(Data Below)
Managing monopolistic supplier of energy Combined/Cogeneration Heat & Power (CHP) Plant Employs an energy "cogeneration" technology, which produces simultaneously both electricity and heat from one production process. Cogeneration allows providing the same volumes of power and heat by consuming much less primary energy than a conventional energy supply system producing power and heat separately. Cogeneration yields the economies of scope in terms of production costs since the cost of fuel, typically ranges from 50 to 80% in total energy supply costs. For more information see Project 2 presentation. Project setup and tasks From now on, assume you are managing the energy generating company, which owns the CHP plants from your data sample. The unit of your analysis is a representative CHP plant with monopolistic in the regional electricity and heat markets. Suppose you manage a representative CHP that employs cogeneration technology to produce electricity and heat. Technology is embodied in empirical cost (of fuels) function constructed from data in sample assigned to your project team. To produce electricity and heat two (of three fuels natural gas, furnace (heating) oil, coal) are used. The prices of the fuels are as follows: natural gas $162,5 per tonne, furnace (heating) oil $520 per tonne, coal $80 per tonne. O Tasks. 1. Using data on fuel prices and your data sample allocate the fuels' cost between electricity and heat outputs produced under cogeneration technology. Provide justification of a framework applied for distributing the fuel costs between electricity and heat outputs. 2. On the basis of the fuel cost assigned to electricity and heat outputs construct an empirical cost function for each type of output C(El) and C(Ht). You have to choose functional form for each output by yourself. Analyze the obtained empirical model and evaluate how good it is. 3. Draw your conclusions on the properties of cogeneration technology with regard to each type of the output (electricity and heat)/ Tasks. 4. Compare the fuel cost functions developed in above task with respective cost functions elaborated in project 3 under an assumption of separate generation of electricity Clwy, W2,El) and heat C(w7,W2,Ht). 5. Assume that fixed cost is equal to 25% of fuel costs in cogeneration of electricity and heat. Both outputs are priced separately according to markup principle. Describe the framework you intend to apply for pricing of electricity and heat. 6. What will be the price for electricity (markup = 25%) and heat (markup = 30%)? 7. Calculate the total profit that will be earned by H&P plants for estimated prices of electricity and heat. Natural gas, tonnes Furnace fuel oil, tonnes Net electricity output, MWh= 1000kWh Net heat output GCAL 1 2 3 4 5 6 1468547 2329621 53741 1306741 97165 336729 55897 512863 978146 7 8 9 2220 1929 936 1040 1042 1046 1151 1559 1275 1281 1183 1109 1111 1112 1130 10 11 148183 39407 Combined Heat and Power Station H&P S 178 H&P S 118 H&P S 77 H&P S 177 H&P S 104 H&P S 145 H&P S 127 H&P S 80 H&P S 126 H&P S 149 H&P S 62 H&P S 83 H&P S 164 H&P S 105 H&P S 6 H&P S 85 H&P S 188 H&P S 162 H&P S 41 H&P S 88 H&P S 99 H&P S 82 H&P S 168 H&P S 152 51818 3900851 193184 34487 2154805 52087 636853 10173 851786 1905649 178994 26980 33289 450221 310387 150244 46396 708185 168565 348084 216982 36462 38093 192395 44290 12 13 14 15 16 17 18 19 20 21 22 23 24 2384942 433200 295190 3833889 512733 472983 330713 1548373 3005238 660899 177020 213283 1191981 1247843 143396 187508 1571758 1970810 2643354 1735401 583830 460315 788820 392479 367822 1215 269471 87024 49452 403390 379553 523965 108765 97146 92900 164195 1228 1313 1338 1409 1469 1541 1722 1806 25 67782 26 1188043 1811 27 1868 28 1955 29 1065 1151 30 31 32 1322 1369 1534 1672 33 34 35 1680 36 37 38 39 H&P S 68 H&P S 142 H&P S 37 H&P S 153 H&P S 161 H&P S 165 H&P S 136 H&P S 249 H&P S 287 H&P S 159 H&P S 123 H&P S 86 H&P S 173 H&P S 254 H&P S 87 H&P S 129 H&P S 250 H&P S 151 H&P S 95 H&P S 125 H&P S 103 H&P S 67 H&P S 89 H&P S 141 H&P S 140 H&P S 47 H&P S 130 H&P S 39 70526 417754 57166) 809211 446388 342776 704415 462938 120624 113383 555230 712626 44611 220736 668502 2721 440689 253110 540871 383898 789069 543139 303538 549817 202811 461265 840885 1749 1755 2000 2036 2121 2128 2139 2359287 38355 524911 25661 1665494 211295 420289 1286750 745388 73404 45868 1148336 1634856 113057 398495 858819 6389 911488 268967 952506 863707 1674256 957035 491830 779805 76832 715723 1193908 3349338 353733 1993792 333167 1193770 2548399 1154536 1207289 1216400 677174 616650 1466812 473456 25113 623930 1842440 2162 1117058 1088162 1738220 902616 2033754 1532954 888950 1757524 1041097 1427896 3552911 40 2350 2388 2623 2686 41 42 43 44 45 46 47 48 49 50 51 52 53 2924 2958 2988 3919 3960 4042 4492 310328 4656 5012 5216 57 5288 5602 191456 1935728 808952 107575 799043 1225813 1895535 6791 6890 2545143 62 63 54 H&P S 171 55 H&P S 134 56 H&P S 38 H&P S 59 58 H&P S 32 59 H&P S 184 60 H&P S 138 61 H&P S 65 H&P S 50 H&P S 90 64 H&P S 14 65 H&P S 56 66 H&P S 110 67 H&P S 69 68 H&P S 36 69 | H&P S 157 70 H&P S 33 71 H&P S 137 72 H&P S 132 73 H&P S 143 74 H&P S 107 75 H&P S 109 76 H&P S 70 77 H&P S 324 H&P S 119 79 H&P S 144 H&P S 23 1124472 406306 108356 411183 1059977 821361 1142119 401906 686023 1069053 313460 886455 1175050 433074 1819393 882926 842592 2417796 744902 489652 605004 1611924 7572 7656 7820 8487 8490 11001 11069 11216 12593 13103 17328 18316 19183 19331 19406 24031 899586 1525081 3078142 387826 1909110 2141808 156656 4556466 1782621 1434107 4746772 1429245 832342 1105429 3360396 1360902 772308 714774 6079957 1764263 3472948 1365506 436785 1623205 4302387 1997302 2378515 1007000 1847604 384487 1173013 2196008 4016594 2510891 1074107 3325794 2526800 7121380 2217565 1919499 2381039) 4644050 24032 25756 78 674239 529511 355455 2014247 2020324 1396779 1221838 275277 27453 80 30172 357449 3336973 2281521 767465 229544 1230345 3638310 335912 531280 3012739 81 H&P S 117 82 H&P S 72 83 H&P S 25 84 H&P S 122 85 H&P S 298 86 H&P S 40 87 H&P S 71 88 H&P S 302 89 H&P S 148 90 H&P S 4 91 H&P S 291 92 H&P S 282 93 H&P S 289 94 H&P S 13 95 H&P S 73 96 H&P S 303 97 H&P S 8 98 H&P S 74 99 H&P S 58 100H&P S 120 101 H&P S 293 102| H&P S 290 103| H&P S 121 104| H&P S 26 105] H&P S 301 33454 35688 36768 39374 39792 40993 41150 41880 44112 45229 48667 61363 64920 925227 1574157 9331570 4462814 2125500 1265430 3986713 11420885 370565 2198372 156865 3669892 1787921 2577167 238051 7190235 2512224 480853 8163522 5510808 1680677 291599 2865187 8389678 873354 804444 9194302 1403237 1121020 909847 11596489 7770802 1206775 8504210 8268788 1131389 1089700 9769352 2096283 1439312 5096785 1180220 69260 74617 75392 76262 536051 677119 3560085 3056061 647121 2760397 3338077 667998 453510 3060978 1174006 746986 1998672 668850 114158 84791 115193 117398 134002 151326 176836 189482 199448 8766932 2706782 1034438 97948 4636281 2728874 2886461 3101050 Managing monopolistic supplier of energy Combined/Cogeneration Heat & Power (CHP) Plant Employs an energy "cogeneration" technology, which produces simultaneously both electricity and heat from one production process. Cogeneration allows providing the same volumes of power and heat by consuming much less primary energy than a conventional energy supply system producing power and heat separately. Cogeneration yields the economies of scope in terms of production costs since the cost of fuel, typically ranges from 50 to 80% in total energy supply costs. For more information see Project 2 presentation. Project setup and tasks From now on, assume you are managing the energy generating company, which owns the CHP plants from your data sample. The unit of your analysis is a representative CHP plant with monopolistic in the regional electricity and heat markets. Suppose you manage a representative CHP that employs cogeneration technology to produce electricity and heat. Technology is embodied in empirical cost (of fuels) function constructed from data in sample assigned to your project team. To produce electricity and heat two (of three fuels natural gas, furnace (heating) oil, coal) are used. The prices of the fuels are as follows: natural gas $162,5 per tonne, furnace (heating) oil $520 per tonne, coal $80 per tonne. O Tasks. 1. Using data on fuel prices and your data sample allocate the fuels' cost between electricity and heat outputs produced under cogeneration technology. Provide justification of a framework applied for distributing the fuel costs between electricity and heat outputs. 2. On the basis of the fuel cost assigned to electricity and heat outputs construct an empirical cost function for each type of output C(El) and C(Ht). You have to choose functional form for each output by yourself. Analyze the obtained empirical model and evaluate how good it is. 3. Draw your conclusions on the properties of cogeneration technology with regard to each type of the output (electricity and heat)/ Tasks. 4. Compare the fuel cost functions developed in above task with respective cost functions elaborated in project 3 under an assumption of separate generation of electricity Clwy, W2,El) and heat C(w7,W2,Ht). 5. Assume that fixed cost is equal to 25% of fuel costs in cogeneration of electricity and heat. Both outputs are priced separately according to markup principle. Describe the framework you intend to apply for pricing of electricity and heat. 6. What will be the price for electricity (markup = 25%) and heat (markup = 30%)? 7. Calculate the total profit that will be earned by H&P plants for estimated prices of electricity and heat. Natural gas, tonnes Furnace fuel oil, tonnes Net electricity output, MWh= 1000kWh Net heat output GCAL 1 2 3 4 5 6 1468547 2329621 53741 1306741 97165 336729 55897 512863 978146 7 8 9 2220 1929 936 1040 1042 1046 1151 1559 1275 1281 1183 1109 1111 1112 1130 10 11 148183 39407 Combined Heat and Power Station H&P S 178 H&P S 118 H&P S 77 H&P S 177 H&P S 104 H&P S 145 H&P S 127 H&P S 80 H&P S 126 H&P S 149 H&P S 62 H&P S 83 H&P S 164 H&P S 105 H&P S 6 H&P S 85 H&P S 188 H&P S 162 H&P S 41 H&P S 88 H&P S 99 H&P S 82 H&P S 168 H&P S 152 51818 3900851 193184 34487 2154805 52087 636853 10173 851786 1905649 178994 26980 33289 450221 310387 150244 46396 708185 168565 348084 216982 36462 38093 192395 44290 12 13 14 15 16 17 18 19 20 21 22 23 24 2384942 433200 295190 3833889 512733 472983 330713 1548373 3005238 660899 177020 213283 1191981 1247843 143396 187508 1571758 1970810 2643354 1735401 583830 460315 788820 392479 367822 1215 269471 87024 49452 403390 379553 523965 108765 97146 92900 164195 1228 1313 1338 1409 1469 1541 1722 1806 25 67782 26 1188043 1811 27 1868 28 1955 29 1065 1151 30 31 32 1322 1369 1534 1672 33 34 35 1680 36 37 38 39 H&P S 68 H&P S 142 H&P S 37 H&P S 153 H&P S 161 H&P S 165 H&P S 136 H&P S 249 H&P S 287 H&P S 159 H&P S 123 H&P S 86 H&P S 173 H&P S 254 H&P S 87 H&P S 129 H&P S 250 H&P S 151 H&P S 95 H&P S 125 H&P S 103 H&P S 67 H&P S 89 H&P S 141 H&P S 140 H&P S 47 H&P S 130 H&P S 39 70526 417754 57166) 809211 446388 342776 704415 462938 120624 113383 555230 712626 44611 220736 668502 2721 440689 253110 540871 383898 789069 543139 303538 549817 202811 461265 840885 1749 1755 2000 2036 2121 2128 2139 2359287 38355 524911 25661 1665494 211295 420289 1286750 745388 73404 45868 1148336 1634856 113057 398495 858819 6389 911488 268967 952506 863707 1674256 957035 491830 779805 76832 715723 1193908 3349338 353733 1993792 333167 1193770 2548399 1154536 1207289 1216400 677174 616650 1466812 473456 25113 623930 1842440 2162 1117058 1088162 1738220 902616 2033754 1532954 888950 1757524 1041097 1427896 3552911 40 2350 2388 2623 2686 41 42 43 44 45 46 47 48 49 50 51 52 53 2924 2958 2988 3919 3960 4042 4492 310328 4656 5012 5216 57 5288 5602 191456 1935728 808952 107575 799043 1225813 1895535 6791 6890 2545143 62 63 54 H&P S 171 55 H&P S 134 56 H&P S 38 H&P S 59 58 H&P S 32 59 H&P S 184 60 H&P S 138 61 H&P S 65 H&P S 50 H&P S 90 64 H&P S 14 65 H&P S 56 66 H&P S 110 67 H&P S 69 68 H&P S 36 69 | H&P S 157 70 H&P S 33 71 H&P S 137 72 H&P S 132 73 H&P S 143 74 H&P S 107 75 H&P S 109 76 H&P S 70 77 H&P S 324 H&P S 119 79 H&P S 144 H&P S 23 1124472 406306 108356 411183 1059977 821361 1142119 401906 686023 1069053 313460 886455 1175050 433074 1819393 882926 842592 2417796 744902 489652 605004 1611924 7572 7656 7820 8487 8490 11001 11069 11216 12593 13103 17328 18316 19183 19331 19406 24031 899586 1525081 3078142 387826 1909110 2141808 156656 4556466 1782621 1434107 4746772 1429245 832342 1105429 3360396 1360902 772308 714774 6079957 1764263 3472948 1365506 436785 1623205 4302387 1997302 2378515 1007000 1847604 384487 1173013 2196008 4016594 2510891 1074107 3325794 2526800 7121380 2217565 1919499 2381039) 4644050 24032 25756 78 674239 529511 355455 2014247 2020324 1396779 1221838 275277 27453 80 30172 357449 3336973 2281521 767465 229544 1230345 3638310 335912 531280 3012739 81 H&P S 117 82 H&P S 72 83 H&P S 25 84 H&P S 122 85 H&P S 298 86 H&P S 40 87 H&P S 71 88 H&P S 302 89 H&P S 148 90 H&P S 4 91 H&P S 291 92 H&P S 282 93 H&P S 289 94 H&P S 13 95 H&P S 73 96 H&P S 303 97 H&P S 8 98 H&P S 74 99 H&P S 58 100H&P S 120 101 H&P S 293 102| H&P S 290 103| H&P S 121 104| H&P S 26 105] H&P S 301 33454 35688 36768 39374 39792 40993 41150 41880 44112 45229 48667 61363 64920 925227 1574157 9331570 4462814 2125500 1265430 3986713 11420885 370565 2198372 156865 3669892 1787921 2577167 238051 7190235 2512224 480853 8163522 5510808 1680677 291599 2865187 8389678 873354 804444 9194302 1403237 1121020 909847 11596489 7770802 1206775 8504210 8268788 1131389 1089700 9769352 2096283 1439312 5096785 1180220 69260 74617 75392 76262 536051 677119 3560085 3056061 647121 2760397 3338077 667998 453510 3060978 1174006 746986 1998672 668850 114158 84791 115193 117398 134002 151326 176836 189482 199448 8766932 2706782 1034438 97948 4636281 2728874 2886461 3101050
