Measuring economies of horizontal and vertical integration in the US electric power industry:how costly is unbundling?

This research employs econometric analysis on a cross section of American electricity companies in order to study the cost implications associated with unbundling the operations of integrated companies into vertically and/or horizontally separated companies. Focusing on the representative sample average firm, we find that complete horizontal and vertical disintegration resulting in the creation of separate nuclear, conventional, and hydro electric generation companies as well as a separate firm distributing power to final consumers, results in a statistically significant 13.5 percent increase in costs. Maintaining a horizontally integrated generator producing nuclear, conventional, and hydro electric generation while imposing vertical separation by creating a stand alone distribution company, results in a lower but still substantial and statistically significant cost penalty amounting to an 8.1 % increase in costs relative to a fully integrated structure. As these results imply that a vertically separated but horizontally integrated generation firm would need to reduce the costs of generation by 11% just to recoup the cost increases associated with vertical separation, even the costs associated with just vertical unbundling are quite substantial. Our paper is also the first academic paper we are aware of that systematically considers the impact of generation mix on vertical, horizontal, and overall scope economies. As a result, we are able to demonstrate that the estimated cost of unbundling in the electricity sector is substantially influenced by generation mix. Thus, for example, we find evidence of strong vertical integration economies between nuclear and conventional generation, but little evidence for vertical integration benefits between hydro generation and the distribution of power. In contrast, we find strong evidence suggesting the presence of substantial horizontal integration economies associated with the joint production of hydro generation with nuclear and/or conventional fossil fuel generation. These results are significant because they indicate that the cost of unbundling the electricity sector will differ substantially in different systems, meaning that a blanket regulatory policy with regard to the appropriateness of vertical and horizontal unbundling is likely to be inappropriate.

Estimation of productivity in Korean electric power plants:a semiparametric smooth coefficient model

This paper analyzes the impact of load factor, facility and generator types on the productivity of Korean electric power plants. In order to capture important differences in the effect of load policy on power output, we use a semiparametric smooth coefficient (SPSC) model that allows us to model heterogeneous performances across power plants and over time by allowing underlying technologies to be heterogeneous. The SPSC model accommodates both continuous and discrete covariates. Various specification tests are conducted to compare performance of the SPSC model. Using a unique generator level panel dataset spanning the period 1995-2006, we find that the impact of load factor, generator and facility types on power generation varies substantially in terms of magnitude and significance across different plant characteristics. The results have strong implication for generation policy in Korea as outlined in this study.

Estimation of productivity in Korean electric power plants:a semiparametric smooth coefficient model

This paper analyzes the impact of load factor, facility and generator types on the productivity of Korean electric power plants. In order to capture important differences in the effect of load policy on power output, we use a semiparametric smooth coefficient (SPSC) model that allows us to model heterogeneous performances across power plants and over time by allowing underlying technologies to be heterogeneous. The SPSC model accommodates both continuous and discrete covariates. Various specification tests are conducted to assess the performance of the SPSC model. Using a unique generator level panel dataset spanning the period 1995-2006, we find that the impact of load factor, generator and facility types on power generation varies substantially in terms of magnitude and significance across different plant characteristics. The results have strong implications for generation policy in Korea as outlined in this study.

Vertical and horizontal scope economies in the regulated US electricity power industry

This paper investigates vertical economies between generation and distribution of electric power, and horizontal economies between different types of power generation in the U.S. electric utility industry. Our quadratic cost function model includes three generation output measures (hydro, nuclear and fossil fuels), which allows us to analyze the effect that generation mix has on vertical economies. Our results provide (sample mean) estimates of vertical economies of 8.1% and horizontal economies of 5.4%. An extensive sensitivity analysis is used to show how the scope measures vary across alternative model specifications and firm types. © 2012 Blackwell Publishing Ltd and the Editorial Board of The Journal of Industrial Economics.

Sustainable rural micro-enterprises through co- and tri-generation:review of concepts

Biomass production, conversion and utilization can be done locally with value addition to small farmers. However, new technical inputs are needed for profitable exploitation of biomass within the constraints related to land, water and skill availability and to provide higher quality of energy needed for rural industries. Trigeneration, which is generating energy simultaneously in three forms (electric power, heat for processing and refrigeration), helps in fully utilizing the stored energy in biomass and would be most appropriate for micro enterprises. This paper presents concepts in terms of trigeneration systems feasible for rural areas.

Direct current ripple compensation for multi-phase fault-tolerant machines

A second-harmonic direct current (DC) ripple compensation technique is presented for a multi-phase, fault-tolerant, permanent magnet machine. The analysis has been undertaken in a general manner for any pair of phases in operation with the remaining phases inactive. The compensation technique determines the required alternating currents in the machine to eliminate the second-harmonic DC-link current, while at the same time minimising the total rms current in the windings. An additional benefit of the compensation technique is a reduction in the magnitude of the electromagnetic torque ripple. Practical results are included from a 70 kW, five-phase generator system to validate the analysis and illustrate the performance of the compensation technique.

A micro industry with closed energy and water cycles for sustainable rural development

Sustainable development requires combining economic viability with energy and environment conservation and ensuring social benefits. It is conceptualized that for designing a micro industry for sustainable rural industrialization, all these aspects should be integrated right up front. The concept includes; (a) utilization of local produce for value addition in a cluster of villages and enhancing income of the target population; (b) use of renewable energy and total utilization of energy generated by co and trigeneration (combining electric power production with heat utilization for heating and cooling); (c) conservation of water and complete recycling of effluents; (d) total utilization of all wastes for achieving closure towards a zero waste system. Enhanced economic viability and sustainability is achieved by integration of appropriate technologies into the industrial complex. To prove the concept, a model Micro Industrial Complex (MIC) has been set up in a semi arid desert region in Rajasthan, India at village Malunga in Jodhpur district. A biomass powered boiler and steam turbine system is used to generate 100-200 KVA of electric power and high energy steam for heating and cooling processes downstream. The unique feature of the equipment is a 100-150 kW back-pressure steam turbine, utilizing 3-4 tph (tonnes per hour) steam, developed by M/s IB Turbo. The biomass boiler raises steam at about 20 barg 3 tph, which is passed through a turbine to yield about 150 kW of electrical power. The steam let out at a back pressure of 1-3 barg has high exergy and this is passed on as thermal energy (about 2 MW), for use in various applications depending on the local produce and resources. The biomass fuel requirement for the boiler is 0.5-0.75 tph depending on its calorific value. In the current model, the electricity produced is used for running an oil expeller to extract castor oil and the castor cake is used as fuel in the boiler. The steam is used in a Multi Effect Distillation (MED) unit for drinking water production and in a Vapour Absorption Machine (VAM) for cooling, for banana ripening application. Additional steam is available for extraction of herbs such as mint and processing local vegetables. In this paper, we discuss the financial and economic viability of the system and show how the energy, water and materials are completely recycled and how the benefits are directed to the weaker sections of the community.