kansas corporation commission
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KANSAS CORPORATION COMMISSION Externalities in Benefit Cost Tests
EXTERNALITIES: DRAWING THE LINES External to What? Changing Notions of Insult/Value Assessing Damages Assigning Costs
Adapted from Koomey and Krause, Lawrence Berkeley Laboratory, 1997
COSTS OF ENERGY
Exploration/EvaluationHarvestingProcessing/RefiningTransport/DistributionStorageConversion MarketingEnd Use
Land/Air/Water UsedEffluentsHuman HealthPhysical
TransformationsSocio-political
Influences (politics, employment)
MARKET SOCIETY
WATER
Source: USGS Circular 1268, March 2004
(LESS) WATER
Source: NOAA
AIR
Source: Brian McLean, U.S. EPA, "Experience with Cap-and-Trade Programs"
CLIMATE
Slide from Jon Anda, President of Environmental Markets Network
HEALTH Concerns
Asthma Stroke Heart Attack Lung Disease Mercury Poisoning (especially in utero) Insect-borne Disease (changing pathogen
vectors)
CDC, ALA, ACS, EPA, Harvard School of Public Health
IT’S NOT ZERO…
WHAT’S THE RIGHT COST?
DOING THE MATH
EC= EF x HR x VED
EC = Externality Cost in ¢/kWhEF = Emission Factor, in lbs/Btu of fuel
consumedHR = Heat Rate of power plant, in Btus/kWhVED = Value of Environmental Damage, in ¢/lb
Physical or Social Consequences of Insults Magnitudes of Consequences Temporal Distribution of Harm Spatial Distribution of Harm Coincidence of Risks and Benefits Scaling (linear or nonlinear) Resistance to Remedy Irreversibility Visibility of Harm
Holdren, John P., "Energy and Human Environment: The Generation and Definition of Environmental Problems," in Goodman, Kristoferson, Hollander: Academic Press.
CONSIDERATIONS
EFFICIENCY AS A RESOURCEEfficiency makes economic sense now, whether or not “externalities” are considered.
Cost of New Electricity Resources
Source: ACEEE 2008, EPRI 2006 & UCS 2008
0
1
2
3
4
5
6
7
8
9
EnergyEfficiency
Biomass PulverizedCoal
Nat. GasCombined
Cycle
Coal IGCC Wind Nuclear
Leve
lized
Cos
t of E
lect
ricity
(cen
ts/k
Wh)
w/o carbon w/ $20/ton carbon
EFFICIENCY AS A RESOURCE Efficiency AS “New” Generation
Verified, Permanent Reductions Performance Standards (1% +) Least Cost Resource
IMPLICATIONS FOR BENEFIT/COST Changes in Economy & Society Swift and
Dramatic Flexibility, Not Stasis, Makes Sense Total Resource Cost Test Preferable Ratepayer Impact Measure: Would new
generation withstand this test? Emphasis on Lower Bills
If we choose not to provide incentives for investor-owned utilities that, added to avoided costs, rival ROI for new generation, then we need to look closely at the following map:
Perverse Incentives
STATES WITH PUBLIC BENEFIT FUNDS
Nancy Jackson Executive Director jackson@climateandene
rgy.org (785) 331-8743 www.climateandenergy.o
rg
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