Interfuel Substitution—Upper Bound Estimates

Abstract

The degree to which alternative energy sources can be substituted for each other is an important consideration in several energy policy areas. This article examines the issue of interfuel substitution within a very limited framework, namely, the capability of the steam electric industry to switch among coal, oil, and natural gas in plants able to bum all three fuels. In this sense, we claim that our substitution possibility estimates will be upper bounds, since the necessary capital is already in place to accommodate each fuel. Section II describes the theoretical model used in describing the behavior of steam electric plants. Section III discusses the justification of the empirical technique presented; Section IV discusses this study's data and presents results; Section V discusses the implications of these results.