Electric Power Costs in Texas in 1985 and 1990

Abstract

A major problem associated with energy conservation projects is how to estimate the financial savings associated with a reduction in energy consumption. Although many conservation projects can be implemented in a matter of months, the energy savings may extend over a period of years or decades. The decision to initiate a conservation project often hinges upon the favorable outcome of an "engineering economics" or "present worth" analysis which compares present costs and future incomes. For a conservation project, four sets of data are required for the economic analysis: project cost, rate of return or discount rate, the amount of energy saved, and the future price of energy.

Estimating the future price of electricity requires considerable effort since utilities in Texas will be using a mix of fuels. This paper analyzes the cost of generating electricity from nuclear power, out-of-state coal, in-state lignite, fuel oil, natural gas, geothermal, and solar power. These costs are then used to estimate system costs for an electric utility with various mixes of power plants. The electricity costs can then be used to determine the economic value of various conservation projects.