WHY A MISS IS NOT AS GOOD AS A MILE

The cost of electricity has three components:

The first is also known as the "fixed cost" of a plant, the other two are "variable costs."

For 24 hours a day, including the times when demand is low (2 a.m.), the utility provides power from the plants with the cheapest cost. In the US, this is nuclear or coal (which usually have roughly the same cost per kWh); in most other countries the nuclear "baseload" plants run cheaper.

The plants producing more expensive power are brought in only as necessary to satisfy the extra demand that the baseload plants cannot cover. Like the tourist who rents a Cadillac only after all the Chevvies and Oldsmobiles are gone, a utility leaves the oil-fired plants and gas-turbines till last. Almost all of the US electric spare capacity is now oil-fired. Gas-turbines (not unlike jet plane engines) at least have the virtue of quick start-up and shut-down to over peak demand.

Now let us look at the economics. Reliability costs money: as you triple your spare capacity, you triple the fixed costs (the varia-ble costs remain fairly constant, because the spare plants do not burn any fuel). The result is a linear increase with spare capacity.

Now all this looks at things from the point of view of the utility. If utilities were unregulated and competitive, they would have to cal-culate the optimum deal for the consumer to beat the competition.

The absence of a free market does not change the principles of the calculation. However, the cost of outages is far higher to the consumer than it is to the utility. The utility loses only the forfeited sales, but the consumer may lose anything from spoiled food in the refrigerator to the productivity of hundreds of workers. A 20- minute interruption of power costs a residential customer (Onta- rio Hydro figures) only 4 cents/kWh; but in large industries it averages $2.46/kWh (and varies about that average by a factor of 10); and for office buildings the loss is $6.73/kWh. When seen from the consumer's point of view, the minimum between miss and mile therefore moves somewhat toward the right, as in the figure GRAPH of consumer cost vs Planning Reserve Margin (taken from EPRI Report Costs and Benefits of over/undercapacity in electric system planning, RP1107, Oct. 1978), which finds the op-timum spare capacity at about 30% of total demand.

This tangible advantage of spare capacity to the consumer is why dedicated consumer advocates like Ralph Nader or Amory Lovins lobby so aggressively for new power plant construction . . .