For example the choice for future new power generation investment (or LNG purchases in a country) will be made on the basis of long run marginal cost (LRMC) together with the requirements dictated by other government policy drivers, such as those for security of supply or to support decarbonization commitments. The LRMC considerations will include the full costs of both the generation capacity and the investments and operations associated with fuel supply, to the extent that these are not already committed to be paid under other arrangements.

For instance, LNG will be costed into SRMC considerations based on the landed cost of cargoes delivered to an FSRU facility, and any losses and variable fees charged for regasification and for the supply of the regasified gas through to the power plants in the existing gas pipelines. In this respect, it will ignore the already contracted annual lease costs of the FSRU as sunk cost as well as the land-side investment costs already made in the port to support the regas project as well as any long term committed capacity payment made for the use of the pipeline needed.

In contrast, for long term continued purchase of LNG beyond the contractual years of the initial FSRU, a decision to renew the lease on an FSRU beyond the option date for termination or the leasing of another FSRU facility, must take into account the subsequent use of LNG and the need to bear the full costs associated with the lease extension or new lease when compared with the use of other fuels, including other potential gas supplies. Reality also kicks in once a contract is signed as there is the need to stick to the ToP terms.