Rethinking contracts for purchasing power: The economic advantages of dispatchability
- Cornell Univ., Ithaca, NY (United States)
The purpose of this article is to evaluate and compare the incremental cost of purchased power from non-utility generators (NUG) versus utility built generation considering a variety of contracts for energy purchases. Four types of contracts are evaluated: (1) Flat Rate Produce and Pay, (2) On-Peak/Off-Peak, (3) Basic Dispatchable, and (4) Actual Cycle Energy Dispatch. An analysis conducted for a representative utility calculates the effects of NUG power purchases on a utility`s energy production costs and the cost of new debt issuances. Dispatchable energy contracts are shown to provide significant economic and operating advantages over Flat Rate and On-Peak/Off-Peak energy contracts. The analysis also shows that NUG purchases based on the actual costs of dispatch cost less than utility-built generation financed at the utility` s weighted average cost of capital. NUG contracts for a utility which already has significant risk exposure are shown to parallel a capital lease. Under these conditions, additional payment obligations to NAGS increase the cost of new debt issuances making an equity issuance for utility built capacity a more attractive option. 15 refs., 3 figs., 4 tabs.
- Sponsoring Organization:
- USDOE
- OSTI ID:
- 237585
- Journal Information:
- Energy Journal, Journal Name: Energy Journal Journal Issue: 4 Vol. 15; ISSN ENJODN; ISSN 0195-6574
- Country of Publication:
- United States
- Language:
- English
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