Eu Ets Scheme - Driver Of Generator Actions
The EU ETS provides a driver for investment in lower carbon intensity generation. To
this extent it should encourage investment in existing plant to reduce carbon intensity.
There are a number of ways of reducing carbon intensity:
• Improvements in Generation Efficiency
Although in theory it may be possible to improve generation efficiency at some stations,
the high fuel component in the marginal cost of generation has meant that the power
sector has always been extremely focused on maximising the efficiency of plant, although
it has to be accepted that there is often a trade-off between optimising efficiency and
maintaining plant flexibility (for peaking plant, the ability to respond quickly and having
low fixed costs to spread over short periods of generation may be more important than
efficiency of generation). Thus, it is unlikely that significant improvements in generation
efficiency of existing plant will be made as a direct response to the EU ETS.
• Fuel Switching within Station
Some stations have dual fuel capability, and so can reduce carbon intensity by switching
fuel. In GB three stations (Peterhead, Kingsnorth and Didcot A) have dual fuel capability,
although only Didcot A has coal/gas dual fuel and so could switch to a significantly lower
intensity fuel source.7 Although it would be possible to retrofit dual firing with gas at coal
stations, there is a relatively large cost associated with such adaptations and connection to
the gas transmission grid. In addition, the reductions in carbon intensity are much lower
than those that would arise from the construction of a new CCGT. Thus, it is considered
unlikely that there will be significant investment in dual firing of existing stations as a
result of the EU ETS.
• Fuel Switching within a Generation Portfolio
Most of the portfolio generators...
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