Mysterious allocation to the heat benchmark sub-installations being new entrants
Thursday, 07 July 2011 19:04

 

The unknown capacity utilisation factor (differing across Member States), the first come, first served rule as regards allocation from the new entrants reserve and the flexible grounds for the rejection by the European Commission of the preliminary total annual amount of emission allowances submitted by the Member States – all these circumstances cause that the potential investors have no legal certainty how to valuate the relevant factors and have to assess in their projections the risks stemming from this fact.

 

 

Somebody who wished to establish precisely, or at least roughly, the number of free emission allowances for allocation as from 2013 for the heat benchmark sub-installations being new entrants (for definition for the new entrant cf. box beside), would encounter insurmountable difficulties. It is quite surprising assuming that year 2013 is close enough to be integrated into business projections made by the industry.

 

Why these obstacles are insurmountable? Lets try to present beneath in short the main steps in the trajectory leading to the final allocation to the heat benchmark sub-installations being new entrants, taking into account the Commission’s Decision determining transitional Union-wide rules for the harmonised free allocation of emission allowances pursuant to Article 10a of Directive 2003/87/EC of 27 April 2011 (for the simplification purposes in the rest of the present remarks it would be useful, however, to except allocations to installations referred to in the third indent of Article 3(h) of Directive 2003/87/EC that is having significant extensions after 30 June 2011).

Article 3(h) of Directive 2003/87/EC

‘new entrant’ means:

— any installation carrying out one or more of the activities indicated in Annex I, which has obtained a greenhouse gas emissions permit for the first time after 30 June 2011,

— any installation carrying out an activity which is included in the Community scheme pursuant to Article 24(1) or (2) for the first time, or

— any installation carrying out one or more of the activities indicated in Annex I or an activity which is included in the Community scheme pursuant to Article 24(1) or (2), which has had a significant extension after 30 June 2011, only in so far as this extension is concerned.

 

1. The first stage in this procedure for the allocation as from 2013 of the free CO2 allowances to the heat benchmark sub-installation being new entrant is the indication of the initial installed capacity for each sub-installation using the continuous 90-day period on the basis of which the start of normal operation is determined as a reference. The initial installed capacity is subject to the approval of the Member State and needs to be verified as satisfactory by a verifier (Article 17(4) and (5) of the Commission’s Decision).

 

2. The heat-related activity level, pursuant to the Decision of 27 April 2011, is the initial installed capacity for the import from installations covered by the Union scheme, production, or both, of measurable heat consumed within the installation's boundaries for the production of products, for the production of mechanical energy other than used for the production of electricity, for heating or cooling with the exception of the consumption for the production of electricity, or exported to an installation or other entity not covered by the Union scheme with the exception of the export for the production of electricity multiplied by the relevant capacity utilisation factor (Article 18(1)(b) of the Commission’s Decision).

 

3. The said relevant capacity utilisation factor will be determined by Member States on the basis of duly substantiated and independently verified information on the installation’s intended normal operation, maintenance, common production cycle, energy efficient techniques and typical capacity utilisation in the sector concerned compared to sector-specific information (Article 18(2) of the Commission’s Decision).

The determination of the capacity utilisation factor is the first enigma in this equation. From the text of the Decision follows first of all that the said value will differ in distinct Member States. Such geographical differentiation may cause distortions to the level-playing field across Member States and may influence on the localisation of the relevant investments. It seems that data on capacity utilisation factors adopted by the Member States should be urgently aggregated and transparently published – in order to enable the European industry to take these values into account when elaborating business projections.

 



 

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