[Gasification] DOE's demonstration gasification project history

[MMBTUPR at aol.com]

          from          Lewis L. Smith

In almost every political jurisdiction, the "avoided cost" which utilities 
and regulatory authorities claim is saved by replacing a petroleum fuel with a 
renewable source of energy, seriously and deliberately understates the true 
cost to the affected jurisdiction of using that same petroleum fuel. The 
difference represents "externalities" or "hidden costs", costs which are paid by the 
jurisdiction's economy but not by the utility or its customers. It may also 
include fuel costs which are passed through to customers via a fuel-adjustment 
costs. In this latter case, the item of cost is paid by the customer but not by 
the utility. In fact, almost everywhere the price of electricity benefits from 
this hidden subsidy.

For example, our local utility in Puerto Rico has just agreed on avoided 
costs of between eight and nine cents per kWh for a proposed wind farm.   However, 
I estimate that there are hidden costs of AT LEAST 5.7 cents, and that the 
TOTAL avoided cost of electricity to our economy [ "Puerto Rico, Inc." ] is   AT 
LEAST 18.7 cents, primarily because of pass throughs.

Similar considerations apply to biogas projects, whatever fossil-based type 
of energy they may be "backing out". So whether or not a particular biogas 
project is feasible, depends on which "measuring stick" one uses.   

Sometimes of course, one cannot incorporated all or any of the hidden costs 
in a utility's rate schedule, because of competitive, humanitarian and/or 
political reasons. In such cases, a subsidy to the renewable source of energy is 
certainly an alternative, but granting it in such cases does not mean that the 
biogas project is uneconomic.

Cordially. ###


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