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Efficiency Considerations in the Electricity Supply Industry; The Case of Iran

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  • Ali Emami Meibodi

    (Surrey Energy Economics Centre (SEEC), Department of Economics, University of Surrey)

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    Abstract

    Electricity plays a vital role in modern economies. It is considered a core activity in the economic development plans of most countries. The requirement of large investments in the power sector and the rising cost of electricity provision have intensified the need for increased efficiency in the Iranian electricity supply industry. This study provides an efficiency analysis of the electricity industry in Iran. It presents efficiency scores for the Iranian electricity industry relative to the efficient frontier for electricity production, and in relation to the electricity industries of 26 developing countries. The average level of technical efficiencies in the electricity industry of these developing countries, the Iranian power plants and regional distribution organisations are estimated at 77%, 72.7% and 81% respectively. They are based on a two-year panel data of 26 developing countries, six-year unbalanced panel data of thirty Iranian power plants and one cross-section of thirty distribution organisations taken in 1995. This study utilises two popular techniques; Stochastic Frontier Analysis (SFA) and Data Envelopment Analysis (DEA). The use of both SFA and DEA extends the capabilities of addressing issues in ways that would otherwise not be available. Econometric models using panel data are employed to investigate technical inefficiencies. The Malmquist index approach is applied to investigate technological change, technical and scale efficiency changes in the electricity industry in the sample of developing countries as well as Iranian power plants. The DEA efficiency scores are used in Tobit models to determine which factors are the main causes of inefficiency.

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    Bibliographic Info

    Paper provided by Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey in its series Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) with number 95.

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    Length: 56 pages
    Date of creation: Jul 1998
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    Handle: RePEc:sur:seedps:95

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    Cited by:
    1. Mohsen Pourebadollahan Covich & Archana Aggarwal, 2010. "Reform and Efficiency: An Application to Iranian Regional Electricity Companies," Iranian Economic Review, Economics faculty of Tehran university, vol. 15(2), pages 83-104, spring.
    2. Iglesias, Guillermo & Castellanos, Pablo & Seijas, Amparo, 2010. "Measurement of productive efficiency with frontier methods: A case study for wind farms," Energy Economics, Elsevier, vol. 32(5), pages 1199-1208, September.
    3. Iglesias-Gómez, Guillermo & Seijas Díaz, A., 2008. "Evaluación de la eficiencia productiva de los parques eólicos gallegos," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 26, pages 167-194, Septiembr.
    4. Jamasb, T. & Pollitt, M., 2001. "Benchmarking and Regulation of Electricity Transmission and Distribution Utilities: Lessons from International Experience," Cambridge Working Papers in Economics 0101, Faculty of Economics, University of Cambridge.
    5. See, Kok Fong & Coelli, Tim, 2014. "Total factor productivity analysis of a single vertically integrated electricity utility in Malaysia using a Törnqvist index method," Utilities Policy, Elsevier, vol. 28(C), pages 62-72.
    6. 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.
    7. Preetum Domah, 2002. "Technical efficiency in electricity generation - the impact of smallness and isolation of island economies," Cambridge Working Papers in Economics 0232, Faculty of Economics, University of Cambridge.
    8. See, Kok Fong & Coelli, Tim, 2013. "Estimating and decomposing productivity growth of the electricity generation industry in Malaysia: A stochastic frontier analysis," Energy Policy, Elsevier, vol. 62(C), pages 207-214.
    9. Jamasb, T. & Pollitt, M., 2000. "Benchmarking and regulation: international electricity experience," Utilities Policy, Elsevier, vol. 9(3), pages 107-130, September.
    10. 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.
    11. Azadeh, A. & Ghaderi, S.F. & Anvari, M. & Saberi, M., 2007. "Performance assessment of electric power generations using an adaptive neural network algorithm," Energy Policy, Elsevier, vol. 35(6), pages 3155-3166, June.

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