Wheeling, dealing and data

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External Costs for U.S. Power Plants-Some Quantitative Views 30

The chart at right demonstrates the potential disparity between estimates of external costs of emissions from existing power plants. Schilberg et al estimated external costs for existing gas, oil, and coal plants in three geographical regions: outside California, inside California but outside the South Coast Air Quality Management District (SCAQMD), and inside SCAQMD. The Schilberg estimates reflect the costs of "abatement" for emissions from an average existing plant, assuming it were located in the region specified (coal plants are, of course, practically nonexistent in the SCAQMD). Abatement cost methods typically use the cost of pollution controls imposed by regulatory decisions as a proxy for the true externality costs imposed by a pollutant. The external costs implied in New York's bidding program are also based on abatement cost analysis. New York's estimate of external costs is less than Schilberg's "outside California" estimate largely because New York chose to value CO2 at a relatively low level. Though most planners are not proposing to incorporate external costs in energy prices--a course many economists would favor--it is interesting to compare the external cost estimates at right with average U.S. electricity prices, which were 6.6 cents/kWh in 1988.

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Gas Oil

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Schilberg et al Outside Ca.

Gas Oil

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Schilberg et al Ca. Outside SCAQMD

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Schilberg et al Ca. Inside SCAQMD

Gas Oil

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Implied in NY State Bidding System

Source:l. Koomey,ComparativeAnalysis of Monetary Estimatesof External EnvironmentalCosts Associated with Combustionof FossilFuels,LawrenceBerkeleyLab., 1990

July 1990

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W H E E L I N G ,

Cumulative Fossil CO2 Emissions per Capita (1950-1986)

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As the chart to the right shows, North America was the largest cumulative emitter of CO2 in per-capita terms over a 26-year period. It was also the largest in absolute terms, having emitted 40 billion tons of carbon in this period, followed by Eastern Europe. In terms of emissions per year, however, Eastern Europe surpassed North America in the early 1980s.

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Source: F. Krause, W. Bach, J. Koomey, Energy Policy in the Greenhouse, Vol. L 1989

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Rate of Return

Incorporating Externalities: What the PUCs Are Doing The map above shows the various methods adopted by states to deal with externalities. Methods include qualitative treatment of environmental costs during the resource planning process; direct quantification of costs and impacts as part of integrated resource planning and/or as part of competitive resource acquisition; use of a percentage adder

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or subtractor which is applied to the capital cost of resources during the planning process; and authorizations of higher rates of return for demand-side management. Source: S.D. Cohen, J.H. Eto, C.A. Goldman, J. Beldock, G. CrandalL A Survey of State PUC Activities to Incorporate Environmental Externalities into Electric Utility Planning and Regulation, J_~wrenceBerkeley Laboratory, 1990

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clean a3ai firms, plant life exterksioo.s, remote resources, cxmsumer-instaUed resumes, anything small. Interests. demand-side advocates, gas utilities, politicians, lawyers, ~ firms, seers, actuaries, stress coumelol~

The Electricitv Journal

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Percent he growth in d e m a n d for electrical energy in the United States during the past decade averaged less than half that recorded over previous decades, resulting in more baseload generation than was needed to assure reliable service. Yet electricity demand continued to outstrip nonelectric energy demand in this period (Top) and still appears closely coupled to overall U.S. economic performance (Middle). Although electricity demand grew at a lower rate, new capadty commitments were extremely low. As a result, many industry experts foresee the need for substantial generating capadty to be added in many regions in the early 1990s.

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Electricity as a Percentage of U.S. Energy Use Source: Department of Energy

1950

1955

1960

1965

1970

1975

1980

1985

1990

Index(1973=100)

Growth of GNP and Energy Use

(Bottom).

Electricity GNP Non-Electric Energy

Source: Department of Energy

v ~

1973

1976

1979

1982

1985

198

Percent

National Cap.acity Margin Declining Source: NERC

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1969

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1988

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N e w U.S. Electric Generation In 1989, for the first time this century, new electric plant capacity additions from non-uKlity generators equaled capacity additions by regulated electric ulilities. Source: Utility Data Institute (UDI), 1989

Bidding Watch • Long Island Lighting's November 1989 solicitation for 150 MW has attracted 21 bids totaling 1,770 MW, with proposals ranging in size from 6.6 MW to 800 MW. The solicitation followed a June 13, 1989, order in which the PSC told Lilco to solicit 150 MW for service by January 1994--four years earlier than the company proposed to ask for 300 MW. • Niagara Mohawk Power has obtained 72 supply-side proposals totaling 7,605 MW, and 126 MW in demand-side management bids in response to its solicitation for 350 MW, according to a rough count. NiMo will compare the bids to extending the lives of two 135 MW coalfired units at its own Huntley Steam Station in Tonawanda, N.Y. • The Los Angeles Department of Water & Power has issued a 600 MW solicitation for deliveries beginning in 1996 through 2000. The solicitation includes requirements for earthquake survivabil,~ ity and environmental impacts.

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88 89 Year-on-Line

MW has drawn 94 proposals from 59 bidders totaling 14,665 MW. After accounting for 22 duplicate proposals, the net figure was 8,669 MW.

program that includes seven pilot projects. The results are being evaluated for issuance of a request for proposals that would reduce peak load by 50 MW.

• The Orlando (Fla.) Utilities Commission is preparing a request for proposals for 400 MW as a possible alternative to building a coal-fired baseload unit.

• Public Service Colorado also plans involvement in the world's first plant to convert landfill gas into diesel transportation fuel. The $14 million plant, to be built in Pueblo, Colorado, will be owned by Fuel Resources Development Co., a unit of Public Service.

Technology • Public Service Colorado is using flyovers with infrared cameras to pinpoint energy losses in 60 downtown Denver buildings. The effort is part of an accelerated demand-side management

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• CMS Energy has agreed to inject an additional $17 million into four projects owned by its partnership with Oxford Energy Co., which builds power plants that burn waste tires.

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International • Japan's Ministry of International Trade and Industry unveiled a plan to build 40 nuclear power plants in Japan over the next 20 years to almost double the country's reliance on nuclear power to 16.7% of total primary energy supplies.

• Several U.S. utilities are considering becoming involved as general and limited partners with a Maryland company in power and heating projects to be built in Poland, which is privatizing its utility system. North American Energy Corp. of Calverton, Md., is talking with the Polish government in connection with a jointventure project that would involve the installation of pollution-control equipment, construction of up to 500 MW of new capacity, and construction of a coal preparation plant. • As part of East Germany's plans to enter a free market system with West Germany, its power industry is gearing up for privatization after decades of state ownership and direct control.

• Sacramento Municipal Utility District's solicitation for 1000

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The Electricity Journal