ECONOMIES OF SCALE AND NATURAL MONOPOLY IN THE COASTAL VIRGINIA OFFSHORE WIND ENERGY: THEORETICAL AND EMPIRICAL ANALYSES

The authors discuss theoretically the basis for establishing the Coastal Virginia Offfshore Wind (CVOW) as a public utility monopoly and provide some empirical evidence using data from fixed-bottom offshore wind farms already installed around the world over the past 20 years.They argue that that there are benefits associated with natural monopoly because of the presence of economies of scale in offshore wind energy and the vertical integration in the production, transmission, and distribution of electricity.Although, a regulated public electric utility is under the control of the government over monopoly pricing, the competitive market system may not be the best alternative in the case of offshore wind energy because of the complex nature of marine ecosystems as well as the high initial investment costs involved in the construction and operation of a typical offshore wind farm.