"EPA/600-S7-81-157." "October 1981." Caption title. At head of title: Project Summary.

In a quick-look fashion, the economic tradeoffs of using purchased utility electricity as an alternative to on-site combustion of fossil fuels for industrial steam generation were examined in this study. Specifically, the impacts of marginal or incremental cost pricing of electricity and increasingly stringent industrial boiler emission controls were examined for a 44 MWt (150 x 10p6s Btu/hr heat input) industrial boiler. Data were compared to determine if electricity, despite its lower overall thermal efficiency, could be economically competitive with direct firing of fossil fuels in this size boiler. Marginal (incremental) costs are designed to reflect the full social costs of resources needed to deliver additional (incremental) electricity. In this study, the marginal cost pricing concept is extended to industrial steam generation. This study is neither a definitive analysis of marginal cost pricing techniques nor a comprehensive overview of the impacts of marginal cost pricing on industrial energy sources. Only a few of the many pertinent variables were considered in estimating marginal industrial costs, and a number of simplifying assumptions were made because of resource limitations. Several simplifications tended to reduce the hypothetical marginal cost of electricity while increasing the estimated marginal cost of on-site fossil fuel combustion. Nevertheless, the study results show that (for the two cases evaluated) electricity would not be competitive with direct firing of fossil fuels as an industrial boiler energy source if both electricity and fossil fuels were priced at marginal cost. These results are not applicable to all situations where selection of an industrial boiler energy source has to be made, but only for the cases described and for the assumptions made.