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Cost Structures for Fossil Fuel-Fired Electric Power Generation

Abstract:
This paper estimates short- and long-run marginal production costs and returns to scale in electric power generation in the United States. We find substantial short-run diseconomies of scale at high output levels. A relatively large number of small and mid-sized firms have optimal capital stocks below actual levels. In contrast, several large firms have optimal capital stock targets, substantially above current levels. These disparities in actual and optimal capital' suggest a possible consolidation in the industry.

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Energy Specializations: Natural Gas – Markets and Prices; Coal – Markets and Prices; Electricity – Generation Technologies

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
Q2 -

Keywords: Electricity prices, US Electricity generating costs, Coal

DOI: 10.5547/ISSN0195-6574-EJ-Vol21-No2-4


Published in Volume21, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.