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Low-Cost Carbon Credits Driving Europe Back To Burning Coal And Forests

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The number of new coal-fired power plants in planning or construction in Europe is rising. Coal imports are soaring. How did the region, most dedicated to reducing CO2 emissions, do an about face? A major contributing factor is the cost of electricity.

The U.S. coal and logging industries are booming thanks to exports to Europe. Alternatives to these two fuels are much more expensive in Europe. At the same time, the carbon credit price has fallen to insignificance. The result is a great incentive for European power plants to burn solid fuels, according to McIlvaine’s “Fossil & Nuclear Power Generation: World Analysis & Forecast.” The impacts on industrial boilers, flue gas desulfurization (FGD), DeNOx, precipitator, and fabric filter markets are also being analyzed in McIlvaine reports.

Some of the surprising developments in Europe:

  • The number of new coal-fired power plants in planning or construction in Europe is rising.
  • The electricity production  of existing coal-fired power plants is up substantially.
  • A large number of dedicated biomass power plants are underway.
  • Major investments are being made to convert coal-fired power plants to burn combinations of biomass and coal.
  • Coal imports are soaring.
  • Gas-fired power plant construction is down.

How did the region, most dedicated to reducing CO2 emissions, do an about face? A major contributing factor is the cost of electricity. Solar and wind are expensive and do not generate as much power as had been anticipated, so Europe has to rely on other fuels. Germany is shutting down nuclear facilities and is planning on lignite (brown coal) to fill the gap. France is renovating three large coal-fired boilers and plans to operate them for another 30 years. The economics dictate fossil fuels because the penalties for CO2 emissions have become negligible.

In 2007, the EU set a goal, by 2020, of reducing Europe’s greenhouse-gas emissions to 20 percent below their 1990 level. It also set a goal of moving Europe to 20 percent renewable energy by 2020. To accomplish this, it set up a plan for carbon trading. Emitters have to pay for their CO2 emissions. A drastic drop in industrial activity has sharply reduced the need for companies to buy emission rights, causing a gradual fall in the price of carbon allowances.

On April 16, the European Parliament was on the verge of temporarily tightening the supply of allowances to boost the price of carbon and shore up the market, but opposition by countries led by Poland defeated the measure. The result is the price of carbon plummeting to a historic low of $3.60.

A new supercritical coal-fired power plant generates 30 percent less CO2 than an old subcritical power plant. With the relatively high price of coal, the cost per kWh of coal-fired generation is lower with the more efficient new power plants. The result is a program to replace existing old power plants with new ones. Germany, in particular, has followed this course.

European power producers realize that the carbon credit situation could change with another decision regarding the carbon allowances, so they are looking for renewable solid fuels that do not generate net carbon increases. One of the results is an expanded focus on biomass. Forty-nine percent of renewable energy generated in the EU came from wood and wood waste in 2010.  This percentage is now rising rather than falling.

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