Efficiency and Environmental Impacts of Electricity Restructuring on Coal-fired Power Plants

We investigate the impacts of electricity market restructuring on fuel efficiency, cost of coal purchases, and utilization among coal-fired power plants using a panel data set from 1991 to 2005. Our study contributes to the literature in two aspects: (1) the use of more data from recent years allows us to examine longer term impacts of restructuring; (2) the focus on coal-fired power plants (vs. all power plants) avoids the possible confounding factors that arise from different power generation technologies. We find a two to three percent improvement in the heat rate after restructuring among investor-owned utilities (IOUs) in states that carried out restructuring relative to IOUs in states without restructuring. Our cost of coal purchases results suggests that the cost per unit of heat input dropped five to six percent for plants in restructured regions relative to similar plants in regulated regions. Lastly, our analysis shows that while capacity factors increase with lower generation costs, implying that within-plant efficiency gains from restructuring lead to cross-plants reallocation of electricity generation, restructuring appears to have on average lower capacity factors for coal plants.

Speaker: Harrison Fell, Colorado School of Mines