Prices for carbon dioxide emissions allowances reached another record, exceeding 60 euros per ton. Not only will electricity consumers lose, but energy companies will lose as well.
- Since the start of the year, the cost of carbon dioxide emissions has risen by 86%, driven by stricter EU regulations and increased energy demand related to the post-pandemic recovery.
- In the wholesale market, electricity – mainly produced from coal – has increased by half during the year, and according to Kamel Kleichs of mBank Brokerage House, prices for individual customers in 2022 could increase by more than 20%.
- The increase in the price of carbon dioxide emissions allowances is also unfavorable for energy companies, however, according to the analyst, their prices will largely depend on the prospects for the energy transition.
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On Monday, European CO2 emissions permit prices broke another record. For the first time in history, ICE traded more than 60 euros per ton, a Only since the beginning of the year, the issue cost has increased by 86%. With the weighting of the Polish energy sector structure towards coal This will definitely have an impact on the amount of your electricity bills.
The costs of purchasing carbon dioxide emissions allowances by energy producers are equivalent to two-thirds of wholesale energy prices. Their share in individual recipient accounts is smaller, but already more than a third, according to Kamil Klischkes, head of analysis at mBank’s Brokerage House.
EU policy is raising the price of electricity from coal
Prices for carbon dioxide emissions in the spring of 2020 after the COVID-19 pandemic soared to less than 15 euros per ton, but their value has more than quadrupled since then. all because of New and stricter climate law in the European Unionwhich is to oblige other industries to obtain allowances for carbon dioxide emissions, and the increase in energy demand associated with post-pandemic recovery.
The European Union is escalating emissions restrictions to force companies to move faster to cleaner energy sources. Although the cost of emissions in the years 2016-2017 was about 5 euros per ton, which was not a strong incentive to reduce them, it has increased several times since then.
This may not be the end of the increase in the price of provisions, because, according to the European Commission, it may reach 85 euros per ton before the end of this decade, and market analysts expect even larger increases. For power consumers, that means it After increases of about 10 percent in electricity prices in early 2021, electricity bills are likely to rise at least twice in the coming year..
– If the ERO (Energy Regulatory Office – ed.) takes into account the individual increase in the costs of energy producers, the prices of individual consumers will rise by more than 20%. – says Kamil Klich.
Electricity prices for individual consumers will increase by more than 20%.
As he explains, the distribution fee will not change significantly, and the increase in tariffs will practically only result from higher energy prices. In the wholesale market, electricity increased by half over the year, mainly due to the higher price of allowances CO2 انبعاثات emissions (Other costs remain relatively stable because coal prices, for example, are fixed in long-term contracts.)
– Our estimates are based on the assumption that energy supplies for 2022 will be secured at an average price of PLN 350 / MWh, but next year’s energy contract prices are already higher, reaching PLN 376 – confirms mBank Brokerage House specialist.
At the same time, companies may feel more energy prices rise, because in their case distribution fees have a lower share. According to the analyst Individual customers can only be saved from such high increases in the fact that in the past the ERO has not usually agreed to transfer the full cost increase incurred to them by the distribution companies.. Two years ago, the regulator decided to freeze energy prices.
The electricity market is regulated to prevent unjustified increases. However, in practice, when costs increase, energy distributors usually have to take it, at least in part, and pass it on to consumers with a delay, Kamil Clishes points out.
Exorbitant emission allowances are a blow to energy companies
As the specialist acknowledges, The increase in the cost of purchasing carbon dioxide emissions allowances also affects energy companies. According to “Dziennik Gazeta Prawna”, PGE itself paid 6 billion PLN for emissions permits only in 2020, and this was the period before the largest increase in their prices.
Prices of energy companies on the Warsaw Stock Exchange are rising. Since the beginning of the year, the WIG Energia index that includes it has increased 43 percent. With a barely 24% increase in the main WIG index, however, according to Kamil Clichs, investors do not have to ignore the fact of an indefinite increase in allotment prices.
– The market is alive as energy companies transform. If they actually donated their coal assets to NABE, their investment profile would change completely. In this case, current results, changes in the price of emissions allowances and expectations about future earnings are of little interest to investors. The market can react negatively to the increase in the provision price, if the shift is called into question for some reason – notes the head of analysis at mBank’s Brokerage House.
Will the boom in the energy sector continue?
but before the massive rebound, from the peak of 2014 to the trough recorded during the March 2020 crash. WIG Energia lost more than 80 per cent. Value. Kamel Klišić mentions the reasons for this decline Predominance of coal in productive energy sources, suspension of dividends, investments based on uneconomic considerations, and disrespect for minority shareholders’ interests.
– Seeing the disappearance of at least some of these problems encourages investors to buy shares – says the specialist.
If there is indeed a decoupling of coal assets, companies will regulate the distribution sector, energy production from renewable sources, and the heating sector, where coal will remain a burden. It is clear that Polish energy companies will still be cheaper than Western companies, but for valuations to equalize, changes in policy towards minority shareholders and investment approaches will be required.
– The driving force behind the changes in energy companies is the need to provide capital for a new investment cycle. However, for the prosperity to continue, investors must feel that investments will also increase shareholder value – Summarizes Kamil Klisch.
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