Closure of coal-fired power plants

Publication number: 2016-18
Authors: E. Buunk, B. Hof & B. Tieben
Commissioned by: Natuur & Milieu
Published by: SEO Amsterdam Economics
ISBN: 978-90-6733-807-3

In this report it has been assumed that the five remaining coal-fired plants in our country will stop production in 2020. The study calculates the sum of the social costs and benefits that can be attributed to the closure. The main effect is the reduction of CO2 emissions and emissions of other substances such as NOx and particulate matter. The prevented emissions represent a social benefit with a total value of €9.8 billion.

The closure also leads to additional costs. Energy consumers are negatively affected by the closure of the plants because it will lead to an increase in electricity price. On balance, the higher price represents a loss of consumer surplus for households and businesses equal to approximately €3.1 billion.

Producers pay a price as well. The owners of the closed coal-fired plants will miss out on future profits from the production of electricity. On the other hand, the production of the coal-fired plants will be substituted for in part by gas-fired plants, which consequently will make extra profits. This also applies to other producers that benefit from the higher price of electricity. On balance, energy producers will be confronted with a combined loss of €1.9 billion that can be attributed to the closure.

With regard to the €4.7 billion impact on welfare, effects whose value could not be calculated (memo items) should be taken into account as well. The costs of decommissioning the plants are probably the most important in this regard. The report concludes that all memo items combined are likely to have a relatively limited impact on the total balance.

Please also read the press release that Natuur & Milieu has published on the occasion of this report.

Category: 2016, Bert Tieben, Bert Hof