EN27 Electricity production by fuel

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The trend in electricity production by fuel provides a broad indication of the impacts associated with electricity production. The type and extent of the related environmental pressures depends upon the type and amount of fuels used for electricity generation as well as the use of abatement technologies.

Electricity production from fossil fuels continues to dominate total electricity production, with a share of almost 54 % in 2004, despite the recognised environmental impacts such as emissions of greenhouse gases and other pollutants, and resource depletion. Natural gas, which causes less overall pollution than other fossil fuels, was the primary, although not only, choice for new fossil-fired power plants over the general period 1990-2004, mainly driven by economic concerns. This fuel switch was one of the factors leading to a decrease in greenhouse gas emissions from public power generation over the period. However, with an increase in natural gas prices relative to coal since 1999 (IEA, 2005) as well as a decrease in hydro electricity production since 2002 due to low rainfall, the use of coal has increased in recent years and hence GHG emissions from public power generation have begun to rise again (+7.6 % between 1999 and 2004; see EN01 for more information). Within this general trend however, there was a 2.6% drop in electricity production from coal and lignite in 2004 compared to 2003 due in part to an increase in production from renewables and a slight recovery in hydro production over the period. The share of oil for power generation is slowly diminishing with time as many of the existing oil-fired plants are kept only as part of the required power reserve margin.

The share of electricity produced from gas has risen by a factor of 2.5 in the EU-25 between 1990 and 2004 to around 20 % in 2004. This growth has been influenced by the liberalisation of electricity markets and implementation of environmental legislation, such as the Large Combustion Plant Directive and the requirements for investing in pollution abatement technologies to lower emissions of air pollutants such as SO2 and NOx (see EN09 for more information). However, the primary factor was economic, with low gas prices for much of the 1990s and the rapid investment in transportation infrastructure for the delivery of gas from within and outside the EU, which has also assisted its progress. Competition to provide electricity more cleanly and at a lower cost has favoured gas use due to the high efficiencies and low capital costs associated with some gas-based technologies, in particular Combined Cycle Gas Turbines (CCGT).

Electricity produced from coal and lignite accounted for 29.5 % of EU-25 electricity production in 2004, falling from 37.4 % in 1990. After a high experienced in 2003, production from coal and lignite decreased between 2003 and 2004 with share of production returning to 2002 levels. Whether this trend continues into the future will depend upon the long-term cost of gas, which is linked closely to the price of oil and has risen considerably in recent years. It will also depend upon national initiatives and environmental legislation such as the aforementioned Large Combustion Plant Directive, and in particular the EU greenhouse gas emissions trading scheme (2003/87/EC) which favours a shift to less carbon intensive fuels for electricity generation, such as gas, as well as improvements in generating efficiency.

Electricity produced from nuclear fuels continued to grow in absolute terms from the 1990s through to 2004 in the EU-25, although its share of total production fell slightly to 31 % in 2004. This declining share of the relative contribution of nuclear to total electricity production is expected to continue, because few new nuclear plants have been commissioned in recent years to replace those reaching the end of their lives, and also because there is a strong growth trend in electricity generation. Economically, the production of electricity in nuclear power plants is seen as an expensive option in the context of a liberalised market and public concern about environmental and safety considerations has led to plans to phase out nuclear power in certain Member States (such as Germany (Parliament decision in 2001), the Netherlands, Spain, Sweden and Belgium), with some others either declaring or considering moratoria on the building of new nuclear plants (see EN13 for more information). However, factors such as concerns about security of energy supply (and an overdependence on energy imports1) and the need to reduce greenhouse gas emissions are increasingly providing countervailing arguments in Member States' debates on the need for new nuclear capacity. In Romania, the Cernavoda 2 reactor is due to be completed in 2007 and the process of building additional capacity in Finland and in France, based primarily on new nuclear designs such as the European Pressurised Water Reactor and Westinghouse Advanced Passive technology, is ongoing.

Total renewable energy sources contribute 13.7 % to gross electricity production in the EU-25 in 2004, and this share has only increased by 1.4 percentage points since 1990. Substantial growth will be required to meet the EU-25 renewable electricity indicative target of 21.0 % renewable electricity share of gross electricity consumption by 20102. For a detailed description of past and future trends in renewable technologies, see EN30 and EN29.

The fuel mix for electricity production in the new EU Member States is rather different to the EU-15 due to historic and economic reasons. The traditional electricity industries in the region were originally vertically integrated monopolies controlled by central governments, but in the second half of the 1990s, the generation, transmission and distribution of electricity were mostly separated. As the power industry's generating plant was in general old, inefficient and highly polluting, huge investments have been required for refurbishment, with the aim of improving their performance, cutting production costs and reducing environmental impacts. Due to the rapid decline in industrial output in the early 1990s and the restructuring of the industrial sector, there was a decline in electricity use in the new Member States, although this started to rise again from the mid-1990s onwards.

Overall, fuel switching within electricity has benefited the environment, but this trend has slowed in recent years. However, a significant portion of these benefits have been counteracted by the rapid increase in overall final electricity consumption of about 29 % from 1990 to 2004 (see EN18) leading to increase in overall electricity production of about 33.5 % over the same period. PRIMES projections of future electricity production by fuel indicate that the share of gas is expected to increase by 7 percentage points from almost 20% share of electricity production to 27% by 2020 before slowly declining due to the anticipated re-emergence of coal generation and acceleration of production from renewables to 2030. The projected re-emergence of coal, after declining until around 2015-2020, is based on an assumption that forecast increases in the relative price of gas and concerns over the security of energy supply would increase the competitiveness of coal-fired plants. This is also in part due to new coal plant technology (such as IGCC Integrated Gasification Combined Cycle) with efficiencies in the range 40-45 % (with further potential advances that may allow this to exceed 50 %) and which allow sulphur, nitrogen compounds and particulates to be removed prior to combustion, thus allowing environmental legislation to be complied with more efficiently (OECD, 2005). After 2015 the PRIMES projections expect a decline in production from nuclear as ageing plants are retired and no new plants are commissioned. Although recent high gas prices have resulted in a number of Member States looking seriously again at nuclear power as an option, this is not yet concrete enough to include in the projections. For renewables, PRIMES expect the share to grow steadily to a 33 % share of electricity consumption in 2030 (see EN30), with the 20.3 % share for 2010 narrowly missing the indicative Renewable Electricity Directive target.

By comparison, the imposition of a rising permit price for carbon under a Low Carbon Energy Pathway (LCEP) scenario projections causes coal and lignite generation to drop rapidly by 2030 to less than a quarter of their expected share under the PRIMES projections (EEA 2005). Under this LCEP scenario the share of gas doubles its current share by 2030, as does the share of renewables. The share of nuclear would be around 4 percentage points higher than in the PRIMES projections. The LCEP scenario also shows a slightly slower growth in the demand for electricity overall and hence lower levels of electricity production. The bulk of the additional savings under a low carbon pathway are expected to come from fuel switching.