Economic Valuation of Power Stations Efficiency Improvement

Generation of electricity releases various types of pollutants, which cause damages to a wide range of receptors such as human health, natural ecosystems, crops, and building materials. When the cost of such damages is not accounted in the price of electricity, they are referred as external costs. The estimation of external cost has important usage in policy making. An external cost, also known as an externality, arises when the social or economic activities of one group of people have an impact on another group, and that impact is not fully accounted, or compensated for, by the first group. Thus, a power station that generates emissions of SO2, causing damage to building materials or human health, imposes an external cost. Because the generator of the electricity when deciding on the level of the activities does not take into account the impact of these activities on the buildings’ owners or on those who suffer health damage. In this example, the environmental costs are “external” because, although they are real costs to the members of the society, the owner of the power station is not taking them into account when making decisions. The economic value is a measure of the benefit provided by an action or service to an economic agent. It is generally measured relative to units of currency, and the interpretation is, therefore "what is the maximum amount of money that a specific actor is willing and able to pay for the good or service"? .In this paper, we calculated the economic value of power generation efficiency improvement. The results show the economic value of one percent increase in power generation efficiency is equal to 294 million dollars