Trends in Cost
Figure 3 shows that total cash less fuel per megawatt-hour (TCLF/MWh) steadily increased for both North American and European coal units during the study period, but cost increases were most pronounced in Europe after carbon trading went into effect. TCLF/MWh increased by 60% for European coal units, compared to 30% for North American units, during the study period. The overall trend of increasing TCLF/MWh was driven by both rising costs and reduced generation. European CCGT units experienced an increase in cost after the beginning of carbon trading, but this leveled off as utilization increased. There is no clear trend in the cost for North American CCGT units.
3. Pay to play. The cost of operating coal-fired plants has risen steadily in the EU since the ETS system began operation. The cost of operating coal plants in North America has also risen, but at a much lower rate. Source: Solomon Associates
Figure 4 illustrates changes in the ratio of overhaul plus long-term service agreement spending to non-overhaul spending among North American and European units. This approximates the ratio of long-term to short-term maintenance costs. Solomon Associates’ prior research indicates that planned long-term spending yields much longer lasting benefits to operators than unplanned short-term spending. During the study period, North American coal units moved toward a higher percentage of long-term spending, largely as a result of increased dependence on coal and the need for higher market availability.
4. Opposite investment decisions. North American operators continue to invest in their coal plants less than in their combined-cycle plants. In the EU, the exact opposite is the case. A means of measuring this investment is dividing the sum of the overhaul (OH) costs plus the cost of any long-term service agreement (LTSA) divided by the non-overhaul maintenance expenses. Source: Solomon Associates
Similarly, European CCGT units trended to a higher ratio of long-term spending because this technology is increasingly used for baseload generation. European coal units also moved to a higher percentage of long-term spending during the period, but in this case, they were likely doing so in response to higher-than-acceptable unplanned unavailability.
Total work hours required to operate and maintain units trended upward for both European and North American coal units, and downward for CCGT units, during the study period. Additionally, operators on both continents trended toward using a higher ratio of contractor to in-house personnel.
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