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Technical Efficiency of Thermal Electricity Generators in Kenya

Author

Listed:
  • Grace Njeru

    (School of Economics, University of Nairobi, P.O Box 30197 00100, Nairobi, Kenya.)

  • John Gathiaka

    (School of Economics, University of Nairobi, P.O Box 30197 00100, Nairobi, Kenya.)

  • Peter Kimuyu

    (School of Economics, University of Nairobi, P.O Box 30197 00100, Nairobi, Kenya.)

Abstract

The Government of Kenya introduced energy sector reforms in the late 1990s aimed at improving efficiency in the supply of energy. After over two decades of reforms, there has been no comprehensive study to estimate the technical efficiency amongst electricity generators in Kenya. This study examined 27 thermal electricity generating plants in Kenya using data sourced from Energy Regulation Commission for the period July 2015 to December 2017. The study applied two methods to estimate efficiency, viz., the Stochastic Frontier Analysis and Data Envelope Analysis. The results indicated that there is inefficiency in thermal power generation. The average efficiency score was 71% meaning the industry was missing its technical potential by about 29%. The plants experienced increasing returns to scale and were improving on efficiency and productivity. Age and public ownership contributed to inefficiency while grid connection had a positive effect on efficiency. The government should encourage private investment in future power generation projects while at the same time increasing connection of the isolated areas to the national grid. The regulator should also revisit the current specific fuel targets used in determining the fuel pass through costs to consumers to encourage efficiency.

Suggested Citation

  • Grace Njeru & John Gathiaka & Peter Kimuyu, 2020. "Technical Efficiency of Thermal Electricity Generators in Kenya," International Journal of Energy Economics and Policy, Econjournals, vol. 10(3), pages 340-347.
    • Handle: RePEc:eco:journ2:2020-03-43
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    References listed on IDEAS

    as
    1. Tooraj Jamasb, 2007. "Technical Change Theory and Learning Curves: Patterns of Progress in Electricity Generation Technologies," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 51-72.
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    3. Preetum Domah, 2002. "Technical efficiency in electricity generation - the impact of smallness and isolation of island economies," Working Papers EP14, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    4. Sahba Fatima & Kaustuva Barik, 2012. "Technical Efficiency of Thermal Power Generation in India: Post-Restructuring Experience," International Journal of Energy Economics and Policy, Econjournals, vol. 2(4), pages 210-224.
    5. Federico Belotti & Silvio Daidone & Giuseppe Ilardi & Vincenzo Atella, 2013. "Stochastic frontier analysis using Stata," Stata Journal, StataCorp LP, vol. 13(4), pages 718-758, December.
    6. 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.
    7. 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 325-332.
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    Cited by:

    1. Sai, Rockson & Lin, Boqiang, 2022. "Productivity assessment of power generation in Kenya: What are the impacts?," Energy, Elsevier, vol. 254(PA).

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    More about this item

    Keywords

    Technical efficiency; Electricity Generation; SFA; DEA; Kenya;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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