Cost of Energy Generation: Elements of Cost

In recent years the mere mention of the word, “power,” especially when uttered by a Government official or used in connection with the word, “water,” has been sufficient to send large groups of Americans into hysterics. As a result it has been difficult for any one to approach this subject calmly at a time when a calm approach is needed.

Modern civilization is founded on the utilization of power in a myriad of ways. Of the total energy used in the United States, that produced by water power has remained almost constant at between 3% and 4 % for fifty years. The energy used to generate electricity for public utilities in 1936 amounted to less than one-tenth of the total derived that year from mineral fuels and water power. Stated in its true perspective in this manner, the importance of power supply for public utilities appears comparatively small.

There is nothing in the situation with respect to power that cannot be rationalized. When reduced to its elements, the power question resolves itself into simple terms. This paper is concerned with elements of power cost, and the writer submits that these elements, in themselves, are not complicated. Papers will follow which will deal more specifically with individual items of cost.

It should be borne in mind-and many writers on the subject have not consistently done so-that each power development or project is a problem in itself, and that it is unsafe to generalize broadly on the power theme. “Sauce for the goose ” is not necessarily “ sauce for the gander” in the power field. That method of power generation which is most economical, and which, therefore, should yield the greatest social values in one area, may be the most costly in another. In any locality, changing conditions also may make the method that was most economical yesterday more costly tomorrow. These facts are self-evident to the Engineering Profession, but they have not always been so treated.