Article from Platts Emissions Daily

Washington, DC, January 9, 2006 - The largest US utilities continued to cut their sulfur dioxide and nitrogen oxide emissions in 2005 while allowance prices generally went up, according to a new report by energy information firm Genscape.

Genscape concludes in its Special Emissions Report for 2005, released Jan 6, that SO2 and NOX dropped at power plants it monitors by 1% and 11%, respectively.

Of the 50 companies cited in the report, Genscape concludes that TransAlta — a company that also runs plants in Canada and Mexico — scored the single biggest drop in SO2 with a 38% decline from 7,052st to 4,403st.

Other large SO2 drops were seen by UniSource (27%), Northeast Utilities (21%) and Salt River Project (19%). Much larger NOX reductions occurred with Santee Cooper cutting its emissions by a whopping 69% from 10,526st in 2004 to 3,311st in 2005, according to Genscape.

FPL Group reduced its NOX by 61 % and Southern Company cut its emissions by 55%, the report states.

Southern and other large utilities did not fare as well with SO2. Southern saw a 10% rise in SO2 to 1.1-mil st. TXU Corp’s SO2 rose 11% and Westar Energy’s climbed 13%. NiSource’s SO2 output increased by 22% and Hoosier Energy Inc in Indiana boosted its SO2 releases by 31%.

While the overall drop in emissions is the result of continuing emissions control installations at power plants, the Genscape report concludes that uncertainty about the effectiveness of some of those controls is affecting allowance prices.

“On the face of it, there nothing to justify the enormous increase in [SO2] prices in 2005,” the report says. That’s because a lot of the 2005 buyers have unused or “banked” allowances. The price of spot SO2 on Friday ($1,540/st) was roughly double of what it was in September 2005.

“The allowance buying may be panic or it may be an insurance premium against failing to meet required targets. If the [emissions control] installation process goes smoothly, [SO2] prices will collapse,” the report says.

Power companies must cut their SO2 and NOX an average of 70% below current levels by 2015 under a new emissions trading rule issued by the US Environmental Protection Agency in March, 2005.

NOX allowance prices in 2005 were less volatile than in the SO2 market, the report observed. “Generally the industry seems sanguine about meeting its NOX targets and prices did not follow the trajectory of SO2.”

A particularly large NOX bank and the pace of installing emissions controls, selective catalytic reduction units, at power plants were the driving factors, according to Genscape. “Certainly, the amount of surplus [allowances] at the end of the [ozone] season and the prospect of more reductions as more SCRs get installed justify the laid-back attitude. Emissions in 2006 may not drop as sharply as in 2005, but drop they will.”