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The Simple Economics of Industrial Cogeneration

Paul L. Joskow and Donald R. Jones

Year: 1983
Volume: Volume 4
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol4-No1-1
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Abstract:
Rising energy prices and dependence on insecure supplies of foreign petroleum have led energy consumers and energy policymakers to seek methods to use energy more efficiently. Industrial cogeneration has frequently been seen as such a method. By generating electricity in conjunction with the production of steam for industrial processes, less energy is used than when process steam and electricity are produced separately. Most recent U.S. energy policy studies have spoken favorably about the potential for cogeneration.' Some specific studies have indicated opportunities to replace central station electric power generation with industrial cogeneration capacity, and, in the process, to reduce domestic energy consumption substantially.



Cogeneration in the People's Republic of China

Qu Yu

Year: 1984
Volume: Volume 5
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol5-No2-9
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Abstract:
Cogeneration refers to the combined generation of heat and electric power. A common application is district heating. Cogeneration's ad-vantage stems from savings in investment and operating expenditures, and frequently also from greater reliability. It is geographically more restricted than large electricity networks since heat losses limit its distance from the generating station. Its optimal applications are therefore in load-intensive regions.



Utilities and Cogeneration: Some Regulatory Problems

Peter Zweifel and Konstantin Beck

Year: 1987
Volume: Volume 8
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No4-1
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Abstract:
Cogeneration-a technology which uses waste heat for electricity generation-has been known for over one hundred years. To be economically viable, it requires that excess electricity be fed into a grid for distribution. In the U.S., utilities have been legally obliged by PURPA legislation (Public Utility Regulation Practices Act) to put their grids at the disposal of electricity suppliers in industry. Nonetheless, cogeneration has recently accounted for no more than 14 percent of electricity used in industry (Anandalingam, 1985). Thus, PURPA legislation may not be enough to open markets to cogenerators.



Inefficiency of Avoided Cost Pricing of Cogenerated Power

Chi-Keung Woo

Year: 1988
Volume: Volume 9
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol9-No1-9
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Abstract:
Section 210 of the Public Utility Regulatory Act of 1978 requires that the rates paid to qualifying small power production facilities (QFs) should be "just and reasonable" and "shall not discriminate against qualifying cogenerators." However, the rates should not "exceed the incremental cost to the electric utility of the alternative electric energy." Armed with this federal regulation, the California Public Utilities Commission (CPUC) in July 1985 issued Decision No. 85-07-022 for the Phase I of the Order-Instituting-Rulemaking No. 2 (OIR-2) arguing that privately owned electric utilities should pay QF's the cost of owning and operating a power plant that can be displaced by QF production. The total avoided cost is the difference between total cost of utility generation before QF production and after QF production (see Appendix 1 of the CPUC decision).



On the Economics of Cogeneration: Pricing and Efficiency in Government Owned Utilities

Jae-Cheol Kim and Byong-Hun Ahn

Year: 1990
Volume: Volume 11
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol11-No1-8
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Abstract:
Cogeneration has been gaining increasing importance in the pro-vision of electric power. When a utility purchases electricity produced by independent cogenerators and resells it to consumers, the question of whether or not a certain payment schedule of purchased power is "just and reasonable" becomes an immediate concern to each party concerned--the utility, cogenerators and possibly regulatory agencies.The U.S. regulatory agencies generally have endorsed avoided cost pricing since the passage of the Public Utility Regulatory Policies Act (PURPA) in 1978, the rule requiring that the utility pay avoided costs--the difference between total costs incurred by the utility before and after cogenerators' production. In Korea, on the other hand, a different rule has been implemented in pricing hydroelectric power purchased by the Korea Electric Power Corporation (KEPCO), Korea's only electric utility company from Korea Water Resources Corporation, a multi-reservoir dam corporation. The latter is currently paid based on actual costs incurred by its individual hydroelectric plants.



The Efficient Design of Contracts To Purchase Cogenerated Powers

Edward C Hall and John E. Parsons

Year: 1990
Volume: Volume 11
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol11-No2-6
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Abstract:
This paper analyzes long-term power purchase contracts between an electric utility and a cogenerating facility and suggests ways to improve them. It discusses the best way to construct the contract payment structure in light of the given avoided cost structure; analyzing in detail the harmful incentives to low maintenance and how to avoid them. The paper concludes that the method it describes can be used to aid in the better design of contract provisions that will remedy the problem of incentives to low maintenance.



Economics of Electricity Self-Generation by Industrial Firms

Kenneth Rose and John F. McDonald

Year: 1991
Volume: Volume 12
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol12-No2-4
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Abstract:
This study develops, and econometrically tests, a model explaining the relative importance of several key economic and engineering factors that industrial firms consider when deciding whether to self-generate or cogenerate electricity. The model and empirical results (based on data from the chemical and paper industries) suggest that industrial self-generation is determined by the derived demand for electricity, price of purchased electricity, and marginal cost of self-generation. The buyback rate was found to be important only when certain economic and engineering conditions are met -- such as a relatively low marginal cost and/or a sufficiently high buyback rate. The evidence presented suggests that for most (inns the buyback rate plays no role in determining the quantity of electricity demanded or produced. The results indicate that policy actions related to industrial cogeneration should focus on the price of electricity and factors that affect the plant's marginal cost of producing electricity.





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