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Market Restructuring, Competition and the Efficiency of Electricity Generation: Plant-level Evidence from the United States 1996 to 2006

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  • J. Dean Craig and Scott J. Savage

Abstract

This paper examines the effects of market restructuring initiatives that introduced competition into the United States electricity industry on the thermal efficiency of electricity generation. An empirical model is estimated on annual data for over 950 plants from 1996 to 2006. Model estimates show that access to wholesale electricity markets and retail choice together increased the efficiency of investor-owned plants by about nine percent and that these gains stem from organizational and technological changes within the plant. Although not directly targeted by restructuring initiatives, similar efficiency gains are also found for municipality-owned plants. This result suggests that the potential benefits from competition have spilled over to public electricity generation.

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  • J. Dean Craig and Scott J. Savage, 2013. "Market Restructuring, Competition and the Efficiency of Electricity Generation: Plant-level Evidence from the United States 1996 to 2006," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    • Handle: RePEc:aen:journl:ej34-1-01
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    3. Craig, J. Dean, 2016. "Motivations for market restructuring: Evidence from U.S. electricity deregulation," Energy Economics, Elsevier, vol. 60(C), pages 162-167.
    4. Agustin J. Ros, 2017. "An Econometric Assessment of Electricity Demand in the United States Using Utility-specific Panel Data and the Impact of Retail Competition on Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    5. Fleten, Stein-Erik & Haugom, Erik & Ullrich, Carl J., 2017. "The real options to shutdown, startup, and abandon: U.S. electricity industry evidence," Energy Economics, Elsevier, vol. 63(C), pages 1-12.
    6. Enriquez, Alejandra & Ramirez, Jose Carlos & Rosellon, Juan, 2019. "Costos De Generación, Inversión Y Precios Del Sector Eléctrico En México [Generation Costs, Investment And Prices In The Electricity Sector In Mexico]," MPRA Paper 98084, University Library of Munich, Germany.
    7. Gabor Molnar & Scott J. Savage, 2017. "Market Structure and Broadband Internet Quality," Journal of Industrial Economics, Wiley Blackwell, vol. 65(1), pages 73-104, March.
    8. Machiel Mulder, 2015. "Competition in the Dutch Electricity Market: An Empirical Analysis over 2006-2011," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    9. Chu, Yin & Chang, Chun-Ping, 2020. "Vertical separation of transmission control and market efficiency in the wholesale electricity market," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    10. Seifert, Stefan & Cullmann, Astrid & von Hirschhausen, Christian, 2016. "Technical efficiency and CO2 reduction potentials — An analysis of the German electricity and heat generating sector," Energy Economics, Elsevier, vol. 56(C), pages 9-19.
    11. Zhen Lei & Chen-Hao Tsai & Andrew N. Kleit, 2017. "Deregulation and Investment in Generation Capacity: Evidence from Nuclear Power Uprates in the United States," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    12. Doyle, Matthew & Fell, Harrison, 2018. "Fuel prices, restructuring, and natural gas plant operations," Resource and Energy Economics, Elsevier, vol. 52(C), pages 153-172.
    13. Germeshausen, Robert, 2018. "The European Union emissions trading scheme and fuel efficiency of fossil fuel power plants in Germany," ZEW Discussion Papers 18-007, ZEW - Leibniz Centre for European Economic Research.
    14. Mou, Dunguo, 2014. "Understanding China’s electricity market reform from the perspective of the coal-fired power disparity," Energy Policy, Elsevier, vol. 74(C), pages 224-234.
    15. Derya Eryilmaz, Timothy M. Smith, and Frances R. Homans, 2017. "Price Responsiveness in Electricity Markets: Implications for Demand Response in the Midwest," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    16. Stefan Seifert, 2015. "Measuring Productivity When Technologies Are Heterogeneous: A Semi-Parametric Approach for Electricity Generation," Discussion Papers of DIW Berlin 1526, DIW Berlin, German Institute for Economic Research.
    17. Matthew Doyle & Harrison Fell, 2016. "Fuel Prices, Restructuring, and Natural Gas Plant Operations," Working Papers 2016-03, Colorado School of Mines, Division of Economics and Business.
    18. Mohammad Ali Motafakker Azad & Mohsen Pourebadollahan Covich & Sakineh Sojoodi, 2015. "The Impact of Electricity Competitive Market Establishment on Technical Efficiency of Thermal Power Plants in Iran," International Journal of Energy Economics and Policy, Econjournals, vol. 5(4), pages 1010-1015.
    19. Christopher R. Knittel & Konstantinos Metaxoglou & Andre Trindade, 2015. "Natural Gas Prices and Coal Displacement: Evidence from Electricity Markets," NBER Working Papers 21627, National Bureau of Economic Research, Inc.
    20. Knittel, Christopher R. & Metaxoglou, Konstantinos & Trindade, André, 2019. "Environmental implications of market structure: Shale gas and electricity markets," International Journal of Industrial Organization, Elsevier, vol. 63(C), pages 511-550.

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