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Forecasting the cost of energy conservation in the industrial sector

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  • G. Lakhani, Hyder Ali

Abstract

In this paper, we attempt to forecast the cost of energy conservation in the industrial sector to the year 2000. We stipulate conservation as a depleting resource industry so that the costs will tend to increase as additional quantities of energy are conserved. The methodology uses regression equations. The data utilize advanced conservation technologies and their costs to the year 2000. The regression of annualized costs on corresponding annual quantities of conservation shows a good fit and a positive and statistically significant coefficient. Thus, the theory of conservation as a depleting resource industry is useful. The marginal cost of conservation to the year 2000 is $0.78 per million Btu, which is less than the price of purchasing an equivalent quantity of energy. The cost elasticity is 0.82 so that it is economical for this sector to conserve energy since a 1% increase in conservation increases the cost by less than 1%.

Suggested Citation

  • G. Lakhani, Hyder Ali, 1981. "Forecasting the cost of energy conservation in the industrial sector," Energy, Elsevier, vol. 6(1), pages 9-18.
    • Handle: RePEc:eee:energy:v:6:y:1981:i:1:p:9-18
    DOI: 10.1016/0360-5442(81)90099-2
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