Lessons for U.S. and Canadian Units
Clearly, carbon trading has had a significant impact on the utilization, reliability, efficiency, and costs associated with European power generation units. Carbon trading in Europe has redefined baseload and intermediate-load fuel and generation technology. North American coal and CCGT units will likely see similar changes. Figure 5 forecasts what North American units might expect in the area of coal-unit unavailability should European trends carry over to the North American market after a cap-and-trade regime takes effect.
5. Glimpse of the future. Expect equivalent unavailability factor to markedly increase in North American coal-fired units should a cap-and-trade system be enacted. Source: Solomon Associates
North American unit unavailability in 2008 was at approximately the same level as European unit unavailability just prior to carbon trading. If we take the North American historical trend and forecast future performance based on Europe’s experience after 2005, we can predict substantial increases in the unavailability of North American coal units. Specifically, we can expect coal units to be used in a manner other than what was originally intended — for intermediate-load rather than baseload generation. This change in utilization will likely result in more starts and less run time per start.
Most North American coal units are not designed for intermediate-load duty and, in fact, have never operated in this manner. As a result, personnel at the majority of North American coal plants have not been trained for intermediate-load operations. In fact, with the low number of starts at these coal units, it is not unusual for an operator or crew to go a year or more without experiencing a start-up. Therefore, unit operators would be advised to adjust training programs and to plan for changes in maintenance programs in anticipation of a cap-and-trade regime.
Additionally, with the marked increase in use of contractor instead of in-house personnel, operators would be prudent to ensure that there is a stable supply of qualified contractor personnel to support their potentially changing operating plans. Because North American coal units are aging and have been run at high capacity while implementing costly environmental controls, operators should also have a plan to recover from any deferred maintenance spending.
In general, European operators who quickly recognized and responded to new constraints and dispatch demands by modifying unit flexibility, training programs, and maintenance practices have achieved better performance than their peers. North American operators would be wise to learn from the European experience and to begin planning for change. Those who do not adapt will likely see fleet performance suffer; in some cases, it may take years to recover. European operators, meanwhile, can expect additional changes to the carbon trading market and would be advised to incorporate this into their long-term planning.
A final lesson for North American generation owners concerns portfolio risk associated with currently installed technology and fuel type. Generators whose portfolios are heavily dependent on a single fuel or technology can expect to experience far greater challenges in adjusting to a cap-and-trade environment than operators who have greater flexibility to transition from coal to CCGT, for example. Although the changes that North American plants would see under carbon trading might not directly parallel the experiences of European units, there is little doubt that the challenges would be significant. Flexibility and preparation will be critical to market adaptation.
—W. Edward “Ed” Platt, PE (ed.platt@ solomononline.com) is manager, power generation, and Richard B. Jones, PhD (rick.jones@solomononline.com) is director of statistics and risk modeling-power generation for Solomon Associates.
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