Conclusions and Policy Options
The efficiency of coal-fired power plants decreases over time as components and systems degrade with age and use. Good O&M practices can slow down the loss of efficiency, but older power plants will not be as efficient as newer plants with more technologically advanced and newer systems. But simply replacing old power plants with newer plants is rarely cost effective as the relative increase in power output seldom justifies the cost. CFPPs that are more efficient emit less CO2 per unit of electricity produced because they use less coal. Making improvements to increase the efficiency of CFPPs (while producing the same electrical output) could result in a significant reduction in CO2 emissions. According to several of the studies summarized in this report, the major improvements in GHG emissions would likely result from major retrofits in technology, or conversions to natural gas (or possibly biomass) as a fuel.
Detailed information on the actual cost of efficiency-enhancing improvements is not readily available, as concerns over confidentiality and competitiveness with regard to actual projects has largely prevented the sharing of such information. The studies referenced in this report largely show relative information on cost (i.e., high, medium, low), estimate the cost effectiveness of improvements, or mention general cost levels. The case studies have reported costs of efficiency improvements and actual increases in efficiency for specific power plant. But these are considered as useful for estimating a range of costs for improvements rather than actual guides for costs, since each power plant has its own design characteristics and maintenance history. Actual cost information would require a technical evaluation, and a cost vs. benefit analysis to
obtain reliable cost estimates for the options under consideration, taking into account site-specific conditions.
Other potential roles exist for Congress. For example, legislation could use tax incentives to encourage energy efficient upgrades for CFPPs which were placed in-service after a certain date. This would allow newer units with environmental controls to recover the cost of scrubbers and other systems, and allow “newer” units to continue operations over a “reasonable” service life, and recover the cost of environmental improvements.
Another approach might be to use a federal energy efficiency standard to accomplish a similar goal as an efficiency frontier, but allow the states to design the program based on local fuel resources, the age of power plants under their jurisdiction, and other criteria defined in legislation. The efficiency standards could increase over time, and require CFPPs not meeting these standards to retire.
Deference to state authorities and regional compliance strategies have been suggested by
observers with regard to EPA’s deliberations over GHG reduction for existing CFPPs. State public utilities commissions (or similar entities) often require utilities to conduct book depreciation
studies (either in connection with rate cases or independent of rate cases). Such studies commonly
examine the physical condition of power plants, and the utility’s recovery of its investment in electric plant. Federal legislation could tie incentives for efficiency improvements to such studies and direct states to meet individual or regional goals for GHG reduction.