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For both of these reasons, accurate evaluation of intermittent renewable electricity generating technologies and many DSM technologies requires the modeling of the utility system as a whole to compute the requiredrevenuesoftheutilitywithandwithouteachofthetechnologyoptions. Thiscanbeanextensive modeling process, and it has the drawback that one must pick a specific utility generation mix/load to achieve results that are essentially valid for only that specific situation. To summarize, the three alternatives presented here are as follows. 1. Compare on the basis of energy value only. 2. Pair an intermittent technology with a conventional technology to compare with a conventional technology that wiIl provide an equal service. 3. Evaluatetherequiredrevenuesofautilitywithandwithouteachofthetechnologyalternatives. The method used depends on the purpose of the analysis, the relative economic strength and value of each technology option, and the resources available to conduct the analysis. Itisdifficulttodiscusscapacityandenergyvalueswithoutmentioningavoidedcosts. In1978,PURPA waspassed. Thisactrequiresutilitiestopurchasepowerfromqualifyingfacilities(QFs)atapriceequal tothespecificutility'savoidedcostsforenergyandcapacity. AQFisacogenerationfacilityorasmall power production facility (producing electricity by means of biomass, waste, geothermal, or renewable wind, solar, or hydro).30 The Federal Energy Regulatory Commission (FERC) defines avoided costs as "the incremental cost to an electric utility of the electric energy or capacity or both which, but for the purchase from the qualifying facilities, such utility would generate itself or purchase from mother source." Avoided costs can be in the form of avoided capacity costs or avoided energy costs or both. Avoided capacity cost is the change in a utility's generation, transmission, and distribution capacity costs as a result of a portion of the utility's capacity being supplied by a QF. Avoided capacity costs are normally providedonadollarperkWbasis. Avoidedenergycostsarethoseenergycostsavoidedwhenpurchasing akWhfromaQF. WhentheoverallamountofenergypurchasedfromtheQFissmallcomparedtothe utility's total system output, avoided energy costs will mimic the utility's marginal energy costs. Avoided energycostsaretypicallyprovidedonaper-kWhbasis. Ratestructuresincorporatingavoidedcostswill bedifferentforspecificutilities. Somewillincorporatebothavoidedcapacityandavoidedenergycosts, while others might have one number that accounts for both. When performing an analysis in which avoided cost is a variable, the analyst should be aware that avoided cost calculation techniques will vary across utilities and states, and that the values for any given utility will change over time. For example, a utility may have a large base-load unit as its avoided plant on whichavoidedcostsarebased. However,2yearshornnow,theutilitymayreviseitscapacityexpansion plans so that the large base-load unit is no longer needed in the near future and, instead, plan to use a smallerpeakingunit. Thus,theavoidedcostsarechanged. Equally important is the fact that the PURPA rules governing electricity purchases at avoided costs offer room for discretion. For example, some utilities will negotiate specific contracts with cogenerators that 3 9 0 qualio under PURPA, QFs must have less than a 50% equity interest held by electric utilities, electric holding companies or subsidiaries, or combinations of the two. A small power production QF may not exceed SO M W (although this restriction has been temporarily lifted) and must use the fuels listed above for at least 75% of the total energy input.PDF Image | A Manual for the Economic Evaluation of Energy Efficiency and Renewable Energy Technologies
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