Scale, economies

Whether produced from fossil or non-fossil sources, the widespread use of hydrogen will require a new and extensive infrastructure to produce, distribute, store and dispense it as a vehicular fuel or for stationary applications, such as electric generation. Depending on the source from which hydrogen is produced and the form in which it is delivered, many alternative infrastructures can be envisioned. Tradeoffs in scale economies between process and distribution technologies, and such issues as operating cost, safety, and materials can also favour alternative forms of infrastructure. 

Cohen MA, Moon S (1990) Impact of Production Scale Economies, Manufacturing Complexity, and Transportation Costs on Supply Chain Facility Networks. Journal of Manufacturing and Operations Management 3 269-292... 

A particular mention goes to Mater-Bi, produced by Novamont, who have revolutionised starch-based biomaterials for two decades. The commercial success of this biodegradable and biocompostable plastic relies on two main factors the scale economy that allows the reduction of costs, and the diversity of formulations to develop different end products (plastic bags, tableware, toys, etc.). More than 210 references in Chemical Abstracts are available on this (registered) keyword, and the number of patents related to different formulations and developments is also impressive. Mater-Bi can be essentially described as a blend of starch with a small amount of other biodegradable polymers and additives. The actual compositions are still known only by a very few people. 

At midsize scale, a few tens of megawatts, both natural gas and renewable energy technologies offer production possibilities. Megawatt-scale production is especially attractive for biomass-based energy sources. Natural gas production at this scale could provide an efficient response to early market demand for hydrogen, but could not offer sufficient scale economies to compete effectively in mature hydrogen markets. 

The committee believes that PEM electrolysis is subject to the same basic cost reduction drivers as those for fuel cells. Cost breakthroughs in (1) catalyst formulation and loading, (2) bipolar plate/flow field, (3) membrane expense and durability, (4) volume manufacturing of subsystems and modules by third parties, (5) overall design simplifications, and (6) scale economies (within limits) all promise to lower... 

In analyzing the transition to alternative fuels other than hydrogen— such as ethanol, methanol, CNG, LPG, and electricity—analyses with the TAFV model led to some important conclusions that bear on the proposed hydrogen transition. We find that the transition matters a lot. Furthermore, we can identify some of the most important barriers. For AFVs, the most important barriers seem to be limited fuel availability and vehicle scale economies. For HEVs, incremental vehicle costs are large. As a result, vehicle scale economies matter, but scale cost reductions are more easily attained by the use of widely shared components—such as batteries, motors, and controllers—across multiple vehicle platforms. Similar gains should be possible for FCVs. For HEVs, the dominant transitional factor is the uncertain prospect for LBD. 

Our results lead us to several observations. First, in a market economy where vehicle manufacturers, fuel suppliers, and consumers all make independent decisions, the efficacy of government policies to reduce the dependence of the U.S. transportation sector on petroleum is highly dependent on the world price of petroleum. Second, the penetration of alternative fuels and AFVs depends on the fuel retail infrastructure, the ability of AFVs to achieve scale economies, and other transitional barriers. Third, governmental policies, if sufficiently large, can effectively reduce these barriers and can allow alternative fuels to compete in the marketplace with gasoline. However, given the current and expected low price of petroleum in the world today, doing so would be costly. 

The progressive increase in the size of chemical plants (due to scale economy) and concentration of many plants in the same locations (due to the integration of chemical production and need of common utilities, services, etc.), which led to an amplification of local impact on environment. 

The immediate success of the MITI-sponsored Japanese cooperative effort in capturing the world s market for memory chips provides an impressive example of scale economies creating barriers to entry. In 1972, when Intel introduced the first mass-produced DRAM, the Japanese had 5 percent of the world s memory-chip market. With the second-generation 4-K-bit chip, Japan s share rose to 17 percent. In 1979, after introducing the 16-K-bit, Japan s share reached 71 percent. The advent of the 265-K-bit in 1982 quickly destroyed the U.S. production of memory chips. Intel and the other U.S. makers had by 1985 exited from the industry, as the Japanese accounted for 92 percent of the production of DRAMS. 

Significant consolidation across pharmaceutical and related market segments in pursuit of scale economies of operation and production across a global reach... 

Coordinating agreements can be implemented between a shipper and a transport provider to improve performance. Consider a supply chain consisting of suppliers, manufacturing plants, and customer locations. In the original system, suppose each plant runs as an independent profit center, choosing its own transportation. To create scale economies as well as increase the fraction of line and backhaul routes, an alternate system can be implemented to coordinate across locations and with a transport company. Consider the potential impact on the system as it transitions from independent transport choices to a corporate load control center that enables performance improvement. 

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