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Economies of Scale and Utilization: An Analysis of the Multi-plant Generation Costs of the Electricity Commission of New South Wales, 1970/71-1984/85

  • Bateson, Jeff
  • Swan, Peter L

The authors examine the average costs of electricity generated in New South Wales at the site level, employing a new simultaneous-equations model approach. Further, they argue that costs depend principally on unit size and capacity utilization. They reinterpret capacity utilization as a compositional variable that is a continuous proxy for the (inverse of) the intensity of demand for electricity, thus partially addressing the multiproduct nature of electricty. Low capacity utilization corresponds to intense demands and, hence, peaking output. They find that costs per kilowatt-hour, as conventionally measured, are highly sensitive to the degree of capacity utilization, but less so to unit size (scale). The results emphasize the need for time-related pricing. Copyright 1989 by The Economic Society of Australia.

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Article provided by The Economic Society of Australia in its journal The Economic Record.

Volume (Year): 65 (1989)
Issue (Month): 191 (December)
Pages: 329-44

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Handle: RePEc:bla:ecorec:v:65:y:1989:i:191:p:329-44
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