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CONTACT: Charlotte LeGates
PHONE: 202/326-9316
FAX: 202/326-9334
E-MAIL: clegates@ngsa.org
We have discovered an error in the description of the increase in electricity generation cost in our report. The statement in the text of the report that biomass will have a 66 percent higher cost than the conventional baseload generation it replaces is correct, but the description of the percentage increase in generation cost is not. The correct description of our results is that a 10 percent renewables mandate would increase the cost of baseload generation by 12%, and the cost of total generation by about 8%.
This problem was uncovered in discussions of our results with a staff member of Lawrence Berkeley Laboratory, who was reviewing our study for the Department of Energy. We appreciate his pointing the problem out to us.
The correct calculation of the percentage increase is as follows. Based on our estimates that mandated renewables would be 18.5% of baseload generation and would cost 66% more than the generation replaced by renewables, the cost of baseload generation would increase by about 12%. We also estimate that baseload generation is about two-thirds of total generation. Therefore, unless there are large differences in the average cost of generation between baseload and total generation, this 12% increase in baseload generation translates into about an 8% increase in cost of total generation. Increases in delivered prices of electricity would be driven by changes in the cost of generation.
This clarification of our estimate of the cost impact of a renewables mandate does not alter our conclusion that mandates will significantly increase the price of electricity. We very much regret that we erred in describing the results, because we made every effort in our report to produce as conservative an estimate as possible. We used assumption from the Energy Information Administration about the costs of different generation technologies, and purposely used the least costly form of renewable energy - biomass - as the basis for our calculations. We also assumed, conservatively, that utilizing biomass on such a large scale would not cause any increase in the cost of biomass fuels. Different assumptions in these areas could have produced larger cost impacts.We stand firm in our conclusions that a renewables mandate will increase electricity costs and that a mandate is not necessary to achieve environmental goals is a deregulated industry. These conclusions stand on their own, independent of what specific estimate is given for costs. Throughout the writing of this report, we have tried to avoid having that message obscured in any way by controversy over specific cost estimates. Therefore, we wanted to point out the problem and correct our discussion of costs as quickly as possible.
Sincerely yours,
CHARLES RIVER ASSOCIATES INCORPORATED
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This page was originally placed July 1, 1997; last updated August 31, 1997