Gas plant output might mean no emission increase from fossil fuels

Author: Silvia Molteni

2015/08/24

A number of large European utilities increased electricity production from fossil fuels in the first half of the year, but the increase in emissions could be offset by a less carbon-intensive mix.

Between January-July, 11 major power producers – RWE, E.ON, CEZ, Enel, Endesa, EnBW, Engie, Verbund, Drax Power, Iberdrola and Vattenfall – produced 276.3TWh from their carbon-emitting plants, a 1.3% increase compared with the same period in 2014, data collated by ICIS from the latest round of financial results shows (see table).

But the increase does not necessary mean higher emissions, because some companies generated more power from burning gas and less from burning coal. A coal-fired plant has a higher carbon intensity and therefore requires more EU allowances (EUAs) to cover the same power generation volumes compared with a gas plant.

The figures, however, do not seem to point to a definite trend of more gas burn, as the picture varied among different companies.

Furthermore, not all of them disclosed the breakdown of the fuel mix, including large operators such as Vattenfall (see table).

Of those that did, gas-fired output was up by 12% to 70.8TWh, while coal-fired output was down 2% to 149.4TWh.

Fossil-fuels

Lower temperatures in the first quarter were one of the factors behind the rise of fossil-fuel generation.

Winter 2014 was unseasonally warm, which reduced electricity generation in much of Europe (see EDCM 16 March 2015). This contributed to a fall in emissions in the EU carbon market by 4.5% year on year in 2014 on a like-for-like basis (see EDCM 18 May 2015).

In the first quarter this year temperatures were colder, requiring more electricity production for central heating.

Fuel mix

The fuel mix at different companies seemed very much linked to specific circumstances.

Vattenfall, for instance, said both coal- and gas-fired production decreased because of higher production of renewable energy at its plants.

RWE saw both gas-fired and coal-fired generation increase, as it started a new 1.6GW hard coal-fired power plant in the Netherlands this year and a UK hard coal-fired plant, while several gas-fired plants were available in 2015 while they had outages in 2014.

Verbund also burnt more coal, as it wanted to reduce inventories because it decommissioned a power plant in April this year.

Drax Power saw coal generation decline as the company converted a second plant unit to biomass in October.

Enel saw higher gas- and coal-fired generation at its plants increase to partly compensate lower output from hydroelectric plants.

Looking forward

Looking forward, a heat wave that hit Europe in July seems likely to result in increased fossil-fuelled generation in the third quarter. In Italy, for example, data from grid operator Terna showed that in July thermoelectric generation was 29% higher year on year, at 18.7GWh, as power demand in the month grew by 13% (see EDCM 6 August 2015).

In the UK, the doubling of the carbon price floor has influenced the fuel mix, with gas-fired generation increasing and displacing coal-fired production (see EDCM 30 July 2015). The UK levies an additional charge, called carbon price support (CPS), on emissions from power generators on top of standard EU emissions trading system requirements. The CPS went up to £18.08/tCO2e from £9.55/tCO2e on 1 April. It will drop slightly to £18.00/tCO2e from 1 April next year, where it will remain frozen for four years under current plans. silvia.molteni@icis.com