Economies of scale in electricity generation in the United Kingdom

Abstract

The investment programme of the Central Electricity Generating Board (CEGB) since the late nineteen fifties has been predicated in principle on economies of scale and has been largely based in practice on 500 MW(e) turbine generator sets. This paper compares the strategy adopted by the CEGB with alternative hypothetical strategies based on smaller units of plant. Simulation of the supply system over ten years suggests that the economies of scale in very large plant have not been sufficient to offset the attendant disadvantages. Allowance is made for the variation with capacity of the capital cost, thermal efficiency, construction time, planning margin and availability. It is concluded that better results might have been obtained with sets between 200 MW(e) and 300 MW(e). It is acknowledged that this post hoc analysis has only an indirect connection with the decisions that now face the CEGB. the potential economics of scale in nuclear stations are not of the same form as those in fossil fuelled stations. There are also unsatisfactory aspects of the analysis which leave some uncertainty about the validity of the conclusions. But what the analysis does show is that there are conditions where economies of scale are outweighed by other factors, that these conditions are not especially remarkable, that they seem to have been satisfied by the CEGB system and that supply utilities in developing countries, where comparable decisions have now to be taken and where the disadvantages of scale are more pronounced, should examine carefully the case for large generating units in local circumstances.