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

49 Pages Posted: 3 Apr 2013

See all articles by H. Ron Chan

H. Ron Chan

University of Maryland

Harrison G. Fell

Resources for the Future

Ian Lange

University of Stirling - Department of Economics

Shanjun Li

Cornell University - School of Applied Economics and Management

Date Written: March 31, 2013

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.

Keywords: restructuring, efficiency, cost, utilization, emissions

JEL Classification: L500, Q400, Q500

Suggested Citation

Chan, Hei Sing and Fell, Harrison G. and Lange, Ian and Li, Shanjun, Efficiency and Environment Impacts of Electricity Restructuring on Coal-Fired Power Plants (March 31, 2013). Available at SSRN: https://ssrn.com/abstract=2243451 or http://dx.doi.org/10.2139/ssrn.2243451

Hei Sing Chan

University of Maryland ( email )

Department of Economics
3114 Tydings Hall
College Park, MD 20742
United States

Harrison G. Fell

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States
202-328-5005 (Phone)

Ian Lange (Contact Author)

University of Stirling - Department of Economics ( email )

Stirling, FK9 4LA
United Kingdom

Shanjun Li

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States

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