depends on the supply and use of coal. Figure 4.20 is only a hypothetical and simplistic illustration of a complex relationship, and it is not expected that the levelized cost of energy from these technologies would follow such straight line projections. The uncertainties in the cost of energy from coal are dominated by uncertain fuel costs, whereas the uncertainties in the cost of energy from the SPS are dominated by technologically uncertain fixed costs. The approach in this probabilistic analysis was to focus only on these two dominant variables (other uncertainties were ignored in this analysis) and to treat the costs as random variables; to determine a cost probability distribution for each of the technologies for any particular year; and to combine them to develop a probability distribution for the differences in energy cost between the technologies. First, the coal probability function will be described, along with its ties to historical data, and then the foundation for SPS cost uncertainty will be discussed. The resultant combined probability function will then be shown for a few parameters. Coal Price Relationships. Figure 4.21 shows a plot of constant-dollar coal prices from 1950 through 1977. From 1950 to 1968, the real cost of coal declined by 1.2% per year, mainly due to decreased use because of substitution by oil and gas. After 1968, the real cost of coal rose sharply (11% per year), and this could be attributed to the passage of mine safety regulations Fig. 4.21 Coal Prices (Constant Dollars)
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