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and flue loses, and so on, must be considered. But in general, direct use of natural gas 

 has the greater thermodynamic efficiency. 



The Council, however, never has used thermodynamic efficiency as a planning 

 criterion. Our plans are based on economic efficiency, which is a much broader 

 concept that focuses on total costs rather than energy efficiency. In this broader 

 economic efficiency analysis, the advantage of direct use of natural gas is much less 

 clear than the thermodynamic comparison, and is highly dependent on specific housing 

 conditions. The Council has not taken a strong position to encourage particular fuel 

 choices in our past power plans. However, we thoroughly considered the issues of fuel 

 switching and fuel choice in developing our plans. 



The Council's concern for the long-term availabihty and price stability of natural 

 gas is at the root of our policy regarding fuel switching and fuel choice. We neither 

 encourage nor discourage particular fuel uses. We changed this policy slightly in the 

 1991 Power Plan. In response to falling natural gas prices, the role of gas for electricity 

 generation increased in the plan. This increased use caused us some concern for total 

 energy efficiency. As a result, we expressed a strong preference for "thermally 

 balanced" cogeneration. This is viewed as a high-efficiency resource, whereas 

 cogeneration that is primarily a large generating plant with insignificant thermal loads 

 would raise issues of total fuel efficiency. In recognition of the likelihood of growing 

 reliance on gas-fired generation the Council formed a natural gas policy group to 

 explore the issue of coordination between natural gas and electric industries. 



In the last few years, a number of agencies and associations, including the 

 Council, have studied the issues of fuel conversions and fuel choice. A study by the 

 Oregon Energy Conservation Board concluded that life-cycle costs were minimized 

 with the same efficiency measures for zonal electric space heating, forced-air gas and 

 forced-air electric. As result, Oregon adopted a single code for all homes regardless of 

 the energy source used for heating. In contrast, a study by the Washington State 

 Energy Office concluded that the lowest-cost option from the consumer's perspective 

 was natural gas for space and water heating. Unlike the Oregon study, the Washington 

 State Energy Office study assumed current energy prices escalate at the rate of general 

 inflation. Oregon assumed energy prices would increase faster than inflation. Other 

 studies have concluded that fuel conversion is cost-effective from both the consumer's 

 and society's perspectives, but that conversion becomes less cost-effective with 

 declining usage. As a result, energy conservation measures tended to reduce cost- 

 effectiveness. 



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