Joint Costs in Electricity and Natural Gas Distribution Infrastructures: The Role of Urban Factors

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ŞENYEL KÜRKÇÜOĞLU M. A., Guldmann J. M.

Urban Science, vol.2, no.2, 2018 (ESCI) identifier

  • Publication Type: Article / Article
  • Volume: 2 Issue: 2
  • Publication Date: 2018
  • Doi Number: 10.3390/urbansci2020035
  • Journal Name: Urban Science
  • Journal Indexes: Emerging Sources Citation Index (ESCI), Directory of Open Access Journals
  • Keywords: infrastructure cost modeling, joint energy distribution, economies of scope, electricity distribution, natural gas distribution, MULTIPRODUCT MONOPOLY, SCOPE ECONOMIES, SCALE ECONOMIES, WATER, UTILITIES
  • Middle East Technical University Affiliated: Yes

Abstract

This paper analyzes the joint cost structure of electricity and natural gas distribution investments. Assessing the joint costs is critical for urban development and public policy regarding competition at the local level. The paper accounts for the urban and geographic factors at the local level, while the previous literature primarily used company-level data with a few or no site-specific variables in joint cost analyses. An empirical analysis of the multi-utility capital costs suggests that the local urban and geographic conditions affect such costs, with economies of scope present in electricity and natural gas both in terms of total costs and underground investment costs. Hence, the joint service provision makes economic and environmental sense for urban policy makers.