On cost-effective technical measures to avoid environmental damages of regional energy systems

Abstract

The production of heat and electricity can cause large environmental impacts and, hence, large costs for society. Those are costs that are seldom taken into consideration. An important question is how the future technical energy systems should be formed if environmental costs were considered as any other good or service, such as raw material, capital and labour. This study comprises cost-effective technical measures when monetary values of external effects are included in an energy system analysis. It is an analysis of how the present energy system can for society be cost-effectively reconstructed to be more sustainable. A regional energy system model has been developed to perform the study and it concentrates upon production of heat in single-family houses, multi-dwelling buildings, non-residential premises and district heating systems. The analysis adopts a business economic perspective, using present prices of energy carriers, and a more socio-economic perspective, in which external costs are included. The result of the analysis is the optimal mix of energy carriers as well as new and existing heating plants that minimizes the costs of satisfying a demand for heat. The results show that it is profitable to invest in new heating plants fuelled with woody biomass. Furthermore, the external costs arising with satisfying the demand for heat can decrease substantially, 60%, by carrying through with the investments that are cost-effective according to the institutional rules valid today. When monetary values of external costs are taken into consideration, this number is additional 5-percentage points lower. It is shown that if environmental costs are included it is more expensive to continue with business as usual than it is to reconstruct and run a more sustainable energy system. Copyright © 2002 John Wiley & Sons, Ltd.