Achieving the Economic Potential for Industrial Cogeneration in Ontario: A Financial Perspective on Electric Utility Policy

Steven G. Diener, Stephen R. Cain


This paper is intended to assess the impact of private versus public ownership regimes on the magnitude of achievable industrial cogeneration capacity. Estimates of technical and economical potential are presented for several industrial subsectors and heat demand categories, showing that nearly all of the technically feasible potential of 7600 MW is also economically efficient given a value of power of at least $(1991)0.04/kWh. Using financial data and investment criteria specific to the two forms of ownership, our project evaluation model points to a significantly larger quantum of financial (achievable) potential with public rather than private development of industrial cogeneration. At avoided costs and associated buyback rates of 4 and 5¢/kWh, the achievable cogeneration capacities are about 2400 and 7600 MW under public ownership and 132 MW and 3000 MW under private ownership. Ratepayer savings are significant: the full economic potential can be achieved through public ownership at a buyback rate of 5¢; under private ownership, a comparable capacity requires a 6¢ buyback rate, reflecting additional ratepayer costs of nearly $0.6 billion/year.

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