Least Cost Planning

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Least Cost Planning (English; German: Minimal Cost Planning ; LCP for short ) is an instrument of ecologically-oriented cost accounting , which is mainly used in the field of energy services . In addition to the energy sector , this concept is now also being used in the water and mobility sectors . The basic idea is to minimize costs, above all by increasing efficiency while reducing the environmental impact . Put simply, the question here is whether it is cheaper to save one kWh instead of generating it.

origin

In the 1970s and 1980s, Least Cost Planning was developed in the USA for the local energy industry. A first scientific work entitled "The Least-Cost Energy Strategy: Minimizing Consumer Costs through Competition" was written in 1979 by Roger W. Sant . Above all, electricity savings and an increase in power plant capacities should cover the energy demand at the same time . The instrument was further developed later and can still be applied to the mobility sector and water supply . When the LCP method was used in transport services, the initial idea was to use and justify potential investments in US public transport . In Germany, too, the aim was to use the LCP approach to identify changes in possible costs for the municipalities due to an expansion or renovation of the transport system. The application in water supply developed in a similar way with the background of meeting future changes in the population's water needs in the most environmentally friendly way possible.

Basic concept

The aim of the LCP approach is the combination of a necessary expansion of service capacities on the part of the provider and the will to save on the part of the customer. Least Cost Planning is therefore mostly used when an existing infrastructure reaches its capacity limits. Problems in productions due to strong fluctuations in demand caused by the market justify the use of this method. There are three premises to be identified:

  1. There is potential for savings and at the same time the investments made to improve efficiency are below the potential
  2. This can be explained by obstacles in the willingness to invest more ( market failure or imperfection )
  3. If cost-efficient investments in cost-saving measures have been identified, these should be promoted through economic policy support.

The method of minimum cost planning is recommended if savings are more cost-effective for the customer than additional production of the same service. It is also important to ensure that these savings do not affect the benefits of the respective service. An important difference between Least Cost Planning and traditional planning processes is the involvement of the public and other interested parties at all stages of the planning process.

method

In general, the following steps must be taken when using Least Cost Planning:

  1. Identification of the framework
  2. Analysis and forecast of demand
  3. Investigation of the capacity limits
  4. Compare the cost of the different options
  5. Implement the cheapest option

Planning types related to LCP

Planning is a fundamental part of the LCP. There are mainly three types of planning:

Appropriate planning (utilitarian planning)

Here, the rational problem-solving-oriented planning is at the fore, which is a common basis of the LCP. The fundamental problem is typically formulated as a supply-demand problem, the aim of which is to minimize economic as well as environmental costs (e.g. through emissions).

Collaborative Planning

The focus is on collaborative cooperation with the parties involved to reduce costs. Agreements and goals are usually set out in multi-party agreements.

Ecological Planning

The focus here is on a holistic view of social and economic processes as well as the environment itself. The aim is to make human activities compatible with ecological ones without disrupting a system permanently and disproportionately.

The process of the LCP can be assessed / examined in many ways in relation to the three planning approaches. Thereby, demand-side management, competitive ties, consideration of environmental impacts, subsidies (e.g. for power plants) and the reduction of transaction costs play an important role.

criticism

Important points of criticism of the LCP concept are:

  • Failure to take into account the heterogeneity of consumers in the assessment of potential savings for LCP analyzes. For certain parts of the consumer, investments in efficiency are not economical, since the requirements and equipment of the consumers are individual.
  • Ask about hidden costs of investments. There may be losses in various qualitative aspects ( light color in energy-saving lamps ) or additional costs for the consumer when searching for information on efficient technologies.

literature

  • D. Berry: The Structure of Electric Utility Least Cost Planning . In: Journal of Economic Issues , 1992.
  • T. Bracher, T. Backes, A. Uricher: Possibilities of environmental relief and cost reduction in traffic through traffic planning - with guidelines for the LCTP application in municipalities . In: Umweltbundesamt (Ed.): UBA-Texte 23/02, Berlin 2002.
  • E. Günther: Ecology-oriented management: Environment (world-oriented) thinking in business administration . Lucius & Lucius, Stuttgart 2008, ISBN 978-3-8282-0415-7 .
  • M. Hanson, S. Kidwell: Electric Utility Least-Cost Planning . In: Journal of the American Planning Association , 1991.
  • RW Sant: The Least-Cost Energy Strategy: Minimizing Consumer Costs through Competition . Carnegie-Mellon University, Arlington 1979.
  • H. Schöttle: Analysis of the least-cost planning approach for the rational use of electrical energy . Lit, Münster 1998, ISBN 3-8258-4090-5 .
  • A. Turner, S. White, G. Bickford: The Canberra Least Cost Planning Case Study . In: Water Science and Technology: Water Supply , Vol. 5, No. 3-4, 2005, pp. 257-263.

Web links

Individual evidence

  1. ↑ RW Sant: The Least-Cost Energy Strategy: Minimizing Consumer Costs through Competition . Carnegie-Mellon University, Arlington 1979.
  2. ↑ T. Bracher, T. Backes, A. Uricher: Possibilities of environmental relief and cost reduction in traffic through traffic planning - with guidelines for the LCTP application in municipalities . In: Umweltbundesamt (Ed.): UBA-Texte 23/02, Berlin 2002.
  3. ^ A. Turner, S. White, G. Bickford: The Canberra Least Cost Planning Case Study . In: Water Science and Technology: Water Supply , Vol. 5, No. 3-4, 2005, pp. 257-263.
  4. ^ A b E. Günther: Ecology-oriented management: Environment (world-oriented) thinking in business administration . Lucius & Lucius, Stuttgart 2008, ISBN 978-3-8282-0415-7 .
  5. ↑ a b H. Schöttle: Analysis of the Least-Cost Planning approach for the rational use of electrical energy . Lit, Münster 1998, ISBN 3-8258-4090-5 .
  6. ^ Least Cost Planning . www.nachhaltigleben.de. Retrieved July 30, 2012.
  7. ^ M. Hanson, S. Kidwell: Electric Utility Least-Cost Planning . In: Journal of the American Planning Association , 1991.
  8. ^ D. Berry: The Structure of Electric Utility Least Cost Planning . In: Journal of Economic Issues , 1992.