Energy Policy 60 (2013) 356–363

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Energy Policy

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Engineering and optimization approaches to enhance the thermalefficiency of coal electricity generation in China

Yuan Xu a,n, Chi-Jen Yang b, Xiaowei Xuan c

a Department of Geography and Resource Management & Institute of Environment, Energy and Sustainability, the Chinese University of Hong Kong, Hong Kongb Center on Global Change, Duke University, Durham, NC, USAc Development Research Center of the State Council, Beijing, China

H I G H L I G H T S

� Coal-fired power efficiencies in China greatly affect global CO2 emissions.

� China very likely has improved to surpass the United States in the efficiency.� Engineering factors contributed dominantly to China's progress.� The United States has more efficient electricity dispatch or optimization patterns.� Electricity dispatch is important for China's further efficiency improvement.

a r t i c l e i n f o

Article history:Received 23 November 2011Accepted 15 May 2013Available online 7 June 2013

Keywords:Energy efficiencyCoal-fired power plantsChina

15/$ - see front matter & 2013 Elsevier Ltd. Ax.doi.org/10.1016/j.enpol.2013.05.047

esponding author. Tel.: +852 39436647; fax: +ail address: yuanxu@cuhk.edu.hk (Y. Xu).

a b s t r a c t

China has made improving the thermal efficiencies of its coal-fired power plants a national priority.Official data show that the average thermal efficiency was enhanced from 31.3% in 2000 to 33.2% in 2005and 36.9% in 2010. This paper aims to assess the validity of China's claimed improvement, examine majorresponsible factors, and identify future improvement opportunities. Recognizable factors can account forabout 80% of the reported progress in the 10th Five-Year Plan (2001–2005) and about 85% in the 11th(2006–2010) to largely verify the reported progress. Engineering approaches—especially replacinginefficient power units with more efficient ones—are the largest contributing factors, while optimizationapproaches—particularly electricity dispatch—remains inefficient in China. In 2010, the explainableefficiency improvement might have avoided around 500 million tons of CO2 emissions. In comparison,although the United States was fairly static with most of its coal-fired power plants seriously outdated, ithas more efficient electricity dispatch. In China's ongoing 12th Five-Year Plan (2011–2015), betterdispatch patterns could be more important as opportunities for improvement through engineeringapproaches have been largely exhausted.

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1. Introduction

China's coal-dominated power sector is the largest CO2 emitterin the world. In 2010, it emitted 3549 million tons of CO2, almostcatching up with the European Union's total emissions of 3660million tons (IEA, 2012). China's national energy policy puts greatemphasis on improving its efficiencies. For coal-fired power plants,one high-profile measure is to replace inefficient power units,generally small in unit capacity, with more efficient ones, generallylarge in unit capacity (“Shangda Yaxiao”). The policy started withlimiting the construction of small coal-fired plants, and gradually

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evolved into phasing out small, old, and inefficient capacities (Xueet al., 2003). In the 11th Five-Year Plan (2006–2010), China shutdown 73,800 MW of small power units, equivalent to 19% of totalthermal power capacity at the end of 2005 (China ElectricityCouncil, 2011).

The high political profile of coal-fired power efficiency in Chinais likely unparalleled. Most other countries’ energy efficiencypolicies focus primarily on the consumption side (Geller et al.,2006; IEA, 2010). In the United States, the National Action Plan forEnergy Efficiency does not cover power generation at all (U.S. DOEand U.S. EPA, 2006). In addition to “Shangda Yaxiao”, existing plantscould be renovated with more efficient equipment to reduce in-plant electricity consumption (Zhu et al., 2003). Because coal-firedpower plants can achieve higher efficiency with stable andcontinuous operation, operators may improve efficiencies through

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improving maintenance and dispatch pattern (Liu et al., 2008; Jinand Ming, 2010).

We compare Chinese government's published national averageefficiencies of coal-fired power plants with those in the UnitedStates to illustrate the very rapid progress in China (Fig. 1). Chinaappears to have not only caught up with the United States, but infact have surpassed it by a wide margin. A study in 2007 predictedthat the average efficiency of China's coal-fired fleet would notsurpass that of the United States until 2030 (Bellman et al., 2007),which might have seriously underestimated Chinese progress. Thesharp contrast between rapid Chinese progress and U.S. stagnationraises many questions. Particularly, due to the lack of transparency,China's official statistics are often questionable. The officiallyannounced spectacular improvement in the thermal efficiency ofcoal electricity generation is no exception because there is noindependent outside auditing of those data. This article willexamine whether the Chinese government's proclaimed efficiencygains are real, and, if they are, how they were achieved and howmuch further China can continue its progress.

In order to gain better insights into China's efficiency gain incoal-fired power, we collected data on Chinese coal-fired powerplants from a variety of sources and decompose the efficiency gainto several key contributing factors that are relatively more trans-parent and easier to verify. We also analyze relevant regulatorypolicies to identify the causes of stagnation in the United States.The organization of the paper is as follows. Section 2 introducesdata and methods. Section 3 decomposes China's improvement inthe 10th and 11th Five-Year Plans to quantify the impacts ofseveral major factors. Section 4 analyzes the situation in theUnited States. Section 5 examines the impacts on CO2 emissions.Brief conclusion and discussion are given in Section 6.

2. Data and methodology

In China's official statistics, the net thermal efficiency of coal-fired power plants is expressed in grams of coal equivalent perkW h of electricity, or gce/kW h (Fig. 1). This article will use theunit in the analysis with occasional reference to thermal efficien-cies in percentage terms.

Four major factors are quantified for their impacts on thechange of average thermal efficiencies of the coal-fired powerfleet to supply one kW h of electricity, including the shuttingdown of small coal-fired power units, the installation of large coal-fired power units, the installation of flue gas desulfurization (FGD)systems, and in-plant electricity consumption. In addition, thisarticle will also discuss the potential impacts of electricity dispatchpatterns, mainly focusing on the 10th and 11th Five-Year Plans.

The above factors are examined for the two five-year periods. Themethod on how to determine the contribution of each factor to theoverall thermal efficiency improvement is given in the Appendix.

Data for China's coal-fired power plants come from officialstatistics, mainly including coal-fired power capacity (ChinaElectricity Council, 2006–2011; U.S. Energy InformationAdministration, 2011b), average thermal efficiency and in-plantelectricity consumption (China Electricity Council, 2001–2010,2011), small coal-fired power plants that are shut down (ChinaElectricity Council, 2006–2011, 2011; Changce Thinktank, 2009)and the installation of FGD systems in coal-fired power plants(Ministry of Environmental Protection, 2011). We collect verydetailed data on each individual FGD system (2116 facilities,576,500 MW) in coal-fired power plants together with informationabout associated coal power units (Ministry of EnvironmentalProtection, 2011), and on each small power generator that wasshut down in the 11th Five-Year Plan except from January toAugust 2009 (over 2200 generators if excluding small dieselgenerators, 55,630 MW) (NDRC, 2009–2011). Though they are alsoofficial statistical data, the very detailed information allowsunusual verification opportunities for outsiders. Accordingly, theyshould have significantly higher credibility than the opaque dataon thermal efficiencies. As influential factors, they are used in thispaper to assess to what extent the reported improvement inthermal efficiency could be accountable and real.

This article divides the coal-fired power capacity into the twocategories of small and large power plants. The official definitionof small power plants is mainly based on the unit capacities in MWand the bar was elevated over the years to make more units fallinto the to-be-phased-out category. In a regulation in 1999, theState Council defined small thermal power plants as those withunit capacities no greater than 50 MW and exceptions could bemade for co-generation plants and non-coal power plants (StateEconomic and Trade Commission, 1999). Later on the category ofsmall coal-fired power plants was expanded to cover those powerunits with (i) unit capacities no greater than 50 MW, (ii) unitcapacities no greater than 100 MW and having been in operationfor more than 20 years, (iii) unit capacities no greater than200 MW and have reached the designed lifetime, (iv) coal con-sumption per kW h of electricity 10% higher than the provincialaverage or 15% higher than the national average in 2005, (v) powerunits not achieving pollutant emission standards (State Council,2007b).

During the 9th Five-Year Plan (1996–2000), the State PlanningCommission announced that it would no longer approve any newconstruction of small thermal units (Xue et al., 2003). In 1999, theState Council declared that it would start to close down smallthermal power plants (State Economic and Trade Commission,1999). In early years, the implementation was not entirely success-ful. In the 10th Five-Year Plan, China planned to shut down14,200 MW of small thermal power plants, but only managed tophase out 8300 MW (Changce Thinktank, 2009). Since then, theChinese government has strengthened its enforcement. The 11thFive-Year Plan originally planned to shut down 50,000 MW smallthermal plants and succeeded in closing down 73,800 MW (ChinaElectricity Council, 2011). A notable fact is that China continues toinstall new small coal-fired power units. The total coal-fired powercapacity with unit scales smaller than 100 MW actually increasedfrom 69,100 MW in 2000 to 108,100 MW in 2005 and 140,100 MWin 2010 (China Electricity Council, 2002–2011). Although somesmall thermal power units might be newly added to help releaselocal electricity shortage and the technology was not necessarilydifferent from the shut-down ones, many were for the co-generation of heat and power with much higher thermal efficien-cies or the utilization of non-coal fuels such as waste heat,biomass, and municipal solid waste (China Electricity Council,

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Fig. 2. Four major technical changes in China's coal-fired power plants (left axis)and the total coal-fired power capacity (right axis) (“the share of closed small unitsin 2000 capacity” refers to the cumulative share of closed small coal-fired powerunits since 2001 relative to the total capacity (o300 MW) in 2000) (ChinaElectricity Council, 2001–2010, 2006–2011; Ministry of Environmental Protection,2011).

Y. Xu et al. / Energy Policy 60 (2013) 356–363358

2011). In 2010, coal consumption per kW h of electricity was363 gce/kW h for the total 163 coal-fired power units in thedataset ranging from 6 MW to 100 MW, much higher than the483 gce/kW h for those shut-down in 2007 (SERC and NDRC,2008; China Electricity Council, 2011). Accordingly, the newlyadded small coal-fired power units should be more efficient thanthose old ones to help enhance the overall thermal efficiency.However, the dataset is too limited with only 4640 MW of powerunits between 6 MW and 100 MW to justifiably represent theentire capacity of newly added small power units.

Available data to the authors divide China's coal-fired powerunits into four categories: greater than or equal to (≥) 300 MW,between 200 and 300 MW, between 100 and 200 MW, and smallerthan 100 MW (China Electricity Council, 2002–2011). In 2010, thefour categories covered 67.1%, 6.7%, 6.4% and 19.8% of China's coal-fired power capacity, respectively (China Electricity Council, 2002–2011). A detailed dataset available to the authors reports that55,630 MW of power units shut down in the 11th Five-Year Planhad 1.1%, 9.3%, 33.5% and 56.1% falling into the above fourcategories, respectively (NDRC, 2009–2011). The shut-down powerunits concentrated in the latter two categories and the secondcategory was also responsible for a sizable share. Because detaileddata on the shut-down power units are missing for the 10th Five-Year Plan and from January to August 2009, the categorization isnot feasible for the two periods. However, only one shut-downpower unit was at 300 MW to allow the assumption that all shut-down power units were smaller than 300 MW. Accordingly. thisarticle defines large coal-fired power units as those in the firstcategory (≥300 MW) and small coal-fired power units as those inthe latter three categories (o300 MW).

The U.S. data are rather detailed, comprehensive, and publiclyavailable. We retrieved the annual net power generation and fuelconsumption data from the U.S. Energy Information Administra-tion's EIA923 database (U.S. Energy Information Administration,2011a). We include coal-fired power plants in the electric utilitysector and the combined heat and power plants in the industrialsector. We also use data from the EIA860 database (U.S. EnergyInformation Administration, 2011a).

3. Decomposition of the thermal efficiency improvementin China

China's official data report that its average coal-fired thermalefficiency has improved from 392 gce/kW h in 2000 to 370 gce/kW h in 2005 and 333 gce/kW h in 2010 (Fig. 1). The improvementwas 22 gce/kW h in the 10th Five-Year Plan and 37 gce/kW h inthe 11th.

In the decade, four prominent engineering measures in Chinahave affected the average thermal efficiency of its coal-fired powerplants, including (1) installing large coal-fired power units(“Shangda”), (2) shutting down inefficient small coal-fired powerunits (“Yaxiao”), (3) reducing in-plant electricity consumption, and(4) the wide deployment of FGD systems. The first three factorstend to enhance thermal efficiencies, while the last works theother way. Although FGD systems substantially reduce SO2 emis-sions from coal-fired power plants, the associated energy penaltyincreases energy consumption in power plants to lower thermalefficiencies. In addition to the aforementioned factors, the onsitemanagement of individual coal-fired power plants is also criticalfor thermal efficiencies. Given an electric power system, differentdispatch patterns will correspond to different overall thermalefficiency.

The mix of China's coal-fired power units experienced adramatic change in the past decade. In 2000, only 38.9% of coal-fired power units were equal to or greater than 300 MW

(≥300 MW), or large units. The ratio increased to 45.5% in 2005and 67.1% in 2010 (Fig. 2), indicating that from this perspective the11th Five-Year Plan achieved much more than the 10th. A greatershare of large coal-fired power units tends to enhance the overallthermal efficiency. In 2010, for all large units, the average thermalefficiency was 322 gce/kW h (China Electricity Council, 2011). Dueto the lack of more detailed data, this efficiency level is assumed torepresent those in previous years. The closure of small andinefficient coal-fired power units is another significant technicalmeasure. The total decommissioned capacity was 8600 MW in the10th Five-Year Plan (Changce Thinktank, 2009) and 73,800 MW inthe 11th Five-Year Plan (China Electricity Council, 2011). The onlyavailable data to the authors on their average thermal efficiencyand age are for 2007 with 14,400-MW small coal-fired power unitsshut down (SERC and NDRC, 2008). The average age of retiredcapacities was 27 years and their average net thermal efficiencywas 483 gce/kW h (SERC and NDRC, 2008). Although some smallcoal-fired power units might have been shut down just after a fewyears in service, such cases should be rare considering the oldaverage age. In 2000, 145,200 MW of coal-fired power capacityhad the unit scales smaller than 300 MW. At the end of 2010,about 57% of them had been shut down (Fig. 2).

Thanks to the additional capacity of large coal-fired powerunits, the average thermal efficiency was improved by 14.6 gce/kW h in the 10th Five-Year Plan and 20.8 gce/kW h in the 11th(Fig. 3). As a result of China's progress in enhancing the overallthermal efficiency, the gap with that of large coal-fired powerunits is narrower and a further increase of their share will havesmaller impacts than before. China may further increase the shareof large units, but their positive impacts on the average thermalefficiency are diminishing. The closure of small coal-fired powerunits improved the efficiency by 1.7 gce/kW h in the 10th Five-YearPlan and 11.2 gce/kW h in the 11th (Fig. 3). On the one hand,because the overall thermal efficiency improved rapidly over thepast decade, the efficiency gap with small coal-fired power unitswidened to make their closure more significant. On the otherhand, since China's total coal-fired power capacity increasedgreatly in the past decade, the impact of closing one small coal-fired power unit was gradually attenuated. With fewer old andinefficient small coal-fired power plants left and their share intotal coal-fired power capacity shrinking, it is increasingly difficultto raise the average efficiency through shutting down small coal-

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fired power plants. The structural change of coal-fired powercapacity also reduced the proportion of electricity consumed inpower plants. In 2010, the average rate of in-plant electricityconsumption was 5.7% for 1053 large coal-fired power unitsand 8.3% for 613 small units (China Electricity Council, 2011).If assuming the rates remain constant over the decade, the structuralchange of coal-fired power units reduced the fleet average in-plantelectricity consumption proportion by 0.2% and 0.6% in the 10thand 11th Five-Year Plans, respectively, to improve average thermalefficiencies by 0.8 gce/kW h and 2.1 gce/kW h.

China's fossil-fuel-fired power capacity, dominated by coal,grew from 238,000 MW in 2000 to 391,000 MW in 2005 and707,000 MW in 2010 (China Electricity Council, 2006–2011; U.S.Energy Information Administration, 2011b). The rapidly rising coalconsumption raised serious concerns on pollutants emissions withSO2 as one of the most damaging species. National goals were setup to reduce its emissions by 10% in the 10th Five-Year Plan andagain by 10% in the 11th, but the final achievement was 27.8%increase and 14.3% reduction, respectively, (Xu, 2011b; Xu, 2013).In order to achieve the SO2 emission reduction goals, China widelydeployed FGD systems in coal-fired power plants especially in the11th Five-Year Plan (Xu et al., 2009). In 2010, the share of coal-firedpower capacity with FGD systems was increased to 80.1% from1.5% in 2000 and 9.1% in 2005 (Fig. 2). At the scale of China's FGDsystems, their operation consumes about 1.5% of the electricity inthose coal-fired power plants (Zhejiang Bureau of Quality andTechnical Supervision, 2007; Ministry of EnvironmentalProtection, 2011). Because the operation of China's FGD systemswas poor especially before 2007 and the overall SO2 removalefficiency has not reached 90% (Xu, 2011a), the estimation hereshould stand at the high end in the early years.

Despite the energy penalty of FGD systems, China still managedto reduce in-plant electricity consumption as a percentage of totalgeneration from 7.3% in 2000 to 6.8% in 2005 and 6.3% in 2010(Fig. 2). If excluding the impacts of FGD systems and structuralfactors, the reduction was 0.4% in the 10th Five-Year Plan and 1.0%in the 11th. Active electricity conservation should have contributedto the decline.

The deployment of FGD systems deteriorated the averagethermal efficiency by 0.5 gce/kW h and 4.1 gce/kW h in the twoFive-Year Plans, respectively. Less in-plant electricity consumption– excluding the energy penalty of FGD systems and the improve-ment due to structural change – improved the efficiency by1.8 gce/kW h in the 10th Five-Year Plan and 3.8 gce/kW h in the11th (Fig. 3). Even though the 11th Five-Year Plan made greaterprogress in in-plant electricity conservation, its positive impactswere offset by the fast and almost universal deployment of FGD

systems for coal-fired power units equal to or greater than100 MW (Ministry of Environmental Protection, 2011). The 11thFive-Year Plan had a goal to reduce water use per unit of industrialoutput by 30% and finally achieved 36.7% (National People'sCongress, 2011). A large portion of water use in coal-fired powerplants is for cooling. Because the major technological method iseither to replace once-through wet cooling with recycling coolingtowers or air cooling, significant reduction of water use willgenerally increase in-plant electricity consumption. In the 12thFive-Year Plan (2011–2015), China plans to further reduce theenvironmental impacts of coal electricity, particularly to reducewater use and the emissions of SO2, NOx and fine particles(Ministry of Environmental Protection, 2010; National People'sCongress, 2011). In-plant electricity consumption for environmen-tal purposes will likely rise further in the future.

The major engineering factors together could explain about 80%of reported efficiency improvement in the 10th Five-Year Plan andabout 85% in the 11th. The shutting down of small coal-firedpower plants and the deployment of large units (“Shangda Yaxiao“)were the largest contributing factors (Fig. 3).

Part of the unexplained portion could be a result of incompletedata. For all large coal-fired power units (≥300 MW), we assumethe efficiency to be 322 gce/kW h across all years, which is theaverage of all large units in 2010. It is equivalent to the efficiency ofcoal-fired power units with sizes ranging from 300 to 600 MW(China Electricity Council, 2011). This assumption may under-estimate the impacts of increasing the share of large units.In recent years, most new coal-fired power units are at 600 MWor greater (Ministry of Environmental Protection, 2011).

Besides the shutting down of small coal-fired power units andthe addition of large ones, the addition of new small power unitscould also affect the average thermal efficiency, generally on thepositive side in the past decade. As a rough estimation of itsimportance, assuming that their average thermal efficiency is thesame as those between 6 MW and 100 MW with available data in2010 (363 gce/kW h), this factor would improve the averagethermal efficiencies by 4.8 gce/kW h in the 10th Five-Year Planand 0.8 gce/kW h in the 11th.

Another explanation for the residue may be the renovation ofexisting coal-fired power units. A study suggests that most ofChina's old coal-fired power units could be renovated to reducecoal consumption by 10 gce/kW h on average (Zhu et al., 2003).If all coal-fired power units existing in 2000 had been renovated by2010 and achieved the 10 gce/kW h average reduction, the averagenet thermal efficiency in the two Five-Year Plans would haveimproved by a total of 2.2 gce/kW h.

Improved operation and management of individual coal powerplants may also increase thermal efficiencies. Load factors canaffect the efficiency of any given coal-fired power unit. For atypical 600-MW subcritical coal-fired power unit, if the load factordrops from 100% to 60%, the efficiency will decrease from 40.3% to37.3% (Liu et al., 2008). The only data available to the authors arefrom the coal-dominated Jiangsu province to estimate the impactsof this factor. In 2008 after adjusting for ambient temperature,load factors, and coal quality to more ideal situations, the averagethermal efficiency would be improved by 2.775.7 gce/kW hrelative to the actual levels to indicate that individual coal powerunits were operating close to their designed conditions andefficiencies (Jiangsu Economic and Trade Commission, 2008).Again, lack of data prevented us from making more accurateestimates especially tracing the trajectory, but our rough andindirect inferences indicate that improved operation and manage-ment of individual coal power plants might not be important forefficiency gains.

With coal-fired power units having a significant range of scalesand thermal efficiencies, different electricity generation dispatch

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patterns could have significant impacts on the overall averagethermal efficiency. In principle, more efficient coal-fired powerplants are supposed to operate continuously as base-load capa-cities, while less efficient units should serve mainly as peak-loadand back-up capacities. In Jiangsu province in 2010, the averagecapacity factor of large coal-fired power units (≥300 MW) wasmore than doubling of that of medium size units (100–300 MW)(SERC Nanjing Office, 2011). For China as a whole, the reform indispatch practices had accelerated during the 11th Five-Year Plan(State Council, 2007a). In the five provinces that adopted theexperimental dispatch plan, the Chinese government estimatedthat about 5 million tons of coal equivalent were saved (Wang,2010, December 27, 2010). In 2010, China generated 3415 TW h ofcoal electricity (China Electricity Council, 2006–2011). The energysaving for entire China as a result of the new dispatch planimproved the average thermal efficiency by about 1.5 gce/kW h.As indicated in the gap with the United States, China has notrealized much potential in this optimization approach to indicatethe future direction for improvement.

4. A comparison with U.S. coal-fired power sector

A comparison between the developments in China's and the U.S.coal-fired power sectors can provide useful insights into theirgeneral policy directions. Within one decade, China has not onlycaught up with the U.S. efficiency level, but indeed very likely hassurpassed it. Contrary to the rapidly changing Chinese coal-firedfleet, the U.S. coal-fired fleet is extremely static. During the pastthree decades, the U.S. coal-fired power sector added very fewnew capacities and retired very few. The vast majority of the U.S.coal-fired fleet is over 25 years old (U.S. Energy InformationAdministration, 2011a). Because of its old age, the U.S. coal-firedpower plants were mostly designed with technologies that areoutdated by today's standards.

Many researchers have examined the phenomena of technologyfreezing and deterred retirement in the U.S. coal-fired power sectorand traced the cause to the New Source Performance Standards (NSPS)established by the Clean Air Act Amendment of 1970 (Nelson et al.,1993; Stanton, 1993; Levinson, 1999; Weeks, 1999; Stavins, 2006). TheNSPS places the burdens of cleaning up air pollution entirely on newsources, while exempted the then-existing power plants (“oldsources”) from the standards. There are several rationales forvintage-differentiated regulations. First, retrofitting pollution-controldevices on existing power plants is usually more costly than includingthem in the original designs of new facilities. It is therefore arguablyunfair to subject both new and existing sources to the same standard.Second, lawmakers (mistakenly) believed that old sources would soonbe retired and naturally phase out the pollution. Third, in the UnitedStates, lawmakers are elected from local districts and therefore wouldoppose regulations that impose cost burdens to local business andpossibly induce firms to close business in their constituencies. What isgood for the nation's environment may be bad for the local economy.It is politically more feasible to regulate new sources, which are not-yet-existent, than existing sources, which are currently contributing tolocal employment and tax revenue.

As it turns out, the NSPS endowed those old coal-fired powerplants with a valuable asset—the privilege to emit pollutants, andtherefore deters capital turnover. The legal and political systems inthe United States have prevented environmental regulators frompursuing one of the most cost-effective ways of pollution reduc-tion—phasing out the dirtiest/least efficient facilities. The UnitedStates has probably the world's most detailed and transparentinformation on its power plants. It is very easy to identify whichplants are the dirtiest and the least efficient. U.S. regulators,however, lack legal authorization to regulate the dirtiest polluters.

Although U.S. fleet of coal-fired power plants is technologicallyoutdated, their operations and dispatch are likely more efficientthan their Chinese counterparts (Fig. 4). The electricity marketrestructuring in the 1990s established several regional wholesaleelectricity markets in the United States (Joskow, 2005). In thesemarkets, power generators compete in price for market access.Even in the states with conventionally-regulated vertically-inte-grated utilities, utilities still have incentives to optimize theoperation and dispatch in order to minimize costs. Unlike China,the U.S. power dispatch is based on market competition ratherthan administrative planning. As a result, the United States per-forms better in the operation and dispatch of its existing coal-firedpower fleet than China. Inefficient small coal-fired power plantstend to have significantly lower capacity factors than moreefficient large ones (Fig. 4).

5. Implications for CO2 emissions from China's coal-firedpower plants

The significant efficiency improvement should have avoidedmuch CO2 emissions from coal-fired power plants in China. In theconversion from thermal efficiency to CO2 emissions per kW h ofcoal electricity, because no credible data of coal quality areavailable to the authors at the level of coal-fired power plants,this paper assumes average mixed-coal from Shanxi province isburned (LHV: 23.0 MJ/kg, Carbon content: 59.5%, Sulfur content:1.1% (Liu et al., 1998)). Shanxi province produced about one fifth ofChina's raw coal in 2010, and if including the neighboring InnerMongolia and Shaanxi province, the share was over half (NationalBureau of Statistics, 2009–2011). This assumption fails to accountfor the significant variance of air quality across power plants andover the years. Accordingly, the calculated CO2 emissions per kW hof coal electricity and the avoided emissions due to efficiencyimprovement in China should be read mainly as a reference. Moredetailed data are necessary to reach more accurate estimation.

If squeezing out the unaccounted portion with the four majorengineering factors (20% in the 10th Five-Year Plan and 15% in the11th), its CO2 emissions per kW h of coal electricity would have beenreduced by 5% and 9%, respectively, in the two Five-Year Plans.Compared with the scenario of no change, China would have avoidedabout 500 million tons of CO2 in 2010 in its coal-fired power sector.

In addition to the CO2 emissions associated with the energypenalty, FGD systems also added CO2 emissions through chemicalreactions between SO2 and the absorption reagent limestone (CaCO3).For every molecule of SO2 avoided, there will be one molecule of CO2

Y. Xu et al. / Energy Policy 60 (2013) 356–363 361

released (SO2 þ CaCO3 þ 1=2O2-CaSO4 þ CO2). If not countingCO2 emissions in the process of mining and transporting limestone,the removal of one ton SO2 will emit 0.69 t CO2 from the chemicalreaction. Assumptions to calculate the relevant annual CO2 emissionsinclude: average mixed-coal from Shanxi province is burned (Liuet al., 1998); coal-fired power plants with FGD systems have the sameaverage thermal efficiency and capacity factor as the entire fleet; FGDsystems are operating normally; 10% sulfur is retained in ash whileburning (Zhao et al., 2008) and the SO2 removal efficiency is 90%.In 2010, total CO2 emissions from the chemical reactions were 14.2million tons and energy penalty of FGD systems was responsible foremitting about 38.8 million tons of CO2.

6. Conclusion and discussion

Official data report that China's average thermal efficiency of coalelectricity has surpassed that of the United States. Our analysis showsthat overall about 80% of the claimed efficiency improvement in the10th Five-Year Plan (2001–2005) and 85% in the 11th (2006–2010)could be quantitatively explained with major engineering factors thatcould be more feasibly verified. The shutting down of small, inefficientpower plants and the addition of large, efficient ones were the mostimportant measures, responsible for 8% and 66% of the improvementin the 10th Five-Year Plan and 30% and 56% in the 11th, respectively.The corresponding structural change reduced the proportion of in-plant electricity consumption to account for 4% and 6% of theefficiency upgrading in the two Five-Year Plans, respectively. Althoughin-plant electricity saving also improved thermal efficiencies, theenergy penalty of flue gas desulfurization (FGD) facilities offset muchof it. We conclude that the reported progress in the official data waslargely credible. Furthermore, our analyses suggest that China isquickly exhausting its low-hanging fruits – such as shutting downinefficient small plants, building large new ones, in-plant energyconservation – in further enhancing thermal efficiencies in coal-firedpower sector. Further reduction will be increasingly difficult. Inaddition, increasing installation of pollution control devices willinevitably come with energy penalty. China's air quality still signifi-cantly lags behind that of the United States and fall short of healthylevels. With its very high density of coal-fired emission sources, Chinain fact would need much more stringent air emission standards thanthose in the United States only to achieve a similar ambient air quality.We expect the efficiency improvement in China's coal-fired sector willlevel off in the coming years and possibly reverse its directioneventually due to strengthened emission control. However, in thediminished space for further improvement in the ongoing 12th Five-Year Plan (2011–2015), better dispatch patterns become more impor-tant, which would allow more efficient coal-fired power units to havehigher capacity factors.

Our comparison suggest the both China and the United Stateshave much to learn from each other. The Chinese experiencesprovide an inspiring example of how government can acceleratecapital turnover and improve energy efficiency. The United Statescould reduce significant amount of coal consumption and CO2

emission through capital turnover if the misplaced incentives inthe Clean Air Act are removed. On the other hand, electricitygeneration in the United States is more efficiently dispatched thanin China. If the ongoing reform on electricity dispatch could makesignificant progress, China would further enhance the thermalefficiency and cut CO2 emissions with its current coal power fleet.

Acknowledgements

The authors would like to thank Yongqin Chen, Rob Jackson andtwo anonymous reviewers for valuable comments. Funding comes

from the National Basic Research Program of China (2012CB955803),the Geographical Modeling and Geocomputation Program under theFocused Investment Scheme and a direct grant (C001-2021063) fromthe Chinese University of Hong Kong.

Appendix

The average thermal efficiency of the entire coal-fired powerfleet in period 0 to supply one kW h of electricity (ηn0, in grams ofcoal equivalent per kW h) could be written as:

ηn0 ¼Coal consumption0

Electricity supply0¼ Coal consumption0

Electricity generation0

� 11−k0

¼ η0 �1

1−k0ð1Þ

η0 is the average thermal efficiency to generate one kW h ofelectricity without considering in-plant electricity consumption.k0 accounts for the portion of electricity that is consumed in coal-fired power plants.

This article employs a method to have a complete decomposi-tion of the impacts for the two general factors, η0 and k0. It dividesthe residual term evenly between the two (Sun, 1998). For thechange of ηn in period 1 from period 0 (ηn1−η

n

0), the contribution ofη's change is:

ðη1−η0Þ �1

1−k0þ 12� ðη1−η0Þ �

11−k1

−1

1−k0

� �

¼ 12� ðη1−η0Þ �

11−k1

þ 11−k0

� �ð2Þ

The impact of in-plant electricity consumption on the averagethermal efficiency of electricity supply is

η0 �1

1−k1−

11−k0

� �þ 1

2� ðη1−η0Þ �

11−k1

−1

1−k0

� �

¼ 12� ðη1 þ η0Þ �

11−k1

−1

1−k0

� �ð3Þ

Major factors are responsible for changing η include theshutting down of small coal-fired power units, the addition oflarge power units, the addition of small but more efficient powerunits, and optimized dispatch.

Because large coal-fired power units generally have higherthermal efficiencies, its higher share in the coal-fired power fleetwill raise the average thermal efficiency. This article defines largecoal-fired power units as those in the first category (≥300 MW).Because in the 10th and 11th Five-Year Plans, only one 300-MWunit was shut down in the available data, this article assumes thatall initially existing large units will remain operational at the end(NDRC, 2009–2011). Then the newly added capacity of large coal-fired power units is:AClarge1 ¼ Clarge1−Clarge0. If the additional largecoal-fired power units (efficiency:ηnlarge grams of coal equivalentper kW h) are used to replace a coal-fired power unit with theaverage thermal efficiency in period 0 (efficiency:ηn0 grams of coalequivalent per kW h), it will save ηn0−η

n

large grams of coal equivalentof energy input to supply one kW h of electricity. For theadditional capacity of large coal-fired power plants AClarge1, thetotal energy saving would be ðηn0−ηnlargeÞ � AClarge1 � T large1. T large1 isthe average number of hours large coal-fired power plants operatein period 1, reflecting the capacity factor. Because capacity factorsare almost equal across China's coal-fired power plants withdifferent thermal efficiencies (Fig. 4), we assume that large andsmall coal-fired power units generate electricity for roughly asame amount of hours in a year. Then the average thermal

Y. Xu et al. / Energy Policy 60 (2013) 356–363362

efficiency η1 will increase by

ðηn0−ηnlargeÞ �AClarge1

C1¼ ðηn0−ηnlargeÞ �

Clarge1−Clarge0

C1ð4Þ

Similarly, the addition of small but more efficient power unitsCsa will also help push up the average thermal efficiency η1 by

ðηn0−ηnsaÞ �Csa1

C1ð5Þ

If the shut-down small coal-fired power plants in period 1werestill available, more energy would be consumed to generate asame amount of electricity: ðηnsd−ηn0Þ � Csd1 � Tsd1. Then the shut-ting down of small coal-fired plants in period 1 increases averagethermal efficiency by

ðηnsd−ηn0Þ �Csd1

C1ð6Þ

The structural change of coal-fired power capacity, particularlythe composition of large and small power units, could also affectthe proportion of in-plant electricity consumption, or k. Theproportion only due to structural composition is:

k′¼ klarge �Clarge

Cþ ksmall �

Csmall

C¼ klarge �

Clarge

Cþ ksmall � 1−

Clarge

C

� �

¼ ksmall þ ðklarge−ksmallÞ �Clarge

C

Then the impact of a structural change on the proportion of in-plant electricity consumption is k′1−k′0 ¼ ðklarge−ksmallÞ �ððClarge1=C1Þ−ðClarge0=C0ÞÞ and causes the average thermal efficiencyto change by

12� ðη1 þ η0Þ �

11−k1

−1

1−k0

� �� k′1−k′0

k1−k0¼ 1

2� ðη1 þ η0Þ

� 1ð1−k1Þ � ð1−k0Þ

� ðk1 ′−k0′Þ ð7Þ

The impact estimation above of structural factors has implicitlytaken it into consideration because ηn instead of η was used. Inorder to avoid double-counting, it will be deducted from thecontribution due to the following two factors.

Other factors affecting in-plant electricity consumption causesthe average thermal efficiency to change by 1=2� ðη1 þ η0Þ�ðð1=1−k1Þ−ð1=1−k0ÞÞ � ð1−ðk′1−k′0=k1−k0ÞÞ. Our analysis considertwo major ones: in-plant electricity saving and electricity con-sumption in FGD systems. If in period 1, CFGD1 of coal-fired powercapacity installs FGD systems and consumes m percentage pointsof electricity generated in those coal-fired power plants, the in-plant electricity consumption rate (k1) will increase byCFGD1 � TFGD1 �m=C1 � T1. Again assuming that all coal-firedpower units have a same capacity factor (TFGD1 ¼ T1), then theincrease will be: m� CFGD1=C1. Correspondingly, other factors leadthe in-plant electricity consumption to change byðk1−k0Þ−ðk′1−k′1Þ− m� CFGD1=C1. The overall impacts of in-plantelectricity consumption change will be split into three parts. Thedeployment of FGD systems has an impact on the average thermalefficiency (ηn1):

12� ðη1 þ η0Þ �

11−k1

−1

1−k0

� ��m� CFGD1=C1

k1−k0¼ 1

2� ðη1 þ η0Þ

� 1ð1−k1Þ � ð1−k0Þ

�m� CFGD1

C1ð8Þ

And electricity saving's impact is:

12� ðη1 þ η0Þ �

1ð1−k1Þ � ð1−k0Þ

� ðk1−k0Þ−ðk′1−k′0Þ−m� CFGD1

C1

� �ð9Þ

The coal-fired power capacities (C; Clarge; Csd; CFGD) are recal-culated from the annual data. The data for total coal-fired power,large coal-fired power units and FGD systems refer to the year end.

The capacities available all through a year could be calculated asthe average of the capacities at the ends of the concerned year andthe previous one. For small coal-fired power units that are shutdown (Csd), we assume that they are shut down in the middle ofthe year on average. For the five-year period, Csd is counted as thesum of total capacity shut down in the first four years and half thecapacity shut down in the final year.

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