Real Cost for Energy Sufficiency

Abstract

Managing energy costs in mid-size industrial and commercial firms
is a complex problem that often focuses on the direct costs of energy resources (electrical energy, gas and oil), to exclusion of other components
of the total life cycle-cost of owning and running a business operation.
Such a system life-cycle cost is affected over time by commodity and energy costs, energy availability and reliability, operation and maintenance
costs/investments and the costs of emissions. More recent publications
focus real cost models of energy management and take into account cost
control, risk reduction and efficiency improvement. Costs and investments associated with reliability and demand pricing are often oversimplified or not included in the costing models. This article explores
methods for extending the real options and cost models to include costs
of reliability, demand pricing, emissions pricing and commodity pricing
to allow the real cost models to be used as comprehensive methods
for energy efficiency management. Note ownership or financial costs
are typically included in the demand cost—which is often considered
a capital recovery factor. Costs of reliability of different microgrid configurations are discussed and numerical examples for microturbine and
cogeneration scenarios are presented.