Fuel Prices, Restructuring, and Natural Gas Plant Operations

Reposted Colorado School of Mines Working Paper 2016-03
April 2016


This working paper was published as WP2016-03 in the Colorado School of Mines Division of Economics and Business Working Paper Series while CEnREP Affiliate Harrison Fell was on faculty there.  When referencing this manuscript, please cite it as part of Colorado School of Mines’ Division of Economics and Business Working Paper Series (full information is contained on the cover page for the linked manuscript below).

ABSTRACT: Switching from coal-red to natural gas-red generation and increasing the thermal efficiency (energy gen-erated per unit of energy burned) of fossil fuel red electricity generation plants has been identified as ways of achieving meaningful emission reductions. In this study, we examine the fuel-price responsiveness across gas plant technologies and across the market structures in which the plants operate. We find that there are significant differences in the generation and efficiency responses of gas plants to fuel prices across generation technologies and market structures. Specifically, our results indicate that, regardless of market structure, generation from natural gas combined cycle (NGCC) plants is responsive to both coal and gas prices, but that generation from simple cycle (NGSC) plants only respond to gas prices. On the other hand, with respect to efficency, we generally nd that only NGCC plants operating in deregulated regions show statistically significant efficency improvements in response to coal price increases and that, generally, neither NGCC or NGSC plants, regardless of market structure, respond in any significant way to gas prices. Finally, using these parameter estimates, we calculate emissions savings from efficency improvements and fuel-switching possibilities.


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