GAS POWER PRODUCTION, SURPLUS CONCEPTS AND THE TRANSFORMATION OF HYDROELECTRIC RENT INTO RESOURCE RENT

The paper considers the effects of introducing large scale gas power p roduction capacity into an electricity sector based on hydropower. In this process the economic rent is transmitted from the hydro power sec tor to the resource rent in the gas power sector, but is along the way intermingled with ordinary producer surplus and quasi-rent stemming f rom increasing cost conditions in the production infrastructure and ca pacity constraints. The net effect on total rent generated depends on development in demand, demand elasticities, costs saved from delaying hydropower projects and the existence of producer surplus in gas power generation. The paper closes with a discussion of possible tax base c hanges following from the introduction of a thermal power system based on natural gas. (C) 1997 Elsevier Science B.V.