Economic Capacity Utilization Rate in Iran's Electricity Generation Industry During 1350-1388

This study aims to estimate economic capacity and, in turn the utilization rate of economic capacity in Iran’s electricity generation industry during 1350-1388. Aggregate time series data for thermal power plants are used. With parametric restrictions for linear homogeneity in input prices imposed, capital demand function is first derived and estimated. This allows the derivation of economic capacity. Then, the utilization rate of economic capacity in Iran’s electricity generation industry is obtained by dividing actual generation by economic capacity. Finally, the modeling and estimation of the (economic) capacity utilization rate function permits us to investigate the effects of various factors on the utilization rate of the generation industry. Our results point to the existence of a large difference between utilization rates as defined by engineering and economic perspectives. The economic capacity utilization rate for most years during the period of analysis is smaller than one, indicating actual generation is less than economic capacity.