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<br />. <br /> <br />. <br /> <br />Both of the two scenarios will be based upon the assumptions <br /> <br />that the project under evaluation is built to produce peaking <br /> <br /> <br />power, thus requiring no reworking of Phase I project <br /> <br /> <br />formulations, and that the long-run marginal cost avoided is the <br />, <br /> <br />appropriate measure of project benefits, The first scenario will <br />be based upon the additional assumptions that the project's <br />output of peaking power will be needed to meet peak load demands <br /> <br />\ . <br />throughout the life of the project, and that long-run marglnal <br /> <br />cost is properly computed using the coal cycling alternative <br /> <br />employed by Tudor in the Interim Report, but incorporating the <br />refinements already suggested by Tudor and the interest rate <br />adjustment which I will discuss later in this letter, <br />--r k--1 [/,'1-12-- ~ ;20:S Mdt ;-;::/1 ? <br /> <br />The second scenario will be based upon the assumptions that <br />the project's output wil not be needed to meet peak load demands, <br />so that the project will be operated to produce base load power, <br />and that the long-run marginal cost is properly computed using <br />the costs of a coal-fired thermal plant producing base-load <br /> <br />power. This should require only minor additional computations <br /> <br /> <br />beyond those included in the Interim Report, inasmuch as the cost <br /> <br />data for coal-fired steam base-load plants has already been <br />assembled. <br /> <br />,/ <br /> <br />The data from the Interim Report can be used to illustrate <br /> <br />this decision analysis procedure.in the case of Alternative 2. <br /> <br />-7- <br />