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Page 709
The steps are ranked in order of ascending CCE, with the
cheapest options plotted first, causing the curve to be
upward-sloping.
To decide whether a step is profitable (and how profitable), its
CCE is compared to the "price" of the avoided kilowatt-hour. Table
C.1 shows that "price" varies from different viewpoints. The
average 1989 price of electricity in buildings (line 1) is 7.5
cents/kWh, whereas industry (line 2) pays only 4.7 cents/kWh.
Because one cannot anticipate where a conserved kilowatt-hour will
ultimately be used, the societal price is taken to be an all-sector
average of 6.4 cents/kWh (line 3). One could then subtract the tax
(1.1 cents/kWh), but tax would also have to be subtracted from the
cost of conserved energy. However, both the competing utility and
the conservation industries pay taxes, and only the difference (if
any) in tax rates should be corrected for. To simplify, one will be
assumed to cancel the other.
Line 4 addresses the fact that the short-run marginal cost of
electricity may be lower than its average price. In some parts of
the United States there is still a glut of electric generating
capacity, so that the marginal cost of a kilowatt-hour is low. In
such areas, the "rock bottom" price of generating a kilowatt-hour
from coal and delivering it to the building meter is about 3.5
cents.
Line 5 addresses externalities, although they will not actually
be used now. Today, many jurisdictions require a theoretical
"environmental adder" of 1 to 3 cents/kWh; that is, they give
efficiency an advantage of 1 to 3 cents/kWh over supply during
resource planning. For example, New York has recently adopted a
point system for evaluating competing resources in which the most
environmentally disruptive resource (a new coal plant) under the
most unfavorable circumstances is given. This point system provides
an "environmental adder" of 1.4 cents/kWh. Desiring to be
conventional and conservative in its claims for the profitability
of efficiency investments,
TABLE C.1 "Prices" of Electricity at the Meter
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Price (cents/kWh)
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1. Residential price (seen by consumer)
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7.5
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2. Industrial price
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4.7
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3. All-sector average price
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6.4
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4. Marginal cost of operating a coal plant
and delivering 1 kWh to the meter
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3.5
|
|
5. Line 3 plus externality cost: 1 to 3
cents/kWh (New York has chosen 1.4 cents/kWh for the worst coal
plant)
|
7.4–9.4
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