The European carbon trading system experience suggests that North American generators should expect severely altered coal-fired power plant operating profiles if cap-and-trade legislation becomes law. In a groundbreaking study, Solomon Associates predicts the reduction in mean run time that North American generators should expect. The trends outlined in this study provide an overview of some of the broad challenges facing generators in moving to a carbon-constrained market environment.
In formulating a cap-and-trade bill to address climate change, U.S. regulators and legislators attempted to learn as much as they could from the experience of the European Union (EU), which implemented its carbon trading system in January 2005. As policymakers studied Europe, U.S. and Canadian generators grew skeptical about how much could be learned from the operating experience of European generators under a cap-and-trade program. Their concern was that any comparisons of European and North American plants would be fundamentally "apples and oranges" and, therefore, of limited value.
Despite the significant differences between the North American and European markets, Solomon Associates has identified a number of trends in European power unit performance since 2005 that may prove useful to U.S. and Canadian generators as they prepare for a carbon-constrained market. Most notably, North American generators may be surprised to see the abrupt changes in plant utilization that European units experienced with the introduction of carbon trading — a phenomenon likely to be repeated in the U.S. and Canada.
All data in the following analysis come from Solomon Associates’ proprietary database, utilized in our company’s worldwide benchmarking and consulting services. For this article, we studied data from participating power generation units from 2002 to 2008, concentrating on U.S., Canadian, and European generation, further segmented into coal-fueled steam and gas-fired combined-cycle gas turbine (CCGT) technologies for each region. For better comparison, cogeneration CCGT units that exported more than 20% of their total energy in steam were excluded. We started with an analysis of changes in fleet utilization and then evaluated changes in reliability, efficiency, and cost. The impact of the global economic downturn in 2008 is clearly visible in all the data.
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