Water resource and power generation

We propose a simple model of competition between a thermal station and a hy drostation for the production of energy. We show that, despite the static c haracteristics of the thermal cost function, the thermal output is determin ed by intertemporal considerations. This results from the scarcity of the w ater resource which is storable at zero operating cost. We analyze the comb ination of these technologies in the case of a social planner who maximizes the net total utility from electricity, in the case of private monopoly ei ther regulated or not and, finally, in the case of duopolistic competition in quantities where each private firm operates either a hydraulic power sta tion, or a thermal power station. (C) 2001 Elsevier Science B.V. All rights reserved.