Climate change to make nuclear power a winner: Citi
LONDON (Reuters) - The increasingly urgent need to combat climate change will probably spawn U.S. policies to impose fossil fuel charges and so dramatically favor nuclear power, Citigroup said in a research note on Wednesday.
Burning fossil fuels such as coal and oil is one of the biggest sources of the greenhouse gas emissions that scientists fear are leading to dangerous climate change.
In response, a carbon market in Europe already charges heavy industry to emit carbon dioxide (CO2) above a certain limit -- requiring companies to buy tradeable carbon credits -- and some U.S. states are set to adopt similar schemes.
This will sort winners from losers in power markets, with nuclear especially seen benefiting from increases in power prices driven by carbon charging, as zero-carbon emitters facing none of the costs of having to buy carbon credits.
"Under such (U.S.) legislation nuclear generators would win," Citigroup said.
"Nuclear Winners... should see material gross margin expansion, as revenues will likely rise dramatically without costs escalating."
Carbon markets work by giving for free or auctioning a certain quota of carbon credits, and businesses have to buy extra credits if their emissions exceed that quota.
Coal generators could lose out -- depending on how tough the new regimes are.
A tough regime would see governments auction rather give away for free the baseline quota, and would set these quotas less generously.
As the European Union's scheme showed last year -- when a there was a surplus of credits -- countries are finding it difficult to set tough targets given complaints from some industry about the possible impact on competitiveness.
"Coal generators in gas markets would likely suffer in strict regimes, which are unlikely given their economic impact."
Coal generators which the bank said faced a "material downside exposure" from a strict regime included Allegheny, Dynegy, Edison, NRG, and TXU.
Nuclear generators Entergy, Exelon, and Constellation stood to be significant beneficiaries, it said. |
