Strategic electricity sector assessment methodology under sustainability conditions: a Swiss case study on CO 2 emissions, competition and stranded costs

Designing and implementing a sustainable energy sector will be a key element of defining and creating a sustainable society. In the electricity industry, the question of strategic planning for sustainability seems to conflict with the shorter time horizons associated with market forces as deregulation replaces vertical integration. In order to address such questions, a project called SESAMS (Strategic Electricity Sector Assessment Methodology under Sustainability) has been established to develop electricity sector planning methods related to sustainability. This effort is part of the Alliance for Global Sustainability (AGS) formed by the Massachusetts Institute of Technology (MIT), the Swiss Federal Institutes of Technology (ETHZ and EPFL), and the University of Tokyo (UT). The initial phase of SESAMS in 1997 created a methodology integrating multi-scenario simulation, life-cycle analysis and multi-criteria decision analysis. This 1998 case study has expanded the methodology to study the transitional effects of deregulation associated with the issues of stranded cost. This analysis has studied the inclusion of different classes of stranded assets, different recovery periods, and recovery of costs on a fixed vs. variable (per kWh) basis. On a societal basis, stranded costs are a zero-sum transfer payment, but the ownership patterns of stranded assets mean that compensation for stranded assets will produce relative winners and losers. These winners and losers shift according to the stranded cost and other options present in different scenarios. The results of the stranded cost analysis are integrated with updated multi-criteria trade-off analysis and life-cycle analysis results, based on expanded system boundaries.