The article I will be talking about will cover the ideas of economies of scale.
Here is a link to the article:
http://www.renewableenergymagazine.com/article/tidal-lagoon-power-submits-application-for-worlda-20140212
The articles topic regards the UK's plans for a massive man made lagoon which will include a series of turbines built into the walls of the lagoon. It will provide for 120,000 homes in the area.
The article already mentions that such a project will benefit from economies of scale. Though the article does not expand on what these economies are I will list the ones that the firm responsible for the project will likely benefit from:
-Capital: The firm will certainly benefit from the ability to purchase high tech machinery which will greatly reduce costs for both constructing and maintaining the structure. This would not be the case there were multiple firms constructing small scale tidal energy plants as the total revenue from the project would be dissipated among multiple firms. By having only one firm responsible for this project the firm will be able to afford such high tech capital.
-Specialized labor: With the large sum that the firm has at its disposal it is also capable of hiring highly trained staff in order to construct and maintain the lagoon as these specialized staff will allow for higher efficiency in construction and for more competent organisation of the work force and the firms resources ensuring maximum efficiency.
-Purchasing: Such a large firm can also purchase its raw materials in bulk reducing prices greatly with a project this large.
-Financial: Although the firm itself is funded by the government it will indirectly benefit from financial economies of scale as the government may have to borrow money from the central bank in order to fund the project as lending to the government is a very safe loan and so they are likely to receive a low interest rate. The firm itself will also benefit from this as well if it were to loan money.
We not only see benefits from economies of scale but also benefits from the monopoly power this firm holds as it is the only firm constructing a tidal power plant in the area. If there were multiple firms all producing energy for the area there would a very large loss in efficiency to more difficult communications between all the firms when laying power lines to supply the consumers and when controlling power output to the area.
Here is the website of the firm constructing the lagoon: http://www.tidallagoonswanseabay.com/
Also here is a interactive 3D model of the lagoon: http://www.tidallagoonswanseabay.com/fly-through.aspx
Here is a link to the article:
http://www.renewableenergymagazine.com/article/tidal-lagoon-power-submits-application-for-worlda-20140212
The articles topic regards the UK's plans for a massive man made lagoon which will include a series of turbines built into the walls of the lagoon. It will provide for 120,000 homes in the area.
The article already mentions that such a project will benefit from economies of scale. Though the article does not expand on what these economies are I will list the ones that the firm responsible for the project will likely benefit from:
-Capital: The firm will certainly benefit from the ability to purchase high tech machinery which will greatly reduce costs for both constructing and maintaining the structure. This would not be the case there were multiple firms constructing small scale tidal energy plants as the total revenue from the project would be dissipated among multiple firms. By having only one firm responsible for this project the firm will be able to afford such high tech capital.
-Specialized labor: With the large sum that the firm has at its disposal it is also capable of hiring highly trained staff in order to construct and maintain the lagoon as these specialized staff will allow for higher efficiency in construction and for more competent organisation of the work force and the firms resources ensuring maximum efficiency.
-Purchasing: Such a large firm can also purchase its raw materials in bulk reducing prices greatly with a project this large.
-Financial: Although the firm itself is funded by the government it will indirectly benefit from financial economies of scale as the government may have to borrow money from the central bank in order to fund the project as lending to the government is a very safe loan and so they are likely to receive a low interest rate. The firm itself will also benefit from this as well if it were to loan money.
We not only see benefits from economies of scale but also benefits from the monopoly power this firm holds as it is the only firm constructing a tidal power plant in the area. If there were multiple firms all producing energy for the area there would a very large loss in efficiency to more difficult communications between all the firms when laying power lines to supply the consumers and when controlling power output to the area.
Here is the website of the firm constructing the lagoon: http://www.tidallagoonswanseabay.com/
Also here is a interactive 3D model of the lagoon: http://www.tidallagoonswanseabay.com/fly-through.aspx