Economies and Diseconomies: Estimating Electricity Cost Functions

Economies and Diseconomies: Estimating Electricity Cost Functions This paper presents estimates of the variable cost function ofelectricity generation. The cost function is estimated using a two dimensional definition of capacity utilization. Because electricity cannot be conveniently stored, generation facilities follow the load across demand cycles. Capacity utilization can be captured empirically in two ways. One is generation relative to capacity when a unit is connected to the system; the other is thepercent of time the unit is disconnected. The estimated cost function shows that both dimensions affect average cost, which generally declines as capacity utilization increases. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Economies and Diseconomies: Estimating Electricity Cost Functions

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2001 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1023/A:1011140400951
Publisher site
See Article on Publisher Site

Abstract

This paper presents estimates of the variable cost function ofelectricity generation. The cost function is estimated using a two dimensional definition of capacity utilization. Because electricity cannot be conveniently stored, generation facilities follow the load across demand cycles. Capacity utilization can be captured empirically in two ways. One is generation relative to capacity when a unit is connected to the system; the other is thepercent of time the unit is disconnected. The estimated cost function shows that both dimensions affect average cost, which generally declines as capacity utilization increases.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Oct 3, 2004

References

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