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Generally, wind turbines can substitute for coal in the production of electricity. Imagine a breakthrough in the production of wind turbines reduces the cost of generating electricity with wthe ind by 50%. How would this alter the incentive to find and prove new reserves of coal? Explain.

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Insha Fatima
Insha FatimaLv10
28 Sep 2019

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Related questions

Electricity that is supplied to the Australian market comes from a variety of sources including wind turbines (around 30%), gas powered generation stations and older coal fired stations that produce relatively large amounts of carbon dioxide, a major contributor to greenhouse warming and the production of airborne particles that results in asthma. Gas-powered electricity generation plants can be turned on and off at short notice.

Rising gas prices impact on the price of electricity and increased market power for gas-fired electricity producers​. One proposal that has been suggested is to reinstate the coal fired ‘Northern’ generation plant. Assume that if operated, this plant could potentially provide a large share of the total electricity requirements for South Australia. What might be the implications of such a move and what considerations should be taken into account when deciding on this step?

Please help me with this question. Thank you very much!

Green Energy, Inc., is a manufacturer of wind turbines. In the annual meeting, the directors are discussing the next year's operation plans. With the country's GDP growing at an impressive pace, overall energy demand is expected to increase by 10 percent annually over the next few years. Wanda Hill, the Director of Sales, claims that the firm is already enjoying economies of scale and so should install new capacity and hire more workers to expand production. However, Edward Sanchez, the Managing Director of the firm, is not in favor of increasing capacity. He is of the opinion that the firm is currently operating at the minimum efficient scale and any further expansion will increase costs.

Which of the following, if true, will support Edward's view that the firm is currently operating at the minimum efficient scale?

a. The firm caters to just 5 percent of the market demand.

b. Latest data compiled by the Department of Energy reveals that the country's wind energy capacity increased by 5 gigawatt last year when two new wind farms became operational.

c. The firm's average cost of production remained unchanged over the last 100 units.

d. A rival firm experienced an increase in per-unit cost of production this year.

e. The government's expenditure on research and development in the fields of green technology has traditionally been high.

I know what "economies of scale" means, but I have no idea how to answer this question. I guessed "b," but that was wrong. Please explain like I'm five.

The next part of the question:

Which of the following are Wanda and Edward likely to agree with?

a. The per-unit cost of the firm is increasing at the currrent output level.

b. The marginal cost at the current production level is higher than the average cost.

c. The sale of wind turbines will increase if they can increase supply.

d. The firm currently has excess capacity.

e. Green Energy's profits are expected to fall in the near future.

Consider the use of the following policy instruments that could be used in order to reduce an externality such as pollution. Briefly state how the policy instrument will affect each of the three channels of pollution abatement (input substitution, end of pipe treatment, & output reduction). For simplicity, use the following example in crafting your answers: a coal fired power plant emitting SOx (Sulfer Oxide) caused by burning coal with sulfur in it. (2 points)

a. A tax on all coal.

b. A subsidy to wind farms.

c. A tax on SOx emissions from smokestacks.

d. Establishment of permit trading over the right to emit SOx.

e. A federal law being passed that every coal fired power plant have “scrubbers” which remove SOx from the smoke.

f. A federal law being passed that only low sulfur coal may be used in power plants.

g. A tax on electricity being produced from coal fired power plants.

Given your answers, order the policies from most efficient to least efficient (this doesn’t have to be exact). What does the marginal cost of abatement curve look like for policies g versus c versus d.

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