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

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  • Preetum Domah

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.

Suggested Citation

  • 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.
  • Handle: RePEc:cam:camdae:0232
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    File URL: http://www.econ.cam.ac.uk/electricity/publications/wp/ep14.pdf
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    References listed on IDEAS

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    1. Pollitt, Michael G, 1996. "Ownership and Efficiency in Nuclear Power Production," Oxford Economic Papers, Oxford University Press, vol. 48(2), pages 342-360, April.
    2. 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.
    3. 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.
    4. 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.
    5. Mayer, Peter C., 2000. "Reliability economies of scale for tropical island electric power," Energy Economics, Elsevier, vol. 22(3), pages 319-330, June.
    6. 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 715-723, August.
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    Cited by:

    1. repec:bla:econpa:v:36:y:2017:i:3:p:300-316 is not listed on IDEAS
    2. 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.
    3. Weisser, Daniel, 2004. "Power sector reform in small island developing states: what role for renewable energy technologies?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 8(2), pages 101-127, April.
    4. 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.
    5. 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.
    6. Nepal, Rabindra & Jamasb, Tooraj, 2012. "Reforming small electricity systems under political instability: The case of Nepal," Energy Policy, Elsevier, vol. 40(C), pages 242-251.

    More about this item

    Keywords

    Electricity; SFA; Malmquist DEA; small islands;

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • N70 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - General, International, or Comparative

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