNs).

The ILEX report follows the Ofgem consultation on the potential sale of network distribution businesses in July 2003 and addresses the potential benefits and costs to the end consumer which might result from the NGT proposal.

The full ILEX report can be found in an Annex to Ofgem's report 'National Grid Transco - Potential sale of network distribution businesses - Next Steps', December 2003.

For the full report please see the Ofgem website

Impact of Emissions Trading Scheme on Irish Electricity Prices

5 December 2003: ILEX has been commissioned by the Commission for Energy Regulation in Ireland (CER) to carry out a study into the impact of the Emissions Trading Scheme (ETS) on Irish wholesale electricity price.

This analysis on the price impact has been carried out for the years 2006 and 2008 for projected permit prices of �10, �20 and �30 per tonne of carbon dioxide. The impact has been studied under allocation on the basis of both an Historical Emissions and Projected Output basis. The scenarios for the allocation of permits are 0%, 70%, 80% and 90% of requirements. (The 0% of requirements models the impact of a 100% pass-through of permit costs to prices.)

For further information, please see the CER website: Impact of the EU ETS on the Irish electricity market

This study follows on from previous ILEX analysis 'The Price and Dispatch Impact of a Centralised Wholesale Electricity Market in Ireland', 30 April 2003 , also commissioned by the CER. This study investigated the proposed new electricity trading arrangements, and market-based proposals including a centralised energy-only market with locational marginal pricing (LMP) for generation. The aim of the modelling was to assess the stability of energy prices across the year under different assumptions of bidding behaviour, and to assess the robustness of locational prices to different circumstances.

For further information visit the CER website: Price and Dispatch Impact of a Centralised Wholesale Electricity Market in Ireland.

New updated GB Electricity Report

25 November 2003: ILEX, established expert in the GB electricity market, has recently completed an update to its GB market study. This new edition has revised price projections for the market, and investigates the potential effect of current issues such as the EU Emissions Trading Scheme, the Large Combustion Plant Directive, zonal location losses, the Renewables Obligation and BETTA. Price projections are provided both with, and without, a value of carbon.

For further information, see GB Electricity Report.

New updated UK Gas Market Report

25 November 2003: The updated Study of the UK Gas Market November 2003 is now available. This new edition incorporates a substantially revised and enhanced price forecasting methodology, and provides both a valuable overview of the current UK gas market and a discussion of the key issues affecting its development to 2020.

See GB Gas Information for further details.

Web subscription re-enabled

23 Oct 2003: The website subscription system has been revamped, and all those who have signed up should receive regular updates. If you signed up and received an error, your details will have been stored, and there should be no need to sign up again.

If you wish to sign up, and have not already done so, please click here to go to our registration page. Any queries should be directed to webmails@ilexenergy.com

Value of Renewables in Great Britain

21 Oct 2003: ILEX has released the latest edition of the report 'The Value of Renewable Electricity in Great Britain'. The report projects the value of each of the separate elements that make up the total value of renewable electricity to 2026: ROCs, wholesale electricity, carbon, LECs and embedded benefits. The report includes many new features, among them a comprehensive review of the first year of operation of the Renewables Obligation, discussion and analysis of the proposed changes to the Obligation and an introduction to the value of carbon. More information is available in our service description.

ILEX is currently recruiting

20 Oct 2003: ILEX is seeking to fill three senior positions. Click here for more information

Ireland Electricity Update

20 Oct 2003: ILEX has published an update to its Ireland Electricity report. As with all ILEX market reports, the update includes detailed projections of market prices and volumes. In addition, the report includes detailed commentary on the structure of the Irish electricity market, plus the impact of changes such as locational marginal pricing (LMP), financial transmission rights (FTRs), and emissions legislation such as the EU Emissions Trading Scheme (EU ETS), the Large Combustion Plant Directive (LCPD), and National Emissions Ceiling Directive (NECD).

Changes at ILEX

We are pleased to announce the appointment of four new members of the consulting team:

James Cox (Consultant) joined us on 1st September from Marakon Associates. He brings to us his expertise in strategy and financial modelling. He also speaks Spanish and French.

Kari Fremstedal (Senior Consultant) is joining us on 6th October from our parent company Electrowatt-Ekono. She has a wide experience of the technical and commercial side of power generation as well as emissions trading. Her mother tongue is Norwegian and she also speaks fluent English, German and Italian.

Sophocles Poullis (Technical Analyst) is also joining us 6th October following the completion of his MSc in Environmental Technology at Imperial College London. His mother tongue is Greek and speaks fluent English.

George Peridas (Consultant) is joining us on 7th October. He has recently completed his MSc in Environmental Technology at Imperial College London. His mother tongue is Greek and he speaks English, German and Italian.

On top of all this, we are also pleased to announce that a number of staff have been promoted:

Rhian Bisson currently on secondment from DEFRA, has been promoted from Consultant to Senior Consultant.

Simon Coates has been promoted from Senior Consultant to Principal Consultant.

Richard Slark has been promoted from Senior Consultant to Principal Consultant.

Stephen Woodhouse has been promoted from Senior Consultant to Principal Consultant.

Armando Zamora has been promoted from Senior Consultant to Head of Iberian Office, based mostly in Madrid.

Caroline Doble (Senior Consultant) will be taking up a six months' secondment with the Department of Environment, Food, and Regional Affairs (DEFRA) from 6th October. She will be working on various projects relating to the EU Emission Trading Scheme.

As well as new recruits, there have been a couple of departures to announce. Shara Karapetian (Consultant) left to work for the Dutch utility, Nuon BV, in Amsterdam, and Anastasia Papaioannou (Senior Consultant) left in July after seven years with ILEX to take up a position with management consultancy group, Kantor.

Gas Capacity Statement for Ireland

15 Sept 2003: ILEX was asked by the Commission for Energy Regulation (the CER) to produce the first ever Gas Capacity Statement. The Statement is an annual forecast of capacity, flows and customer demand on Ireland�s natural gas system over a seven year period. Recent events, such as the closure of the IFI plant and the delay to the Corrib terminal, have shown how external variables can influence both the size and configuration of the gas market. The Statement has modelled those scenarios which are most likely to �stretch� the transmission system to a point where reinforcement may be necessary. The Gas Capacity Statement is available on the CER website.

The impact of co-firing on the UK's Renewables Obligation

3 Sept 2003: On 28 August 2003, the DTI published a consultation paper on changes to the Renewables Obligation (RO), the UK's support mechanism for renewable generation technologies. The most significant changes relate to an extension in the timescale over which the co-firing of biomass wastes and energy crops in fossil-fired power stations will be eligible for Renewable Obligation Certificates (ROCs). These proposals are drawn from recommendations made by ILEX in a report to DTI that has been published alongside the consultation paper. The ILEX report concludes that: more time is necessary if co-firing is to promote energy crops as a viable renewable energy source; that the economics of co-firing energy crops are favourable; and that co-firing will not flood the ROC market or unduly depress prices. The ILEX report and DTI consultation are available on the DTI website.

Transmission reform in England and Wales

14 July 2003: Transmission charging and access rights in the England and Wales electricity market are still under review, over two years after the introduction of NETA. ILEX recently reviewed a number of options for transmission reform, in the light of Ofgem's desire to introduce a regime of tradable transmission rights. These options included locational marginal pricing (LMP), tradable access regimes as well as incremental reform to the present arrangements. We concluded that while there could be merits in introducing stronger short-term locational price signals, there is no compelling case for major change from the existing arrangements.

This project was funded by a range of GB market participants with different interests - in effect this was arms-length funding and the findings were intended to be entirely objective:

Scottish Power;
Teesside Power;
Innogy;
BNFL Magnox;
Alcan;
London Electricity; and
the Association of Electricity Producers.

The paper was finalised in December 2002. As a result, there are a few points of detail that are slightly outdated (the passing of BSC modification P82 on locational transmission losses, CUSC modification CAP043 altering the definition of generators' transmission rights, the delay of BETTA to April 2005 and the introduction of a one-year shallow incentive scheme on NGC as the system operator), but the main body of work remains current and, we believe, relevant to the present position.

You can obtain a full version of the paper (.PDF, 1.3MB) here

ILEX has been acquired

27 June 2003: ILEX has been acquired by Electrowatt-Ekono (EE) to become a leading European energy management consultancy in Europe employing over 100 energy experts.

Richard Pinnock, CEO of EE's Energy Business Group, said "ILEX is very well known in the UK and Ireland as the preferred consultant to help with specialist energy advice and analysis. ILEX will continue to offer its clients - in government, energy companies and the regulators - help in understanding and managing competitive energy markets."

David Cox, Managing Director of ILEX, said "ILEX has already expanded into Europe, in particular Italy and Spain, helping clients operate in energy markets as liberalisation progresses. Electrowatt-Ekono has offices throughout Europe staffed by energy experts with detailed local country knowledge. We believe that the two companies combined will offer an enhanced and formidable range of services across the whole energy sector."

The European Union Emissions Trading Scheme

23 June 2003: The European Union Emissions Trading Scheme could have fundamental impacts on Europe"s electricity sector including:

major shifts from coal- and oil-fired generation to gas-fired and renewables;
wholesale power price increases of the order of 10% to 50%; and
the trade in allowances which, for a 1GW coal-fired power station, could be anywhere from �30m to �150m per annum depending on CO2 prices.

The combination of the above factors could have major financial repercussions for electricity generators and consumers. The structure of the EU ETS is such that the risks will be very different for the different types of generator based on factors such as fuel type, efficiency, incumbent vs. new-entrant, and historic operating pattern. Some generators will undoubtedly enjoy windfall gains, whereas others may be driven out of business or never make it off the drawing board.

Because the structure and composition of the electricity sector is very different in each of the EU countries, the implications of the EU ETS on the electricity sector will be different for each country in terms of price rises, plant displacements, altered interconnector power flows (both within and between countries), and emissions reductions.

ILEX has been at the forefront of analysing the implications of this scheme, and has advised government and industry on issues ranging from the design and implementation of trading schemes through to projections of CO2 prices. This expertise on emissions trading is coupled with our unrivalled expertise in the electricity markets, within a series of country reports that analyse the specific impacts of the EU ETS for each country"s electricity sector.

Details of these reports can be found at CO2 and Power (pdf)

Preparations for the EU Emissions Trading Scheme (EU ETS)

23 June 2003: Preparations for the EU Emissions Trading Scheme (EU ETS) are rapidly gathering pace as governments around Europe start to decide how to allocate free-of-charge CO2 allowances in time to meet the 31 March 2004 deadline.

ILEX has prepared a short briefing note on the implications for various industry sectors of the UK government"s latest deliberations on its National Allocation Plan. (Most of the implications are also directly relevant for other European countries).

This briefing note is available for free on the ILEX website, as are details of a number of other major studies ILEX has completed on the implications of the EU ETS.

These include:

"What price carbon?" - A report detailing ILEX projections of CO2 prices in the EU ETS, plus detailed analysis of the main drivers and uncertainties.

"Implications of the EU ETS on the electricity sector" - Detailed quantitative and qualitative analysis on the different impacts of the EU ETS on the different electricity sectors around Europe.

"Implications of the EU ETS on industry profitability and competitiveness" - A report examining which European industry sectors are likely to be "winners" or "losers" from the EU ETS, and examining options open to governments to remedy potentially adverse impacts on European competitiveness and the global environment.

These can be read at NAP Briefing (pdf)

Security of supply in a free market

12 June 03: Security of supply and generation adequacy is taken for granted in industrialised economies. However, the traditional integrated planning mechanisms are no longer in place, and instead market mechanisms are being relied on to deliver security.

The Association of Electricity Producers held a seminar on 4 June to discuss various aspects of market-driven security of supply. As part of this seminar, ILEX gave a presentation covering the mechanisms by which the market will provide security, looking at some specific issues within the NETA arrangements that could impede the working of the market, and asking whether the level of security delivered by the market will be acceptable to stakeholders such as government.

See Security of Supply (pdf)

Modelling locational marginal prices in the Irish electricity market

9 June 03: ILEX, with UMIST and University College Dublin, was commissioned by the Commission for Energy Regulation in Ireland to model their proposed new electricity trading arrangements. The market proposals included a centralised energy-only market with locational marginal pricing for generation. The aim of the modelling was to assess the stability of energy prices across the year under different assumptions of bidding behaviour, and to assess the robustness of locational prices to different circumstances.

With UMIST and UCD, ILEX designed and built a model framework to consider these two aspects of the proposed new trading arrangements; an energy-only market with no explicit capacity mechanism and a market with locational marginal pricing for generation. The modelling was in the context of a single future year, 2006. The model framework had two parts - a non-locational model to consider price patterns across the year and a variant on the same framework to consider prices at 350 different nodes on the Irish transmission and distribution network. The model framework incorporated a demand model, a model of generator bidding, and a detailed DC load flow model calculating least-cost feasible dispatch.

The final results were published on the CER website, and were presented at a public forum on 8 May.

DTI gas quality scoping study

6 June 2003: Energy Minister Brian Wilson announced a three-phase exercise on gas quality in a Parliamentary statement yesterday.

The DTI, working with the Health and Safety Executive (HSE) and the Office of Gas and Electricity Markets (Ofgem), is taking forward a scoping study under Phase One of this exercise.

There is anecdotal evidence that some of the potential sources of gas imports for the UK market may have a Wobbe index that exceeds the current upper limit in HSE"s Gas Safety Management Regulations. High Wobbe gas uses more oxygen to burn completely; and there is a risk that some of the older gas appliances may not be able to draw in sufficient oxygen to work safely.

This study will look at the Wobbe Index of future imported gas. It will explore the UK"s capability of importing gas of the expected specification, taking into consideration existing gas terminal facilities as well as known future import projects.

During this study the DTI will hold a workshop, to provide an opportunity for stakeholders to register their interest, and to brief them. ILEX Energy Consulting Ltd has been appointed to take this work forward.

For more, see this DTI link.

Changes at ILEX

28 May 2003: The ILEX team has changed with the departure of two directors. Just after Easter, David Smol returned to New Zealand to start work in a position that was offered him by the Ministry of Economic Development in Wellington. And in May Liz Reason decided that, after 13 years unstinting service in helping build ILEX, she would like to pursue other - partially energy related - interests. Both directors have left as friends of the company, and they will be missed.

Both David's and Liz's roles have been absorbed into the rest of the company.

NAO report on NETA

9 May 2003: ILEX assisted the National Audit Office in its report on the New Electricity Arrangements in England and Wales. Links are:
NAO press release
Full report
Executive summary

The ILEX Carbon Report

3 April 2003: Large carbon emitters are in danger of being caught unawares by the pace of implementation and possible impacts of the EU carbon emissions trading scheme. ILEX has projected carbon permit values and impacts on electricity generators, sectors with Climate Change Agreements and direct participants in the UK emissions trading scheme.

Zonal charging of transmission losses in GB

27 March 2003: Quantification of the zonal Transmission Loss Multipliers under the locational charging of average transmission losses in GB, and an assessment of their likely impact on participants, generation patterns, prices and emissions. A report commissioned by the Scottish Executive to advise their, and other parties, response to the DTI consultation on GB transmission losses.

See Zonal average losses in GB (pdf)

Change afoot in the Irish electricity market

26 Feb 2003: Competition has been developing slowly in the Irish electricity market. Since liberalisation began in February 2001, opportunities for new entrant generators and suppliers have been limited. But things are changing. A range of issues could bring new opportunities for market entry in the Republic

See here.