Step 9 Evaluating Utility Supply Options

Given the fast developing deregulated energy industry environment, alternative sources or arrangements for purchasing fuel and power are integral to the evaluation of long-term cost reduction opportunities in that they can significantly lower operating costs. Therefore, as part of the study process, the project team should investigate various options available for providing fully reliable fuel and electric power services to the facility at the lowest possible price. This includes evaluation of natural gas delivery infrastructure to provide gas purchase or transportation purchase, as well as retail wheeling and utility bypass, if appropriate. It also includes negotiations with the local utility, as well as any other potential power sellers on the grid.

This process is integral to the evaluation of on-site electric power generation options. Accurate and objective evaluation of the economic performance of on-site generation system applications will be integral to any electric rate negotiations with the local utility or other power supplier or purchaser. Competitive energy rates will be offered almost exclusively on the basis of verifiable competitive options available to the facility. Complete development of on-site generation system project economics therefore will serve as a basis of electric rate negotiation process.

It is important to separate the supply functions of capacity and commodity in this process. The ability to withstand interruptions to gas or electricity supply will usually allow significant reductions in operating costs. With fuel supply, this is commonly accomplished through multiple fuel source operating capability. With power purchases, this is usually accomplished with the ability to shed loads, either through a demand controls strategy or on-site generation. On-site generation capacity can, therefore, allow for elimination of capacity costs associated with the purchase of power.

Interactive impacts of alternative fuel and power purchase options will also be considered. Just as a reduction in load brought about by another measure can lower the economic performance of a given measure under consideration, the reduction in fuel or power cost brought about by an alternative purchasing arrangement can lower the economic performance of a potential technology application. Therefore, savings analyses must be performed with a sensitivity toward the cost of energy with alternative fuel and power purchase options in place including long-term escalation (or de-escalation) rates.

Guide to Alternative Fuels

Guide to Alternative Fuels

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