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Technical efficiency in electricity generation - the impact of smallness and isolation of island economies

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  • Preetum Domah
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    Abstract

    This paper conducts a comparative technical efficiency analysis of electricity generators in 16 small island economies using panel data, and two methodologies: data envelopment analysis (DEA) and stochastic frontier analysis (SFA). The results indicate neither apparent differences in the production structure between islands and non-islands electric utilities, nor any evidence suggesting that they are less technically efficient. At a theoretical level, our results suggest that benchmarking of small islands, using non-island generating utilities as comparators, is both feasible and desirable given the lack of historical generation data for most small islands. On a more empirical basis, our study bridges an important gap in research on the efficiency of small and interconnected electricity systems.

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    File URL: http://www.econ.cam.ac.uk/electricity/publications/wp/ep14.pdf
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    Bibliographic Info

    Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0232.

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    Length: 26
    Date of creation: Oct 2002
    Date of revision:
    Handle: RePEc:cam:camdae:0232

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    Web page: http://www.econ.cam.ac.uk/index.htm

    Related research

    Keywords: Electricity; SFA; Malmquist DEA; small islands;

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    1. Reifschneider, David & Stevenson, Rodney, 1991. "Systematic Departures from the Frontier: A Framework for the Analysis of Firm Inefficiency," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(3), pages 715-23, August.
    2. Pollitt, Michael G, 1996. "Ownership and Efficiency in Nuclear Power Production," Oxford Economic Papers, Oxford University Press, vol. 48(2), pages 342-60, April.
    3. Mayer, Peter C., 2000. "Reliability economies of scale for tropical island electric power," Energy Economics, Elsevier, vol. 22(3), pages 319-330, June.
    4. Schmidt, Peter & Lovell, C. A. Knox, 1980. "Estimating stochastic production and cost frontiers when technical and allocative inefficiency are correlated," Journal of Econometrics, Elsevier, vol. 13(1), pages 83-100, May.
    5. Ali Emami Meibodi, 1998. "Efficiency Considerations in the Electricity Supply Industry; The Case of Iran," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) 95, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.
    6. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
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    Cited by:
    1. Fokaides, Paris A. & Kylili, Angeliki, 2014. "Towards grid parity in insular energy systems: The case of photovoltaics (PV) in Cyprus," Energy Policy, Elsevier, vol. 65(C), pages 223-228.
    2. Mota, R.L., 2004. "‘Comparing Brazil and USA electricity performance; what was the impact of privatisation?’," Cambridge Working Papers in Economics 0423, Faculty of Economics, University of Cambridge.
    3. See, Kok Fong & Coelli, Tim, 2012. "An analysis of factors that influence the technical efficiency of Malaysian thermal power plants," Energy Economics, Elsevier, vol. 34(3), pages 677-685.

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