IDEAS home Printed from https://ideas.repec.org/a/sae/enejou/v12y1991i2p47-66.html
   My bibliography  Save this article

Economics of Electricity Self-Generation by Industrial Firms

Author

Listed:
  • Kenneth Rose
  • John F. McDonald

Abstract

This study develops, and econometrically tests, a model explaining the relative importance of several key economic and engineering factors that industrial firms consider when deciding whether to self-generate or cogenerate electricity. The model and empirical results (based on data from the chemical and paper industries) suggest that industrial self-generation is determined by the derived demand for electricity, price of purchased electricity, and marginal cost of self-generation. The buyback rate was found to be important only when certain economic and engineering conditions are met -- such as a relatively low marginal cost and/or a sufficiently high buyback rate. The evidence presented suggests that for most firms the buyback rate play’s no role in determining the quantity of electricity demanded or produced. The results indicate that policy actions related to industrial cogeneration should focus on the price of electricity and factors that affect the plant's marginal cost of producing electricity.

Suggested Citation

  • Kenneth Rose & John F. McDonald, 1991. "Economics of Electricity Self-Generation by Industrial Firms," The Energy Journal, , vol. 12(2), pages 47-66, April.
    • Handle: RePEc:sae:enejou:v:12:y:1991:i:2:p:47-66
    DOI: 10.5547/ISSN0195-6574-EJ-Vol12-No2-4
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.5547/ISSN0195-6574-EJ-Vol12-No2-4
    Download Restriction: no
    File URL: https://libkey.io/10.5547/ISSN0195-6574-EJ-Vol12-No2-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Amemiya, Takeshi, 1979. "The Estimation of a Simultaneous-Equation Tobit Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(1), pages 169-181, February.
    2. Nelson, Forrest & Olson, Lawrence, 1978. "Specification and Estimation of a Simultaneous-Equation Model with Limited Dependent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(3), pages 695-709, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Westner, Günther & Madlener, Reinhard, 2011. "Development of cogeneration in Germany: A mean-variance portfolio analysis of individual technology’s prospects in view of the new regulatory framework," Energy, Elsevier, vol. 36(8), pages 5301-5313.
    2. Dismukes, David E. & Kleit, Andrew N., 1999. "Cogeneration and electric power industry restructuring," Resource and Energy Economics, Elsevier, vol. 21(2), pages 153-166, May.
    3. Wickart, Marcel & Madlener, Reinhard, 2007. "Optimal technology choice and investment timing: A stochastic model of industrial cogeneration vs. heat-only production," Energy Economics, Elsevier, vol. 29(4), pages 934-952, July.
    4. Ghosh, Ranjan & Kathuria, Vinish, 2014. "The transaction costs driving captive power generation: Evidence from India," Energy Policy, Elsevier, vol. 75(C), pages 179-188.
    5. Soares, J. B. & Szklo, A. S. & Tolmasquim, M. T., 2001. "Incentive policies for natural gas-fired cogeneration in Brazil's industrial sector -- case studies: chemical plant and pulp mill," Energy Policy, Elsevier, vol. 29(3), pages 205-215, February.
    6. Mary Jialin Li, 2016. "Cogeneration Technology Adoption in the U.S," Working Papers 16-30, Center for Economic Studies, U.S. Census Bureau.
    7. Bhattacharyya, Subhes C & Quoc Thang, Dang Ngoc, 2004. "Economic buy-back rates for electricity from cogeneration: Case of sugar industry in Vietnam," Energy, Elsevier, vol. 29(7), pages 1039-1051.
    8. Strachan, Neil & Dowlatabadi, Hadi, 2002. "Distributed generation and distribution utilities," Energy Policy, Elsevier, vol. 30(8), pages 649-661, June.
    9. Bonilla, David, 2007. "Fuel Price Changes and the Adoption of Cogeneration in the U.K. and Netherlands," The Electricity Journal, Elsevier, vol. 20(7), pages 59-71.
    10. Zarnikau, Jay & Reilley, Bob, 1996. "The evolution of the cogeneration market in Texas," Energy Policy, Elsevier, vol. 24(1), pages 67-79, January.
    11. Schwob, Marcelo Rousseau Valença & Henriques Jr., Maurício & Szklo, Alexandre, 2009. "Technical potential for developing natural gas use in the Brazilian red ceramic industry," Applied Energy, Elsevier, vol. 86(9), pages 1524-1531, September.
    12. Seeto, Dewey & Woo, C. K. & Horowitz, Ira, 1997. "Time-of-use rates vs. Hopkinson tariffs redux: An analysis of the choice of rate structures in a regulated electricity distribution company," Energy Economics, Elsevier, vol. 19(2), pages 169-185, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dirk W. Early, 1998. "The role of subsidized housing in reducing homelessness: An empirical investigation using micro-data," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 17(4), pages 687-696.
    2. Fors, Gunnar & Svensson, Roger, 2002. "R&D and foreign sales in Swedish multinationals: a simultaneous relationship?," Research Policy, Elsevier, vol. 31(1), pages 95-107, January.
    3. Bruno Lanz, 2015. "Avertive expenditures, endogenous quality perception, and the demand for public goods: An instrumental variable approach," CIES Research Paper series 36-2015, Centre for International Environmental Studies, The Graduate Institute.
    4. Julia Bredtmann, 2014. "The Intra-household Division of Labor: An Empirical Analysis of Spousal Influences on Individual Time Allocation," LABOUR, CEIS, vol. 28(1), pages 1-39, March.
    5. Hassan, Rashid M., 1996. "Planting strategies of maize farmers in Kenya: a simultaneous equations analysis in the presence of discrete dependent variables," Agricultural Economics, Blackwell, vol. 15(2), pages 137-149, November.
    6. Matzkin, Rosa L., 2012. "Identification in nonparametric limited dependent variable models with simultaneity and unobserved heterogeneity," Journal of Econometrics, Elsevier, vol. 166(1), pages 106-115.
    7. Jose Maria Labeaga & Ester Martinez-Ros, 1994. "Estimación de un modelo de ecuaciones simultáneas con variables dependientes limitadas: una aplicación con datos de la industria española," Investigaciones Economicas, Fundación SEPI, vol. 18(3), pages 465-489, September.
    8. Giovanni Facchini & Johannes Van Biesebroeck & Gerald Willmann, 2006. "Protection for sale with imperfect rent capturing," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(3), pages 845-873, August.
    9. Ueda, Atsuko, 2005. "Intrafamily time allocation of housework: evidence from Japan," Journal of the Japanese and International Economies, Elsevier, vol. 19(1), pages 1-23, March.
    10. Diagne, Youssoupha S & Thiaw, Kalidou, 2008. "Fiscalité et secteur informel au Sénégal [Informal sector and tax compliance in Senegal]," MPRA Paper 54867, University Library of Munich, Germany.
    11. Bachmann, Ronald & Beimann, Boris & Bredtmann, Julia & David, Peggy & Ehlert, Christoph & Kassenböhmer, Sonja & Schaffner, Sandra & Siemers, Lars, 2011. "Studies on flexicurity Lot 1: Study on various aspects of labour market performance using micro data from the European Union statistics on income and living conditions (EU-SILC). Contract No. VC/2010/," RWI Projektberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, number 72620.
    12. Christofides, Louis N. & Peng, Chen, 2006. "Contract duration and indexation in a period of real and nominal uncertainty," Labour Economics, Elsevier, vol. 13(1), pages 61-86, February.
    13. Fors, Gunnar & Svensson, Roger, 1994. "R&D in Swedish Multinational Corporations," Working Paper Series 406, Research Institute of Industrial Economics.
    14. Anne-Sophie Bergerès & Philippe d'Astous & Georges Dionne, 2011. "Is there Any Dependence Between Consumer Credit Line Utilization and Default Probability on a Term Loan? Evidence from Bank-Level Data," Cahiers de recherche 1119, CIRPEE.
    15. Badaoui, Eliane & Mangiavacchi, Lucia, 2022. "Assessing the impact of fostering on children’s outcomes in Niger," Economics & Human Biology, Elsevier, vol. 46(C).
    16. Svensson, Roger & Fors, Gunnar, 1994. "R&D and Foreign Sales: Evidence from Swedish Multinationals," Working Paper Series 423, Research Institute of Industrial Economics.
    17. Esho, Neil & Lam, Yung & Sharpe, Ian G., 2002. "Are maturity and debt type decisions interrelated? Evidence from Australian firms in international capital markets," Pacific-Basin Finance Journal, Elsevier, vol. 10(5), pages 549-569, November.
    18. Raja Chakir & Julien Hardelin, 2010. "Crop Insurance and Pesticides in French agriculture: an empirical analysis of multiple risks management," Working Papers 2010/04, INRA, Economie Publique.
    19. Jean-David Fermanian & Sylvie Lagarde, 1999. "Les horaires de travail dans le couple," Économie et Statistique, Programme National Persée, vol. 321(1), pages 89-110.
    20. El Badaoui, Eliane & Mangiavacchi, Lucia, 2018. "Fostering, Child Welfare, and Ethnic Cultural Values," IZA Discussion Papers 11691, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    Electricity self-generation; Cogeneration; Econometric model; Electric utilities;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:enejou:v:12:y:1991:i:2:p:47-66. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.