Carbon price drives generating fuel switch
Coal pays for its greater carbon intensity in a rising European CO2 price environment
Calculating the gross profit from a power plant, before the advent of carbon pricing, was a fairly straightforward affair. The difference between the electricity price and the cost of fuel—adjusted for either the thermal efficiency of a particular plant or, for a more generic situation, industry standards for coal and gas-fired stations' efficiency—was all you needed to work out. Since 2005, Europe's power industry has had to pay for a majority of its CO2 emissions and this has triggered a change in profit calculations. It means that coal faces stiffer competition from cleaner-burning natural gas, with the strength of the competition increased by higher CO2 prices and vice versa. The so-call
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