Relation of plant size to power cost

The author gives three principal reasons why a central station plant can take care of a given service more economically than a small plant. First, because the first cost per kilowatt of the large units is lower than the corresponding cost of the small units, thereby reducing the first cost and the annual fixed charges. Second, because the operation of a large plant is proportionally less than that of a small plant, and because the large plant can afford to make use of labor saving and other devices which would be out of the question in a small plant. Third, because of the existence of a diversity factor whereby a combined load can be operated with a smaller total capacity than would be required if each part of the combined load were operated separately. The author concludes that the only reasons why central stations should not supply all the electrical service within their territory are that the rates offered may be out of proportion to the cost of the service, or that the customer may have some motive other than the cost of the supply for not using central station service.