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

Trends in Reliability and Efficiency

Changes in utilization patterns, in turn, have influenced reliability, efficiency, and cost. As shown in Figure 2, the unavailability of European coal plants as measured by equivalent unavailability factor (EUF) increased dramatically during the study period, compared to a modest increase among North American units. EUF is defined here as the fraction of maximum generation that could not be produced due to unit deratings and planned and unplanned outages. While planned outages increased slightly for both European and North American plants during the period, the increase in unavailability among European coal plants was driven by a doubling of unplanned outages.


2. Cycling plants increases outages. Equivalent unavailability factor (EUF) for coal plants in the EU has steadily risen since the EU ETS commenced operation in January 2005. At the same time, there was a modest increase in EUF in North America. This indicates that the increased cycling of EU coal plants has also increased the periods of time when the plants are out of service for repairs or are derated. Source: Solomon Associates

A significant divergence also exists in heat rate between North American and European units. Throughout the analysis period, European coal plant heat rates were better than those of their North American counterparts. Although there were no clear trends in the heat rate of North American CCGT units during the study period, the heat rate of U.S. and Canadian coal units worsened substantially. This is likely the result of heavy usage and a focus on availability to monetize a fuel cost advantage rather than additional outage time to pursue heat rate improvements. By contrast, the heat rate of EU coal units increased only slightly — and, notably, the spread in heat rates among units narrowed considerably after cap and trade took effect. European CCGT units, meanwhile, show a trend toward improved heat rates during the period, driven by improved heat rates of individual combustion turbines due primarily to higher net operating factors. Carbon trading appears to be driving the convergence, as well as improvement in heat rate among European units as a result of the relationship between good fuel conversion efficiency and lower carbon emissions.