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

Author

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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.

Suggested Citation

  • H. Ron Chan & Harrison Fell & Ian A. Lange & Shanjun Li, 2013. "Efficiency and Environmental Impacts of Electricity Restructuring on Coal-Fired Power Plants," CESifo Working Paper Series 4160, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_4160
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Corrado Di Maria & Ian A. Lange & Emiliya Lazarova, 2014. "A Look Upstream: Electricity Market Restructuring, Risk, Procurement Contracts and Efficiency," CESifo Working Paper Series 5124, CESifo Group Munich.
    2. Hei Sing (Ron) Chan & Maureen L. Cropper & Kabir Malik, 2014. "Why Are Power Plants in India Less Efficient Than Power Plants in the United States?," American Economic Review, American Economic Association, vol. 104(5), pages 586-590, May.
    3. Chan, H. Ron & Chupp, B. Andrew & Cropper, Maureen & Muller, Nicholas Z., 2015. "The Net Benefits of the Acid Rain Program: What Can We Learn from the Grand Policy Experiment?," Discussion Papers dp-15-25, Resources For the Future.
    4. Yin Chu & J. Scott Holladay & Jacob LaRiviere, 2017. "Opportunity Cost Pass-through from Fossil Fuel Market Prices to Procurement Costs of the U.S. Power Producers," Working Papers 2017-02, University of Tennessee, Department of Economics.
    5. repec:eee:indorg:v:57:y:2018:i:c:p:35-83 is not listed on IDEAS
    6. Du, Limin & Hanley, Aoife & Rehdanz, Katrin, 2014. "China's CO2 emissions from power generating stations: A first exploration," Kiel Working Papers 1934, Kiel Institute for the World Economy (IfW).
    7. Joshua Linn & Erin Mastrangelo & Dallas Burtraw, 2014. "Regulating Greenhouse Gases from Coal Power Plants under the Clean Air Act," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(1), pages 97-134.
    8. repec:eee:resene:v:52:y:2018:i:c:p:153-172 is not listed on IDEAS
    9. Kabir Malik, Maureen Cropper, Alexander Limonov and Anoop Singh, 2015. "The Impact of Electricity Sector Restructuring on Coal-fired Power Plants in India," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    10. Germeshausen, Robert, 2018. "The European Union emissions trading scheme and fuel efficiency of fossil fuel power plants in Germany," ZEW Discussion Papers 18-007, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    11. Steve Dahlke, 2017. "Effects of Changes in Wholesale Electricity Market Structure on Wind Generation in the Midwestern United States," Working Papers 2017-02, Colorado School of Mines, Division of Economics and Business.
    12. Matthew Doyle & Harrison Fell, 2016. "Fuel Prices, Restructuring, and Natural Gas Plant Operations," Working Papers 2016-03, Colorado School of Mines, Division of Economics and Business.
    13. Teng Ma & Kenji Takeuchi, 2017. "Cleaning up the air for the 2008 Beijing Olympic Games: Empirical study on China’s thermal power sector," Discussion Papers 1718, Graduate School of Economics, Kobe University.
    14. repec:kap:revind:v:52:y:2018:i:3:d:10.1007_s11151-017-9608-6 is not listed on IDEAS
    15. Linn, Joshua & Anna Muehlenbachs, Lucija & Wang, Yshuang, 2014. "How Do Natural Gas Prices Affect Electricity Consumers and the Environment?," Discussion Papers dp-14-19, Resources For the Future.
    16. repec:eee:jeeman:v:88:y:2018:i:c:p:180-209 is not listed on IDEAS

    More about this item

    Keywords

    restructuring; efficiency; cost; utilization; emissions;

    JEL classification:

    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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