Least cost planning : should utilities invest in energy efficiency rather than new supplies?

Working paper

The essence of least cost planning is that in some circumstances it is more profitable for a utility to encourage its customers to use less electric power/water/gas than it is for the utility to sell a larger quantity of its product.

The two parameters that define the circumstances when this may occur are the price at which the utility can sell its service; and the cost of investing in new or additional plant to meet growing demand, as compared to the cost of conservation measures. Capital costs of new plant have increased very sharply over recent decades, while prices charged by utilities are normally regulated, and political pressures limit the extent to which they can be increased - especially if there is evidence that conservation could remove the need for such large increases. This unusual combination of circumstances has led to the unexpected situation of utilities investing on behalf of their customers in conservation.

Authors: Davison, A

• Publication status: Published
• Peer review status: Reviewed (other)
• Publisher: Oxford Institute for Energy Studies
• Series: OIES paper
• Publication date: 1991-01-01
• Edition: Publisher's version
• Paper number: EV6
• ISBN: 094806157X
• Language: English
• Keywords: OIES; competition; cost planning; energy efficiency; bidding; electricity; least cost planning; utilities; regulation; pricing