4.2.1.2. Avoided Energy Costs

The avoided cost of energy is also determined by the Avoided Cost Calculator. This is the cost of generating the electricity that would have been needed had a demand response event not been called. For current demand response programs, this cost is generally relatively small in comparison with the avoided cost of generation capacity. The Avoided Cost Calculator determines the avoided cost of energy by modeling hourly market price shapes for energy for each hour of the year. The 2010 Protocols also allow LSEs to apply an Energy Adjustment Factor to the avoided energy cost, to reflect their own calculations of the expected avoided energy costs.