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Telephone 01293 651218 Email info@energyandcarbonmanagement.com Website www.energyandcarbonmanagement.comEnergy and Carbon Management Limited Longley House, International Drive, Crawley, West Sussex, RH10 6AQ © 2012 Energy and Carbon Management Limited

Energy Newsletter / December 2012Page 1 of 2Welcome to Energy & Carbon

Management’s Newsletter MARKET IN BRIEFLately the Power market has followed the direction of Gas with both seeing a bearish sentiment as the NBP gas system is currently long, with supplies of gas storage healthy. Crude Oil price has shifted downwards as crude stockpiles have risen.

Power and Gas sentiment has been weak, with all eyes on the prompt and the temperature uncertainty.

In the short term the temperature forecast will have the biggest influence on the direction of the market. The current below seasonal low temperature is being combatted by flow and storage into the UK remaining healthy, meaning sentiment has remained bearish.

The EU announced no further decisions on permits in the carbon market, which in turn saw carbon prices’ tumble to the lows seen in 2012 at €6 a ton.

Further direction on the curve could come from any announcement in the US regarding any decision relieving the impending Fiscal Cliff situation. Data from the world’s second-largest economy pertaining to industrial output and retail sales to suggest their economy is picking up, could lead to price movement to control demand. The threat to price also remains with any news of worsening unrest in the MENA countries likely to have a bullish impact on price. ANNUAL REVIEWThe annual price for Electricity is recording a decrease of 1.51%, whereas Gas is recording a marginal increase of 0.49%. Oil this month shows the largest decrease on the year-on-year comparison, recording a sizable decrease of over 14% as supplies are stockpiled. MONTHLY REVIEWThe monthly review follows the same direction as the annual review, with Electricity recording a reduction and Gas an increase at -1.18% and +0.19% respectively. In comparison Oil recorded a 2.71% reduction in the month.

UK temperatures have dropped and the gas system has experienced its first real supply test with demand rising 23%. Healthy imports through the interconnector, LNG Flows and Norwegian flows have been strong, not only keeping prices stable currently in the short-term but also for the whole of winter.

PRICEs COMPAREd TO THIs TIME LAsT YEAR

GASELECTRICITY

ANNUAL REVIEW

Electricity (£ MW) £52.625 £51.83

Gas (ppTh) 66.125p 66.45p

Oil ($ Brl) $100.49 $86.31

07/12

/11

07/12

/12

OIL

0.49%-1.51% -14.11%

PRICEs COMPAREd TO THIs TIME LAsT MONTH

GASELECTRICITY

MONTHLY REVIEW

Electricity (£ MW) £52.45 £51.83

Gas (ppTh) 66.325p 66.45p

Oil ($ Brl) $88.71 $86.31

07/11

/12

07/12

/12

OIL

0.19%-1.18% -2.71%

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Telephone 01293 651218 Email info@energyandcarbonmanagement.com Website www.energyandcarbonmanagement.comEnergy and Carbon Management Limited Longley House, International Drive, Crawley, West Sussex, RH10 6AQ © 2012 Energy and Carbon Management Limited

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OTHER MARKET NEWs

ENERGY BILL

Energy Secretary Ed Davey announced the full details of the Energy Bill last week and confirmed the decision to have a single counterparty for it Contracts for Difference (CfD mechanism. This is expected to provide incentives for businesses to invest in low-carbon generation.

The Government also introduced a Capacity Market, which DECC said would ensure that there is sufficient gas generation to provide “backup” during future supply shortages.

Friends of Earth, Executive Director Andy Atkins believes the Energy Bill will lock the nation into increasingly expensive gas, condemn cash-strapped households to rising fuel bills and threaten the nation’s targets tackling climate change.

UK Engineers commented that the Government’s delay in setting a carbon reduction target for the power sector would lead to a dash for gas and drive prices upwards. There is no incentive to develop Carbon and Capture and Storage technology for gas-fired powered stations in the medium-term.

Having enjoyed 20 years of relatively cheap energy, the UK will need to adjust its attitude to controlling consumption in order to counteract rising prices.

GOVERNMENT CLIMATE CHANGE TARGETs

The Government has told energy companies that, by 2020, they can add a total of £7.6bn to household bills to help pay for all the new power plants, windfarms, etc. This figure, coincidently, is about the same amount as the UK currently spends on importing gas.

The Government hopes by allowing energy providers to charge more that they will have the confidence to invest heavily generating clean power.

The Government’s own figures show that energy companies currently charge about £20 extra per year to help pay for clean energy projects, with this anticipated to rise to £95 in 2020.

To produce 30% of electricity from renewable sources by 2020.

To cut greenhouse gas emissions by 50% on 1990 levels by 2025.To cut greenhouse gas emissions by 80% on 1990 levels by 2050.

GOVERNMENT dIsMIssEs FRACKING REPORT As NONsENsE

The Government has hit back at newspaper reports which suggest shale gas exploration could affect more than 60% of the UK as “nonsense”.

A story in the Independent claimed that based on maps DECC has obtained 32,000 sq miles or 64% of the countryside would potentially be exploited for shale gas and exploration licences considered. The areas in the report include South of England, North-West, North-East and the central belt in Scotland.

DECC commented to say the story was unfounded. A spokesman said: “There is a big difference between the amount of shale gas that might exist and what can be technically and commercially extracted”. The British Geological Survey will do an assessment of the UK’s shale gas resources and report its findings next year.

Energy Newsletter / December 2012Page 2 of 2