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Efficiency and Environmental Impacts of Electricity Restructuring on Coal-Fired Power Plants

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  • H. Ron Chan
  • Harrison Fell
  • Ian A. Lange
  • Shanjun Li

Abstract

We investigate the impacts of electricity market restructuring on fuel efficiency, utilization and, new to this area, cost of coal purchases among coal-fired power plants using a panel data set from 1991 to 2005. Our study focuses exclusively on coal-fired power plants and uses panel data covering several years after implementation of restructuring. The estimation compares how investor-owned (IOs) plants in states with restructuring changed their behavior relative to IOs in states without. Our analysis finds that restructuring led to: (1) a two percent improvement in fuel efficiency for IOs, (2) a ten percent decrease in unit cost of heat input, and (3) a lower capacity factor even after adjusting for cross-plant generation re-allocation due to cost reductions. Based on these estimates, back-of-the-envelope calculations find that restructuring has led to about 6.5 million dollars in annual cost savings or nearly 12 percent of operating expenses and up to a 7.6 percent emissions reduction per plant.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2013/wp-cesifo-2013-03/cesifo1_wp4160.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4160.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4160

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Keywords: restructuring; efficiency; cost; utilization; emissions;

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  1. Stratford Douglas, 2006. "Measuring Gains from Regional Dispatch: Coal-Fired Power Plant Utilization and Market Reforms," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 119-138.
  2. Catherine D. Wolfram, 1999. "Measuring Duopoly Power in the British Electricity Spot Market," American Economic Review, American Economic Association, vol. 89(4), pages 805-826, September.
  3. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, January.
  4. Ali Horta├žsu & Steven L. Puller, 2008. "Understanding strategic bidding in multi-unit auctions: a case study of the Texas electricity spot market," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 86-114.
  5. Mansur, Erin T, 2007. "Upstream Competition and Vertical Integration in Electricity Markets," Journal of Law and Economics, University of Chicago Press, vol. 50(1), pages 125-56, February.
  6. Severin Borenstein & Meghan R. Busse & Ryan Kellogg, 2012. "Career Concerns, Inaction and Market Inefficiency: Evidence From Utility Regulation," Journal of Industrial Economics, Wiley Blackwell, vol. 60(2), pages 220-248, 06.
  7. Lange Ian & Bellas Allen S, 2007. "The 1990 Clean Air Act and the Implicit Price of Sulfur in Coal," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-25, August.
  8. Kabir Malik & Maureen Cropper & Alexander Limonov & Anoop Singh, 2011. "Estimating the Impact of Restructuring on Electricity Generation Efficiency: The Case of the Indian Thermal Power Sector," NBER Working Papers 17383, National Bureau of Economic Research, Inc.
  9. Lucas W. Davis & Catherine Wolfram, 2011. "Deregulation, Consolidation, and Efficiency: Evidence from U.S. Nuclear Power," NBER Working Papers 17341, National Bureau of Economic Research, Inc.
  10. Newbery, David M & Pollitt, Michael G, 1997. "The Restructuring and Privatization of Britain's CEGB--Was It Worth It?," Journal of Industrial Economics, Wiley Blackwell, vol. 45(3), pages 269-303, September.
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