I understand how the combined cycle gas turbine doesn’t quite have the economies of scale that big steam turbines do (though these too ran into scale limits in the late 60s, as Richard Hirsh documents), but why isn’t a CCGT plant still a sunk cost? Even if the economies of scale are diminished, if the fixed costs of a CCGT are still sunk, wouldn’t that still point towards (a slightly smaller) natural monopoly in the BPW account?
This is one of the questions I'm still thinking through because I have no direct experience working in power plants, so I want to check in with my engineer friends before I make a bold claim. The plant comprises many different pieces of capital, many of which are sunk. But since the turbine itself is a jet engine on a platform, can it be redeployed (probably at a rehab cost) for, say, flying a jet? So yes, you've hit on exactly where I am on the implications of BPW.
Fascinating stuff. I also wonder about the implications for transmission and distribution. At first glance, it seems like the theory implies both are still a natural monopoly, unless someone has figured out how to show that the relevant equipment can be used for something other than transmitting and distributing electricity.
I understand how the combined cycle gas turbine doesn’t quite have the economies of scale that big steam turbines do (though these too ran into scale limits in the late 60s, as Richard Hirsh documents), but why isn’t a CCGT plant still a sunk cost? Even if the economies of scale are diminished, if the fixed costs of a CCGT are still sunk, wouldn’t that still point towards (a slightly smaller) natural monopoly in the BPW account?
This is one of the questions I'm still thinking through because I have no direct experience working in power plants, so I want to check in with my engineer friends before I make a bold claim. The plant comprises many different pieces of capital, many of which are sunk. But since the turbine itself is a jet engine on a platform, can it be redeployed (probably at a rehab cost) for, say, flying a jet? So yes, you've hit on exactly where I am on the implications of BPW.
Fascinating stuff. I also wonder about the implications for transmission and distribution. At first glance, it seems like the theory implies both are still a natural monopoly, unless someone has figured out how to show that the relevant equipment can be used for something other than transmitting and distributing electricity.