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Economies and Diseconomies: Estimating Electricity Cost Functions
Review of Industrial Organization (2001)
  • Michael T. Maloney, Clemson University
This paper presents estimates of the variable cost function of electricity 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 the percent of time the unit is disconnected. The estimated cost function shows that both dimensions affect average cost, which generally declines as capacity utilization increases.
  • cost estimation,
  • economies of scale
Publication Date
September, 2001
Citation Information
Michael T. Maloney. "Economies and Diseconomies: Estimating Electricity Cost Functions" Review of Industrial Organization Vol. 19 Iss. 2 (2001)
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