EN19 Efficiency of conventional thermal electricity production

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The majority of thermal generation is produced using fossil fuels with associated environmental impacts such as greenhouse gas emissions, but can also include biomass, wastes and geothermal. Whilst the level of environmental impact depends upon factors such as the particular type of fuel and the extent to which abatement technologies are used, all else being equal, the greater the efficiency the lower the environmental impact for each unit of electricity produced.

The average energy efficiency of conventional thermal electricity production in the EU-25 improved over the period 1990-2004 by 3.2 percentage points to 38.2 %. Including useful heat, as well as electricity in calculating efficiency, results in an increase of 6.4 percentage points to 47.8 % over the same time period.

This energy efficiency improvement has been due to a combination of factors including the closure of old inefficient plants, improvements in existing technologies, installation of new, more efficient technologies, often combined with a switch to fuels with a better generating efficiency, such as from coal power plants to high-efficiency combined cycle gas-turbines. Environmental regulation has also been important in encouraging improvements and fuel switching towards more efficient fuels. However, the main factor in the choice of new electricity production plant during the period 1990-2004 was economic, as the costs of electricity produced from gas-fired plants have generally been less than for coal or oil fired plants, which has led to gas being the more desirable fuel for new plants.

The growth in the use of combined cycle gas turbine plants (CCGT) has been an important factor in the improving efficiency seen in the pre-2004 EU-15 Member States. CCGT plants can achieve conversion efficiencies in the order of 60%, with the prospect of even higher efficiencies in future plants. The liberalisation of the power production markets stimulated the uptake of gas for electricity production, combined with policies in certain Member States that favoured the use of gas, as well as a low gas price in the 1990s, improved gas technologies and improved infrastructure for the delivery of gas in some Member States. However, continued improvements have also been made in conventional coal generation with plant capable of efficiencies in the range 40-45%, and further advances that may allow this to exceed 50% (IEA, 2005).

Although overall improvements in electricity generation efficiency have been seen over the period 1990 to 2004, in recent years, from approximately 2001 onwards, a marginal decline in efficiency has been observed. This has been due primarily to a combination of a recent increase in the relative price of gas to coal, as well as a sizeable drop in hydro electricity production due to low rainfall, both of which have subsequently led to increased utilisation of existing lower efficiency coal plant (see EN-27 for more details).

It should also be noted that positive impacts on the environment overall, due to reduced emissions, from increased efficiency in electricity production may be offset by the high rate of increase in electricity consumption, which is growing at an average rate of 1.8 % per year (see EN18), especially considering that over half of this electricity (53.8 % in 2004) is produced from fossil fuels (see EN27)1. There is also a potential tension between environmental legislation (for example the Large Combustion Plant Directive 2001/80/EC) requiring the reduction of other air pollutants such as SO2, whereby retrofitting flue-gas desulphurisation technology incurs an energy penalty thus reducing overall efficiency. However, future coal technologies such as IGCC (Integrated Gasification Combined Cycle) can operate at higher efficiencies and also allow the sulphur, nitrogen compounds and particles to be removed prior to combustion (OECD, 2005).

At the beginning of the 1990s, the electricity sectors of the new EU Member States were characterised by low efficiencies of production mainly due to obsolete plant technology. However, in the second half of the 1990s, the privatisation of the electricity production industry in many of these countries stimulated the need to cut costs and thus investments were made to improve performance of existing plants. Many of the New Member States had used substantial amounts of low quality brown coal as it was readily available, and another significant trend was a switch from coal to gas in new and reconstructed fossil fuelled heat and power plants. This also contributed to an increase in generating efficiency due to the higher efficiency of gas combined cycle technologies. The growth in the use of gas has been supported by environmental regulation, government support (as high-efficiency electricity production from gas is seen as a low-pollution option) and programmes to finance enlargement of the gas networks. The efficiency in electricity generation thus increased at a higher rate in the EU-10 (4.1%) than in the pre-2004 EU-15 Member States (2.6% between 1990 and 2004)2. Despite this converging trend, the electricity conversion efficiency is still 6.8 percentage points lower in the new MS on average, but the gap has decreased from 8.3 percentage points in 1990.

Individual Member States show marked differences in the extent to which their efficiency of conventional thermal power production has improved and in some cases differences depending on whether just electricity or both electricity and heat is considered. Amongst the larger countries that tend to dominate the overall trend, large improvements have been seen in the United Kingdom and Spain. In the United Kingdom, efficiency improvements have been largely due to the fuel switch to gas prompted by the liberalisation of the United Kingdom energy market. Similarly, liberalisation in Spain has also increased efficiency via a rapid penetration of CCGT. In Germany the efficiency of electricity production has improved only slightly over the period whereas the efficiency of heat and electricity production has improved significantly.

The greatest efficiency improvements in both electricity and electricity and heat production occurred in Luxembourg, where the construction of a new CCGT has significantly increased both electricity production in the country (at the expense of imports) while also dramatically increasing the overall efficiency of conventional thermal production. Significant improvements in the efficiency of electricity production have also been seen in Cyprus, with new more efficient plant being built to increase electricity production (mostly from oil). Significant decreases in the efficiency of electricity production were seen in Lithuania and the Czech Republic between 1990 and 2004, but closer examination of the trend shows a sharp fall in efficiencies in the early 1990s during the period of economic collapse due to low utilisation of plants, followed by steadily increasing efficiencies in more recent years due to higher load factors on existing plants, refurbishment and new investment. Large differences can be seen in the improvement in efficiency for electricity production compared to electricity and heat production for countries such as Denmark, the Netherlands, Germany and Lithuania, which have shown a large increase in combined heat and power since 1990 (see EN20). With more 'waste' heat being utilised, the efficiency of heat and electricity production has increased more sharply than the efficiency of electricity production alone, see the cross-country comparison in Figures 1a and 1b for more details.

The trend in increasing efficiency is expected to continue into the future, as new more efficient technologies are introduced, in particular with the increased market penetration of combined cycle gas turbine technologies, and following the closure of older less efficient plants. The PRIMES energy projections (European Commission 2006) suggest that the bulk of new capacity will come from CCGT plants, which are more efficient and cost-effective than existing power stations and new advanced coal technologies. The transfer from relatively carbon-intensive coal generation to less carbon-intensive natural gas (and hence CCGT generation) would be further encouraged by the introduction of a carbon tax under a low carbon energy pathway as discussed in EEA (2005).