Economies of scale and technological progress in electric power production: The case of Brazilian utilities

Mauricio Marins Machado, Maria Conceição Sampaio de Sousa, Geoffrey Hewings

Research output: Contribution to journalArticlepeer-review

Abstract

This paper examined the cost structure of the electricity generation companies in Brazil during the period 2000–2010 by using a translog cost function that imposes no restrictions on production technology and allows for the existence of non-homotheticity. The hypothesis that economies of scale are a typical feature of the generation market in Brazil and, in general, are not exhausted at lower levels of production is not rejected. This result supports the vision that indivisibilities restrict efficiency gains from free-market competition in the Brazilian electricity generation and most of the last restructuring in the industry regulation was based on this assumption. Furthermore, over the sample period, technological progress led to cost reductions in electric power supply. These technological improvements take the form of both a neutral technological effect as well as a non-neutral fuel effect, which prevails over the capital and labor saving technical changes.

Original languageEnglish (US)
Pages (from-to)290-299
Number of pages10
JournalEnergy Economics
Volume59
DOIs
StatePublished - Sep 1 2016

Keywords

  • Panel model
  • Power supply
  • Scale economies
  • Seemingly unrelated regressions
  • Technical change
  • Translog function

ASJC Scopus subject areas

  • Economics and Econometrics
  • Energy(all)

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