Interfuel substitution in US electricity generation
Ongoing changes in the US electricity market include restructuring and increased competition. With this unfettering of the market, the fuel choice in generation is expected to become more flexible and responsive. To investigate this hypothesis, studies of US electricity fuel choices over the last three decades are summarized and the most recent analysis is provided on a market very different from the one on which earlier studies were done. Modern data handling techniques allow the consideration of the most comprehensive database including 185 utilities on monthly data for 1993. This paper finds fuel choice to show a considerable amount of price responsiveness, the amount of responsiveness is sensitive to the fuel substitution possibilities within the utility, and the amount of responsiveness seems to have increased recently for oil and natural gas.