Investment planning in the energy sector

Abstract

Consequences of investment decisions in the energy sector are examined. Various interpretations have been offered to explain the break in historical energy consumption trends that began in 1974. Following an introductory section, Section II analyzes configurations of electricity demand and utility investment behavior that would lead to increasing costs and consequent effects on demand. Section III, Analytical Model of Electric Utility Investment, includes the basic equations for the model, application of the demand equation, the rate equation, and the projections for the coupling demand and rate equations. In Section IV, Some Sectoral Influences on Utility Demand and Investment, a disaggregated analysis of electricity demand in three areas--residential demand, fuel substitution in high-temperature industrial processes, and by-product power generation in industry is undertaken. These three were chosen because of: (1) their significant effects on electricity demand, (2) the noneconomic factors (so far as demand is concerned), such as curtailments in hookups to utility gas systems, that may influence demand in these areas, and (3) the likelihood that future technological trends may be substantially different from the historical trends in these areas (as in by-product power). This analysis still does not allow incorporation of non-economic factors into the electric utility model. Inmore » Section V the main results are summarized, and areas for future research are indicated. (MCW) « less

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