Edenderry Power Limited, the Offaly-based power station, has entered an agreement with Bank of Ireland to supply emission allowances at a monthly average rate, in a deal which is believed to be the first of its kind in the European Emissions Trading Scheme (EUETS).
The EUETS was launched in January of this year, and has prompted affected Irish companies to develop new strategies to ensure compliance with these regulations which are governed by the ‘polluter pays’ principle. | | Pictured at the launch of the Edenderry deal were (l-r): Philip Lenehan, head of energy & emissions trading, Bank of Ireland Global Markets; Dermott Kelly, general manager, Edenderry Power Limited; Paul Harris, senior sales manager, energy & emissions trading; and John Reilly, EHS manager, Edenderry Power Limited. |
In Ireland the majority of companies received emission allowances close to their requirements – based on both historical and projected figures. However, the power sector received only around 70 per cent of allowances required. Given that the price of purchasing additional allowances has risen from €6.65/tCO2 to around €23/tCO2, the management of any shortfall has become critically important.
Edenderry was one Irish-based installation with a significant shortfall. The station, which burns peat to produce around three per cent of Ireland’s electricity, needed to put in place a strategy to ensure that their shortfall would be met by the April 2006 deadline. The company needed to purchase allowances in a way that was both transparent and prudent.
Under the arrangement agreed with BOI, the bank has contracted to deliver to Edenderry emission allowances equivalent to their shortfall. The cost of these allowances will be determined with reference to the monthly average of the price of allowances on the European Climate Exchange. By linking the purchases to a recognized industry benchmark, BOI has embedded transparency into the procurement process. Additionally, by transacting at an average price, Edenderry ensures that costs are contained: the effective price for the entire shortfall will be close to the average for the period covered.
In addition, the arrangement allows Edenderry to vary the number of allowances purchased in any one month. This flexibility is crucial for the company particularly in the winter months where greater demand for electricity could see Edenderrys emissions rise, necessitating a greater requirement for allowances. |
