+------------------------------------------------------------------------------+
Lithuania's Top Power Plant Favors Free CO2 Permits After 2012
2010-10-28 12:35:35.591 GMT
By Milda Seputyte and Ewa Krukowska
Oct. 28 (Bloomberg) -- Lithuania's biggest power producer,
Lietuvos Elektrine AB, said the government should use the option
of applying for free permits for utilities in the next phase of
the European Union carbon market from 2013.
Eastern and central European nations led by Poland won an
exemption in 2008 from an EU requirement that utilities purchase
all their carbon dioxide permits in the third phase of the
bloc's cap-and-trade program through 2020. The opt-out limits
the share of allowances that must be auctioned to power plants
to 30 percent in 2013, with the portion gradually rising to 100
percent in 2020.
"A transition period between 2013 and 2020 with gradual
reduction of free carbon permits from 50 percent or more would
suit both the interests of Lietuvos Elektrine and Lithuania as a
whole," said Jurate Kavaliauskaite, spokeswoman for a
production unit of Lietuvos Elektrine.
Lietuvos Elektrine, a thermal power plant majority-owned by
the Lithuanian government, became the Baltic nation's main
electricity producer after the Ignalina nuclear plant was shut
down on Dec. 31. The Soviet-built Ignalina provided more than 70
percent of Lithuania's electricity output and also supplied
Latvia and Estonia.
"The transition period is needed because Lithuania
received too few carbon permits in the 2008-2012 period,"
Kavaliauskaite said. "It wasn't taken into account that
Lietuvos Elektrine became key electricity producer in Lithuania
after the closure of the Ignalina" plant.
Lietuvos Elektrine
Based in Elektrenai, Lithuania, Lietuvos Elektrine supplied
1.2 terawatt hours of electricity in the first half of this
year. The company, which relies on natural gas as the main fuel,
spent around 1 billion litai ($401 million) on modernization in
the last 10 years, according to its 2009 financial report.
In the future it plans to fully use its four 300-megawatt
energy blocks and build a new 400-megawatt turbine block, which
will use one-third less gas to produce the same amount of
electricity than the old blocks, according to the report.
The EU carbon-trading program, started in 2005, covers
about 12,000 facilities, which must have an allowance for each
ton of CO2 they let off. Those emitting more than their cap must
buy more; those that emit less can sell their surplus. Unused
allowances may also be carried over to the next trading period.
Lithuania's annual cap for CO2 discharges in the current
2008-12 EU trading period was set at 8.8 million tons, or 53
percent of what the country had proposed. It accounts for less
than 0.5 percent of the overall emissions limit on energy and
manufacturing companies in the EU program, the world's largest.
Emissions-Trading System
In the next phase of the European emissions-trading system,
running from 2013 through 2020, western utilities will have to
buy their full allocation of permits at auctions.
Some East European governments may waive their option to
allocate free emission permits to power producers, opting
instead for auctions that would generate public money, Jos
Delbeke, director general for climate at the European
Commission, said earlier this month.
The Lithuanian government will decide on whether to apply
for an exemption after it receives guidelines from the European
Commission on investment commitments that companies would have
to make to qualify for free permits, said Stasile Znutiene, head
of the climate change division at the Environment Ministry. The
companies would be expected to invest in upgrades from the funds
they save on free permits, she said.
"No decision has been made yet on whether Lithuania would
seek an exemption for electricity producers," Znutiene said.
"Question remains if this would be beneficial to get the
exemption because of huge bureaucratic burden this would come
with."
Government Revenue
An eastern European decision to auction more permits than
required would bolster government revenue while raising the
threat of an unlevel playing field in the region. At issue is
whether nations want to steer more revenue to finance ministries
rather than increase the supply of free permits for utilities.
The governments have until Sept. 30, 2011, to apply.
The Czech government said this month that electricity
producers including CEZ AS should buy a greater portion of CO2
permits than mandated. Czech Prime Minister Petr Necas said
proceeds from auctions would be used to offset higher power
prices.
For Related News and Information:
Emission market news: NI ENVMARKET <GO>
Today's top energy stories: ETOP <GO>
European power-markets home page: EPWR <GO>
--With assistance from Lars Paulsson in London. Editors: Jones
Hayden, Andrew Clapham
To contact the reporters on this story:
Ewa Krukowska in Brussels at +32-2-237-4331 or
ekrukowska@bloomberg.net;
Milda Seputyte in Vilnius at +370 5 269-0046
mseputyte@bloomberg.net.
To contact the editors responsible for this story:
Stephen Voss at +44-20-7073-3520 or sev@bloomberg.net;
Willy Morris at +44-20-7673-2254 or wmorris@bloomberg.net.
