January 1, 2010

The Impact of Carbon Trading on Performance: What Europe’s Experience Can Teach North American Generators

W. Edward Platt, PE and Richard B. Jones, PhD, HSB Solomon Associates LLC

EU Plant Utilization: Big Changes Since 2005

Figure 1 shows power generation utilization as measured by net capacity factor (NCF) in North America and in Europe from 2002 to 2008. NCF is defined here as the ratio of the actual output of a plant in a given year to its output if it had operated at full net nameplate capacity throughout all hours of the year. During the study period, the North American market demonstrated heavy reliance on an aging fleet of coal units. The units operated with a low number of starts and high mean run time, suggesting that North American operators were employing these units in a baseload capacity. Meanwhile, the utilization of North American CCGT units declined during the period.


1. Role reversal. After carbon trading began in the EU, combined-cycle utilization rose and coal plants were forced into cycling operation. Today, coal plants in the EU experience about six times more starts each year than comparable plants in North America. The vertical line indicates that the EU greenhouse gas Emission Trading System (ETS) commenced operation in January 2005. Source: Solomon Associates

European units, by contrast, demonstrate a completely different pattern. After the initiation of carbon trading, the utilization of CCGT units increased dramatically and, in 2008, exceeded that of coal units for the first time. The utilization of European coal units, meanwhile, declined significantly during the study period. The mean run time of European coal units declined by 35%, and the number of starts increased threefold.

On a comparative basis, European coal units experienced more than six times as many starts as North American coal units by the end of the analysis period, and their mean run time was approximately one-third that of North American units. The data indicate that European coal units that were designed and formerly operated as baseload units are now being driven to intermediate duty, with many of them starting much more frequently to respond to their new role. This reorientation can largely be attributed to the impact of carbon trading, with the integration of renewable capacity in the market acting as a secondary influence.