EEX to offer spot and Internet trades

Germany’s European Energy Exchange (EEX) is to offer spot market electricity trading and trading via the Internet from this summer. The Frankfurt-based EEX, launched in 1999 by Deutsche Bourse and the New York Mercantile Exchange (Nymex), previously said that it would concentrate on futures trading.

EEX will offer a spot market from summer 2000 and will start trading in electricity futures in the fourth quarter of 2000. Market participants will gain access to EEX through the Internet or through Deutsche Bourse’s trading network. EEX’s German rival, LPX, will start trading in May 2000 with a spot market.

Spot trading has become a viable option in Germany since liberalization and the recent power grid agreement, which simplifies the physical trading of electricity (see PEi Jan/Feb 2000, Analysis). The use of the Internet, says EEX, will cut fixed costs for EEX and market participants.

Other operators in Europe are also planning Internet-based exchanges. Nordpool and the UK’s National Grid recently announced a tie-up to develop a UK Energy Exchange.

US utilities feel the pressure of UK market

Share prices in US power companies with assets in the UK tumbled in March after Edison International cited low prices in the UK generation market as the main reason for a cut in its earnings projection. TXU Europe and Entergy also said that their 2000 earnings would be flat.

Entergy said that uncertainty brought on by the upcoming implementation of the new electricity trading arrangements (NETA) in the UK and a new ‘good behaviour’ clause in generator licenses have led to a short term drop in electricity prices. UK generators’ share prices, including National Power, PowerGen and British Energy, were also hit.

Forward prices for electricity have fallen 15 per cent since January. California-based Edison International, which in 1999 bought two coal plants from PowerGen, revised its 2000 earning per share projection to $1.90-$2.10 down from $2.10-$2.30.

The UK government hopes that NETA will bring more competition and liquidity to the generation market, and a ten per cent drop in wholesale electricity prices. Increased competition is also being seen in supply. United Utilities recently announced that it wants to sell its Norweb Energi energy supply business as the unit is too small to make meaningful returns in such a competitive environment.

Energy dispute ousts Norway government

A controversial energy-environment policy issue in Norway came to a head in March, forcing the resignation of the country’s prime minister, Kjell Magne Bondevik. Bondevik, leader of the minority coalition government, lost a vote on the construction of natural gas fired power plants in Norway.

Bondevik, a Christian Democrat, had refused to weaken emission laws to allow the construction of natural gas fired power plants as the opposition demanded. The Labour Party is now keen to form the next government and approve legislation for the plants to be built, although it is likely to meet strong resistance from environmental groups.

Bondevik wanted to wait until new technology is available that can make gas-fired power plants virtually pollution free. A combination of growing electricity demand and large domestic natural gas supplies had put pressure on his government to sanction the use of combined cycle technology.

German energy groups cut costs

German group RWE has said that it must cut costs by over $683m to remain competitive in its domestic market where electricity prices have fallen by up to 30 per cent. It warned that the falling prices would hurt its profits this year.

Viag, the German conglomerate and owner of electric utility Bayernwerk, is expecting its profits to fall due to increased competition in the electricity market. German market liberalization has caused electricity prices to fall by 30 per cent for industrial users and 18 per cent for domestic users.

RWE has presented a cost-cutting plan that will see it cut $1.7bn in annual costs over the next four years, dispose of some business units and shed 6500 jobs on top of the 2400 earmarked in its VEW merger plans.

CHP plant orders

ABB Alstom Power has won two orders to supply its GTX100 gas turbine to combined heat and power plants in the UK. The orders are the first in the UK for this gas turbine model.

ABB Alstom will construct a 53 MW plant for UK generator PowerGen on a turnkey basis at a Michelin tyre factory in Stoke-on-Trent. It has also been awarded a contract by ScottishPower to build, maintain and operate a 57 MW plant in Blackburn.

News digest

Denmark: The Danish Energy Authority has developed a scheme for a ‘green’ electricity exchange which it hopes will promote renewable energy sources. Under the scheme, the authority will issue green certificates to producers of renewable power which correspond to output. The certificates can then be traded and will cease to exist when a consumer nominates it for use.

Finland: Vattenfall has awarded Foster Wheeler Oy a contract to supply a 80 MWth bubbling fluidized bed boiler and two 45 MWth natural gas fired auxiliary boilers for a power plant in Myllykoski, Finland. The BFB boiler will be fuelled primarily by bark, forest residue and sludge from the paper mill which it will supply with heat and power.

France: Tractebel Engineering International has selected Dresser-Rand to supply two gas turbine generator packages for a cogeneration project in Le Lardin St Lazare, France. Tractebel is constructing the plant under a turnkey contract for Perigord Energies, a joint venture of Elyo and Cogetherm. Dresser-Rand will supply two DR63G gas turbine generator packages, each using a GE LM6000 PD gas turbine.

Spain: The Spanish utility Iberdrola has posted a 9.8 per cent rise in profits to over $735m for 1999. Some of the profits have come from foreign ventures. Hydropower production fell by over 40 per cent while coal and fuel oil-based generation rose. The profits levels partly reflect Iberdrola’s sale of a stake in grid company Red Electrica.

Spain: Seghers Better Technology Iberica SA and Interquisa have won a Pta800m ($4.62m) contract to design and construct a turnkey waste to energy plant in San Roque, southern Spain. The installation will include a Seghers multi-fuel fluidized bed boiler and will use five different waste streams.

Switzerland: The three Swiss electricity companies in Group West – Aare-Tessin, BKW FMB Energie, and SA l’Energie Ouest-Suisse – have agreed to hive off their 220 kV and 380 kV transmission networks. The move follows the pattern set by the Swiss network company SNG and is an important part of the country’s preparations for electricity market opening.

UK: EDF-owned London Electricity has agreed to buy the 790 MW gas fired Sutton Bridge power plant in the UK from Enron Corp. for £156m ($264.7m) plus assumed debt. With the deal, EDF becomes a fully integrated player in the UK power industry. Sutton Bridge began operating in May 1999. Enron invested $540m in constructing the plant.