The terms and framework presented below focus on electricity and refer to the cost of energy for electricity in remote communities, and it is assumed that diesel fuel is the fuel used and the energy product is electricity. [...] The marginal cost of energy also depends on the efficiency of the diesel generator, which can also vary over time and from community to community. [...] This marginal cost of energy is depicted in Figure 1. Pembina Institute The True Cost of Energy in Remote Communities | 2 Figure 1. Factors in the marginal cost of energy1 Avoided cost of energy Generating electricity from diesel requires diesel fuel and generators, and, therefore, associated costs for operating, maintaining, and servicing that equipment (including significant engine overhauls); s [...] The avoided cost of energy is a commonly used term that specifically refers to the financial savings that could be obtained when the operational time of diesel generators is reduced because the renewable energy source is now producing a portion of the electricity. [...] Figure 2. Factors in the avoided cost of energy 1 Some use the term landed fuel cost, but this often represents just the fuel cost and cost to deliver the fuel to the community ($/L).