Fossil-fired thermal generation
  • Production
  • Coal-fired power plants in France

    Production at an all-time low


    Output from fossil-fired thermal plants contracted by 10.6 % year-on-year in 2020. Sharp declines were seen across all segments.
    Gas-fired generation, which makes up the lion’s share of fossil-fired thermal generation, fell by 10.4 %, or around 4 TWh. Coal-fired generation decreased by 12.7 % and oil-fired generation by 13.3 %.

     

    Coal-fired generation

    In 2020, coal-fired power generation reached an all-time low of 1.4 TWh, down 12.7 % from a year earlier. Plant availability was the same as in 2019. This low level of output is primarily explained by the shrinking economic space for coal-fired plants, against a backdrop of generally lower power demand, and by the carbon price.

    Coal-fired generation is unlikely to contract further in 2021, but it will cease in 2022, with the planned closure (or conversion to a different fuel) of France’s last coal plants.

    Coal-fired generation has declined sharply starting in the 1980s to be gradually replaced by nuclear power, then by new renewable sources (wind and solar) and gas.

    As of today, coal represents 3.6% of total fossil-fired thermal generation.

    Starting in February, coal power plants were fired up much less often, though they were needed temporarily during the heatwaves of July, partly to make up for a drop in nuclear generation due to maintenance schedules and the need to comply with environmental constraints during periods of high temperatures and drought conditions.

    In September, coal-fired plants were once again called upon as demand rose and nuclear power plant availability remained low.
    Though nuclear generation had resumed in October, technical and economic conditions favoured reliance on coal power plants, as the gas price was rising and the CO2 price decreasing, giving coal a slight advantage over other thermal power plants.
    The months of November and December saw renewed reliance on coal power plants due to demand increasing with the approach of winter.

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    Coal-fired power plants in France

    In 2017, the French government announced that it would shut down the country’s last coal-fired plants by 2022. Article 3 of the energy-climate law introduced a mechanism that caps emissions and thus the amount of time coal-fired plants can operate in mainland France after 1st January 2022. This objective was in line with the targets set out in the Multiannual Energy Programme unveiled early in 2019.
    The four coal-fired plants in question, the ones still in service in France, are the Cordemais, Le Havre, Saint-Avold and Gardanne facilities.
    They represent installed capacity (five generating units) of 3 GW, or about 2.2 % of total installed capacity in France.

    Operations
    Producers of electricity seek to cover their fixed and variable costs. Consequently, a coal plant is typically not run unless it can at least cover its variable costs, which depend mainly on how much it pays for fuel and emissions allowances. Under current conditions, the variable costs of a coal power producer in France seem high based on the European economic dispatch order (base-load, then semi-base-load then peak). Coal plants are semi-base load resources designed to operate for a fairly long period in order to cover their relatively high fixed costs. As the carbon price increases, they gradually become the most expensive semi-base load plants to operate within the merit order. The shorter the length of time they operate, the more difficult it becomes to cover fixed costs.

    Influencing factors
    Various technical and economic factors determine when coal plants are fired up: the coal price, the price of carbon emissions credits, and the euro/dollar exchange rate.

    • Price of emissions allowances up sharply

    Generators that produce CO2, are required to purchase permits to offset those emissions. Because coal gives off large quantities of CO2, the price of permits is a key determinant in the operation of a coal plant. In September 2020, the price of an emissions allowance reached a record high of €30.4 per tonne. If a generator fails to cover its production, each tonne of CO2 emitted but not covered by equivalent allowances incurs a penalty of at least €100 per tonne, in addition to the coverage requirement. Permit prices began to decline sharply starting in mid-March, due to the health crisis, but then climbed back above the 2019 level, driving up the variables costs of coal plants


    Platts data

    • Gas prices down sharply

    The CO2 emission factor is almost twice as high for coal as for gas plants (0.986 t/MWh for coal units vs. between 0.352 t/MWh and 0.583 t/MWh for various gas-fired generation technologies, according to ADEME data). Though the coal price did decline in the first half of 2020, the gas price fell even more sharply, making gas more competitive than coal for an equivalent level of service in terms of generating flexibility.


    Platts data

    • €/$ exchange rate

    The €/$ exchange rate is another economic factor that determines when coal plants run. Coal is purchased in dollars but electricity is sold in euros. The ratio generally trended higher starting in May 2020, making coal more competitive relative to other generation resources.

    Marginal cost of coal plants

    In theory, prices on the day-ahead market are set, for a given time of day, based on the variable cost of the marginal technology (i.e. the one supplying the last MW).
    When the average marginal cost is below or close to the day-ahead price, it corresponds to when coal power plants are operating. This is when producers can generate a profit on their electricity sales.

    The chart below shows the average marginal cost of coal power plants in France.


    Platts data

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