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On the Use of 'Adders' by Public Utility Commissions

John Tschirhart

Year: 1994
Volume: Volume15
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No1-7
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Abstract:
State public utility commissions are developing programs to reduce emissions from electric generation facilities. Programs call for minimizing the total cost of meeting future demands for power, where pollution damages are part of the total cost. In the process of choosing new generation sources, dirtier technologies are handicapped relative to cleaner technologies through the use of "adders" which are meant to measure damages. However, the damage costs are left at the planning stage; they are not included in electricity rates. This practice coupled with standard rate setting procedures may lead to inferior outcomes.



Incentive Effects of Environmental Adders in Electric Power Auctions

James B. Bushnell and Shmuel S. Oren

Year: 1994
Volume: Volume15
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No3-4
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Abstract:
We make a systematic examination of the options for incorporating environmental adders into auctions for non-utility generation. To date, adders have been a popular tool of some regulators for the planning process, but have not been embraced as a tool for operations. We argue that any rational implementation of adders into a competitive acquisition process will have at least an indirect effect on the operations of the resulting electric system. If adders are to be employed, regulators must therefore be comfortable enough with them to use them explicitly in both the operation and selection of generation resources.



Social Costing of Electricity in Maryland: Effects on Pollution, Investment, and Prices

Karen Palmer, Alan Krupnick, Hadi Dowlatabadi and Stuart Siegel

Year: 1995
Volume: Volume16
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol16-No1-1
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Abstract:
Many state public utility commissions (PUCs) have started to require electric utilities to consider environmental and other externalities in their planning processes. To date social costing has been applied exclusively to the evaluation of new sources of electricity. More comprehensive approaches to social costing would include requiring the utility to dispatch both new and existing generating units according to social cost, or requiring electricity consumers to pay a price for electricity that reflects its full social cost. Using estimates of external costs taken from the literature, this study contrasts the implications of these three different approaches for utility decision making, electricity prices, demand for electricity and other fuels and the net emissions of selected pollutants for a Maryland utility. We find that applying social costing at the investment stage only may lead to reduced investment in new resources, increased use of existing generation resources and higher emissions of key pollutants. Applying social costing to dispatch generally leads to increased levels of investment in clean technologies, lower levels of emissions and only moderate price increases. Also, social costing of electricity generally has a small impact on consumer demand for natural gas.



Environmental Externalities, Market Distortions and the Economics of Renewable Energy Technologies

Anthony D. Owen

Year: 2004
Volume: Volume 25
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol25-No3-7
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Abstract:
This paper reviews life cycle analyses of alternative energy technologies in terms of both their private and societal costs (that is, inclusive of externalities and net of taxes and subsidies). The economic viability of renewable energy technologies is shown to be heavily dependent upon the removal of market distortions. In other words, the removal of subsidies to fossil fuel-based technologies and the appropriate pricing of these fuels to reflect the environmental damage (local, regional, and global) created by their combustion are essential policy strategies for stimulating the development of renewable energy technologies in the stationary power sector. Policy options designed to internalize these externalities are briefly addressed.





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