Effects of Accounting Rules on Utility Choices of Energy Technologies in the United States

Spinrad, B.I. (1980). Effects of Accounting Rules on Utility Choices of Energy Technologies in the United States. IIASA Research Report. IIASA, Laxenburg, Austria: RR-80-027

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Abstract

Standard presentations of electricity costs from alternate systems are on the basis of capital charge rates that explicitly include effects of inflation, and recurring charges computed and levelized only over a short time horizon. These practices distort perception of what is the "cheapest" system. Specifically, they ignore the future economic growth of the systems beyond the levelizing period. This worth is nevertheless an important factor in total economy. The worth is greatest for systems with high capital costs and low recurring costs, and they are therefore severely penalized. When systems are compared using self-consistent accounting methods that incorporate future value over entire plant history, fossil-fueled electric power, with low capital costs and high recurrent costs, becomes much less attractive, and solar power, with high capital costs and low recurrent costs, becomes much more attractive, both relative to nuclear power which occupies an intermediate position in both respects.

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