A least-cost planning strategy for the European Community

Panel: Panel 1. Policy, Programs and Program Evaluation

Author:
Anibal T. De Almeida, University of Coimbra, Portugal

Abstract

The paper analyses least-cost planning experiences in the USA to draw suitable conclusions for the European Community countries. A comprehensive variety of conservation programmes were developed by USA utilities, which coupled with innovative regulatory frameworks, are saving utilities and consumers billions of dollars. Due to its success, in most of USA least-cost planning is either compulsory or is under consideration. Traditionally European electric utilities have essentially invested in supply-side options, although normally the most cost-effective combination of those options is chosen, in order to meet the growing electricity demand in a reliable way.

However, in plenty of sitnations, the investment in high efficiency equipment to reduce electricity consumption is more cost-effective than investing in new power plants. A combination of inertia and market imperfwtions has prevented the most cost-effective solutions from being systematically implemented. Least-cost planning has not been implemented in the Community due the lack of a suitable regulatory framework. Therefore there is an urgent need to defme a regulatory framework which overcomes the traditional barriers to least-cost planning implementation. The european electric utilities face substantial challenges in the next decades. They will be faced with increased competition due to the Internal Energy Market (IEM) and probably stricter environmental regulations. The USA experience has shown that least-cost planning works well in a competitive environment and thus it seems compatible with the Internal Energy Market. Additionally least-cost planning appears as an essential strategy to contribute of the achievement of the energy objectives for 1995 of the European Community.