3.4.2. Economic Analysis

The economic analysis showed that an important consequence for Ecuador is that, if cogeneration is installed instead of a large thermal power plant to offset the future lack of hydroelectricity, the country could save up to USD 125 million per year by avoiding the use of oil-derived fuels for electricity generation. The cost of the electricity produced in cogeneration plants will depend on the type of cogeneration scheme and the type of fuel used, as seen in Table 8. The cost for electricity produced in cogeneration plants (considering the cost of fuels shown in Table 5, but excluding NG), will vary from USD 0.09/kWh to USD0.17/kWh for electricity produced in the oil palm industry (using lignocellulosic biomass) and in hospitals (using diesel), respectively. Table 8 also shows that some types of cogeneration plants, even using diesel, could produce electricity at costs lower than USD 0.17/kWh. For instance, the hotels industry and the textile industry could produce electricity at USD 0.12/kWh and USD 0.13/kWh (using diesel as fuel), respectively. Although these values are higher than the cost of generating electricity in hydropower plants in Ecuador (up to 0.08 USD/kWh), cogeneration in these conditions is still of interest for Ecuador due to the necessity of diversification of electricity generation and the opportunity of having installed capacity for electricity generation during the dry season of the year. Because of insufficient electricity generation (especially before 2016), Ecuador has often required to import electricity from both Colombia and Peru at prices up to USD 0.28/kWh or to produce electricity using thermal power plants at even higher costs (up to USD 0.50/kWh in old thermal power plants).

An analysis of sensitivity was carried out to understand the effect of using NG (when available in the future) instead of diesel for cogeneration in the country. Results showed that NG could promote a substantial reduction of the costs of electricity production in cogeneration plants. For instance, the dairy industry could produce electricity at around USD 0.06/kWh, hotels at USD 0.08/kWh, and hospitals at USD 0.05/kWh (Table 8). These results reinforce the notion that the country must look for options for buying NG overseas, especially in neighboring countries (see Section 3.4.1). The production and use of biofuels for cogeneration requires further analysis.


**Table 8.** Examples of costs of electricity generated in some types of clusters of industries in the conditions of the study (including the potential use of NG).

#### 3.4.3. Social Impacts of Cogeneration

The adoption of cogeneration/trigeneration in Ecuador could promote more than 2600 new jobs. As mentioned in Section 2.1.5.3, these direct jobs are required for operating, managing, and maintaining the cogeneration plants. There is evidence showing positive impacts of energy efficiency measures on GDP, employment, economic structure, and welfare [99]. In addition, there is an important element that was not included in the economic analysis: the benefit to the state of avoiding the release of CO2 by installing cogeneration plants, which is related to the "social cost of carbon" or marginal damage caused by an additional ton of carbon dioxide emissions [2–4,100]. Therefore, these and other benefits that are not considered at this level of the study (e.g., the impact on rural areas where some cogeneration will be installed, the benefits on health due to better air quality or the creation of indirect jobs) deserve further study.
