Possible Approaches to Encourage Efficiency
Improvement
As previously mentioned, EPA has been directed by the President to propose guidelines for GHG
emissions reduction from existing coal-fired power plants. The general assumption is that EPA
will establish some target for emissions on a state or plant-by-plant basis, with companies free to
decide how they will achieve the reduction (i.e., with efficiency, fuel switching, retirement of
older units, priority dispatch for cleaner units, etc.), and with emissions averaging, banking, and
trading of emissions credits playing a role. Within such a system, efficiency improvements can be
an important contributor.
While the details of the proposal are unknown at this time, the proposal may take into account a
number of factors (such as the remaining useful life of the existing source), and could be less
stringent than the proposal for new sources of power plants emissions of GHGs.55
Power plant efficiency may be another factor which EPA may potentially consider in its
guidelines for existing sources. NETL observed in its 2010 report56 that based on a scenario
where CFPP generation was constant at the 2008 level, increasing the average efficiency from
32.5% to 36% could reduce U.S. GHG emissions by 175 MMmt per year or 2.5% of total U.S.
emissions in 2008.57 NETL conceded that barriers existed to achieving a higher average fleet
efficiency level, citing the power generation industry’s focus on availability (focused on the
profitability of coal-fired generating units), inconsistent cost pass through possibilities (some
deregulated areas have cost pass through clauses, and zero or negative incentives in many areas