How efficient are African electricity companies? Evidence from the Southern African countries

This paper is a first attempt at documenting efficiency levels in Africa's electricity firms, their evolution and the sources of this evolution. The analysis is based on a sample of 12 operators providing services in the 12 country members of the Southern Africa Power Pool. We focus on the changes in total factor productivity (TFP) of the largest operators in each country between 1998 and 2005. We then rely on a data envelopment analysis (DEA) decomposition to identify the sources of the changes in TFP. The results suggest fairly comparable levels of efficiency in the region and performance levels and evolution quite independent of the degree of vertical integration, the presence of a private actor or the main sources of energy supply. The analysis suggest that although the companies have not made significant improvements during the period of analysis in using their capital and human assets, they have done much better in adopting better technologies and better commercial practices. No clear correlation could be associated with the adoption of reforms during the last decade and data limitations impede a more refined assessment of the impact of reforms on efficiency at this stage.     

Assessing the impact of regulatory reforms on China's electricity generation industry

In the past two decades, China has experienced a series of regulatory reforms in its electricity industry, aimed at improving power production efficiency. The central planning system was broken up and the market-oriented modern enterprise system was established. Furthermore, the former vertically integrated electricity utilities were divested and the generation sector was separated from the transmission and distribution networks. In this paper, we intend to estimate the impact of regulatory reforms on production efficiency of fossil-fired generation plants using the plant-level national survey data collected in 1995 and 2004. Applying the econometric method of Differences-in-Differences, we estimate the effects of these reforms on the demand for inputs of employees, fuel and nonfuel materials. The results show that the net efficiency improvement in labor input associated with the regulatory reforms is roughly 29% and the gains in nonfuel materials are about 35%, while there is no evidence of efficiency gains in fuel input associated with the electricity reforms.     

The impacts of the Clean Air Act on production cost,and the substitution between inputs in the electric utility industry

The paper examines how having to comply with Phase 1 of Title IV of the 1990 Clean Air Act affected production cost and the substitution between fuel and non-fuel (labor, capital) inputs. Phase 1 required firms to reduce their sulfur dioxide emissions. Enacting procedures to reduce sulfur dioxide emissions (using lower sulfur content coal or other fuel sources) could lead to higher cost, and impact the substitution between fuel and non-fuel inputs. Using a 1992-2000 panel of 34 U.S. electric utilities, empirical results indicate that the procedures electric utilities enacted to comply with Phase 1 contributed to small increases in both marginal cost and total cost. Firms having to comply with Phase 1 were more willing, than firms not subject to Phase 1, to substitute from fuel to non-fuel (labor, capital) inputs following an increase in the price of fuel. Utilities subject to Phase 1 that had a fuel clause were more willing, than Phase 1 firms without a fuel clause, to substitute from non-fuel inputs to fuel when the price of the non-fuel input increased.     

Sources of production inefficiency and productivity growth in China: A global data envelopment analysis

The current mode of production in China is extensive and inefficient and has caused great stress on both resources and the environment. This paper focuses on analyzing the sources of production inefficiency and productivity growth in China. Here, a developed slacks-based measure is utilized to decompose production inefficiency into three components: input inefficiency, economic output inefficiency, and environmental inefficiency. Furthermore, by applying a method based on global data envelopment analysis, we take a further step to analyze the key factors responsible for the change of environmental productivity during 2003–2011 from the point of view of technical progress, productive scale, and management level. The results show that, redundancy in energy and labor inputs, and excessive emission of sulfur dioxide, chemical oxygen demand, and ammonia nitrogen, are the main sources of production inefficiency in China. During the sample period, the efficiency in all inputs and environmental emissions has improved (except for capital input efficiency, which had a decreasing trend). Further analysis shows that the overall environmental productivity in China has begun to follow an ascending path. Technical progress is the most powerful contributor to China's productivity growth, while the decreases in scale and management efficiency are the two main obstacles preventing productivity improvement.     

The threshold effects of energy efficiency on the elasticity of substitution between energy and non-energy factors

Considerable efforts have been made to estimate the relationship between energy and non-energy inputs in the production process. However, it remains controversial whether energy and non-energy inputs are complements or substitutes. Empirical analysis is conflicting on this issue. This study seeks to explore an alternative way to explain these conflicting results by examining the issue from the perspective of energy efficiency. This study is based on time series data for capital, labor, and energy from 28 Chinese provinces, covering 1985 to 2012. The results show that capital and energy are substitutes in all of the provinces, whereas labor and energy are complements in most of the provinces. Using the threshold effect model, we discover evidence of a threshold point based on the amount of energy efficiency activity in a province. This point separates the substitution behavior of provinces between energy and non-energy inputs. Low-energy efficiency provinces do not substitute as readily as high-energy efficiency provinces. The findings imply that the energy-saving technologies should be applied in provinces with comparatively higher energy intensity because they have more energy conservation potential.     

Heterogeneous effects of regulation on the efficiency of the electricity industry across European Union countries

This paper focuses on the relationship between the stringency of regulation (OECD indicators) and total factor productivity (TFP) growth in the electricity sectors of 19 European Union countries for the period 1994–2007. Both the OECD regulatory indicator and the TFP growth index have been decomposed in order to bring to light a complex picture of interrelations in which the negative impact of the overall regulation on productivity is the result of opposite forces. Estimation results tell us that only the stringency of entry regulation significantly reduces technological change, whereas vertical integration exhibits a negative and significant impact only on the catching up process (pure efficiency change). Lastly, we found an interesting result concerning the explanatory variables of the scale efficiency change: in this case only public ownership matters, in other terms high levels of public in the structure ownership of electric companies guarantee improvements in reaching the optimal scale of production. These heterogeneous effects are also confirmed when we use a different measure of efficiency, that is, the distance of the actual from the optimal reserve margin.     

Provincial allocation of coal de-capacity targets in China in terms of cost,efficiency, and fairness

Developing a de-capacity scheme that is economical, fair, and efficient, has become a key problem affecting the smooth achievement of coal de-capacity targets. It is also an important policy issue with regard to the overall implementation of China's supply-side structural reforms. In this study, we use the production function method as well as the panel variable coefficient model to calculate the 25 provinces' boundary production functions for the coal industry, which leads to the estimation of the coal capacity and capacity utilization rate of each province. Taking into account the labor resettlement cost and disposal cost of fixed assets, a total cost function of coal de-capacity is established. The growth rate function of total factor productivity (TFP) in the coal industry is constructed by the Solow residual value method. An allocation model of coal de-capacity is then proposed, based on multi-objective nonlinear optimization with constraint conditions on the total reduction amount and minimum output of coal in each region. Finally, using the relevant data of China's 25 coal-producing provinces in 1990–2015, the allocation of coal de-capacity is obtained under the goal of minimizing the total cost and maximizing the TFP growth rate. The results show that the capacity utilization rate of China's coal industry is much lower than the lower limit of the reasonable utilization ratio, while TFP shows negative growth over a long period. The comparative analytical results indicate that in terms of total cost, the optimal allocation scheme is 44.5335 billion yuan lower than the government allocation scheme. The disposal cost of fixed assets and labor resettlement costs decrease by 29.2749 billion yuan and 15.2586 billion yuan respectively. In terms of TFP growth, the optimal allocation scheme has a 1.54% higher TFP growth rate compared with the government allocation scheme. In terms of fairness, the Gini coefficients of the optimal scheme calculated by various indexes are all smaller than 0.3, placing the scheme within the category of considerable or absolute fairness. In addition, we calculate the optimal allocation ratio of coal de-capacity in the situation where cost preference and quality preference of central government are considered, to verify the intrinsic consistency of the model. In brief, the optimal allocation scheme proposed in this study effectively realizes the integration of economy, efficiency, and fairness.     

Total-factor energy efficiency of regions in China

This paper analyzes energy efficiencies of 29 administrative regions in China for the period 1995–2002 with a newly introduced index. Most existing studies of regional productivity and efficiency neglect energy inputs. We use the data envelopment analysis (DEA) to find the target energy input of each region in China at each particular year. The index of total-factor energy efficiency (TFEE) then divides the target energy input by the actual energy input. In our DEA model, labor, capital stock, energy consumption, and total sown area of farm crops used as a proxy of biomass energy are the four inputs and real GDP is the single output. The conventional energy productivity ratio regarded as a partial-factor energy efficiency index is computed for comparison in contrast to TFEE; our index is found fitting better to the real case. According to the TFEE index rankings, the central area of China has the worst energy efficiency and its total adjustmentof energy consumption amount is over half of China's total. Regional TFEE in China generally improved during the research period except for the western area. A U-shape relation between the area's TFEE and per capita income in the areas of China is found, confirming the scenario that energy efficiency eventually improves with economic growth.     

Measuring the social rate of return to R&D in coal,petroleum and nuclear manufacturing: A study of the OECD countries

This paper estimates the social rate of return to research and development (R&D) in the energy manufacturing industry. Our model tries to quantify the positive contribution that lagged R&D has on total factor productivity (TFP) growth in the manufacturing of coal, petroleum products and nuclear fuel for a number of OECD countries. Using a panel of data from the OECD STAN database we are able to obtain results suggesting that R&D has a positive and significant rate of return that varies for each country.     

Substitution possibilities and determinants of energy intensity for China

This paper measures technological change, factor demand and inter-factor and inter-fuel substitutability measures for China. We use individual fuel price data and a two-stage approach to estimate total factor cost functions and fuel share equations. Both inter-factor and inter-fuel substitution elasticities are calculated and the change in energy intensity is decomposed into its driving forces. The results suggest that energy is substitutable for capital regionally and for labor nationally. Capital substitutes for energy more easily than labor does. Energy intensity changes vary by region but the major drivers seem to be “budget effect” and the adoption of energy-intensive technologies, which might be embodied in high-level energy-using exports and sectors, capital investment and even old technique and equipment imports. Whether the trend in rising energy intensity continues will be significant for China and the rest of the world.     

Estimating and decomposing productivity growth of the electricity generation industry in Malaysia: A stochastic frontier analysis

This study examines the total factor productivity (TFP) growth of the Malaysian electricity generation industry over the 1998 to 2005 period. The stochastic frontier analysis (SFA) approach is used to measure TFP change and decompose TFP growth into efficiency change and technical progress. We find that it achieved average annual TFP growth of 2.34%, with technical change contributing the most to the TFP growth over the eight year period. We hence hypothesise that the new power plants with their newer capital-embodied technologies commencing during the sample period are likely to be the main reason for this strong technical change. In addition, it is also noted that this estimate for the Malaysian electricity generation industry is larger than the estimate obtained for the electricity sector as a whole, where we obtain 1.34% per year for a comparable period.     

Growth and renewable energy in Europe: Benchmarking with data envelopment analysis

This paper conducts data envelopment analysis (DEA) for the purpose of calculating inefficiencies in the European countries' growth using as main inputs the variables typically used in the growth-energy literature nexus such as energy consumption, carbon emissions, employment and capital but also with a particular focus on renewable energy sources (RES) consumption. Since we have a panel data set, we also apply the Malmquist method to calculate total factor productivity and an analysis of peers. Mean overall efficiency has been calculated to be equal to 0.892, while mean pure technical efficiency is 0.569 and scale efficiency 1.798. Countries with remarkable renewable energy performance have medium to low efficiency, while renewable energy laggards are among the most technically efficient countries in Europe. Results from this paper are useful for monitoring and benchmarking purposes with respect to their 2020 renewable energy obligations stemming from 2009/28/ED Directive.     

Overcoming the shortcomings of energy intensity index: a directional technology distance function approach

In multilateral comparisons of environmental performance over time, energy intensity measures, especially “real” energy intensity computed either by index decomposition approach or structural decomposition approach, are the most commonly used measures. Recently, researchers also resort to production-theoretical approach, which relies on data envelopment analysis techniques, to decompose energy intensity changes over time into their subcomponents. While their intuitiveness and computational ease make these indices attractive, their time series properties create considerable challenges in performing informative and fair comparisons among the energy efficiency levels of units considered. Furthermore, the resultant measure of energy intensity in these studies is still the inverse of a partial factor productivity (PFP) measure, i.e., energy productivity, that does not take into consideration compositional differences between inputs of the units being compared (which are also subject to change over time) and that ignores the type of substitution among inputs and, hence, makes it a measure that disguises rather than illuminates. The theoretical part of this paper shows how one can overcome the shortcomings of the energy intensity measure by constructing a new energy index using directional technology distance functions. The new index constructed in this study not only overcomes the shortcomings of the energy intensity measures but also satisfies the axiomatic properties of index numbers that are laid down by Fisher. An empirical application on U.S state-level agricultural sectors further complements existing studies.     

How ICT investment influences energy demand in South Korea and Japan

This empirical study examines substitute/complementary relationships in the demands for ICT capital, non-ICT capital, energy, materials, and labor in the industrial sectors in Japan and South Korea during 1973–2006 and 1980–2009, respectively. In doing so, a dynamic factor demand model is applied to link intertemporal production decisions by explicitly recognizing that the level of certain factors of production (referred to as quasi-fixed factors: ICT and non-ICT capital) cannot be changed without incurring so-called adjustment costs, defined in terms of forgone output from current production. Special emphasis is on the effects of ICT investment on energy use through the substitute/complementary relationships. This study quantifies how ICT capital investment in South Korea and Japan affects industrial energy demand. We find that ICT and non-ICT capital investment serve as substitutes for the inputs of labor and energy use. The results also demonstrate significant cost differences across industries in both countries.     

Energy consumption restricted productivity re-estimates and industrial sustainability analysis in post-reform China

This paper investigates the impact of energy on China's industrial sustainability by using a novel approach to estimate real total factor productivity. The growth accounting indicates that the substantial industrial reforms in China have led to productivity growth. Energy and capital are also important factors driving China's industrial growth. Productivity growth in China's industry is mostly attributable to the high-tech light industrial sectors.     

Energy flow and greenhouse gas emissions in organic and conventional sweet cherry orchards located in or close to Natura 2000 sites

An energy analysis in orchards is useful to deciding best management strategies. The objective of this study was to evaluate, by selecting organic and conventional sweet cherry orchards located in/or close to Natura 2000 sites (a) the energy flow between the two farming systems and (b) the effect of farming system to gas emissions (CO₂, CH₄ and N₂O). Twenty farms [(2-conventional and 2-organic) × 5-locations] were selected during 2003-2004. Means averaged over all locations for insecticides and fungicides application, fuel, insecticides, fungicides, non-renewable energy inputs, energy shoot outputs, energy fruit outputs, energy shoot + fruit outputs, fruit production, shoot efficiency, fruit efficiency, shoot + fruit efficiency, non-renewable energy efficiency, gas emissions were higher in conventional than in organic orchards, while fertilizer application, harvesting, fertilizers, labor, total energy inputs, renewable energy inputs, intensity and non-renewable energy consumption were higher in organic orchards. Means averaged over two farming systems for fertilizer, insecticide and fungicide application were higher in GRL2 and GRL5. The means averaged over two systems for transportation had the highest value in GRL4 and the lowest in GRL5. Finally, means averaged over two farming systems for labor had the highest value in GRL2. Non-renewable energy inputs as percent of total inputs were 82.63 and 52.42% in conventional and organic sweet cherry orchards respectively. The results show that organic farming systems could reduce non-renewable energy inputs and gas emissions in an efficient way in areas related to Natura 2000 sites.     

Renewable energy and macroeconomic efficiency of OECD and non-OECD economies

This article analyzes the effects of renewable energy on the technical efficiency of 45 economies during the 2001–2002 period through data envelopment analysis (DEA). In our DEA model, labor, capital stock, and energy consumption are the three inputs and real GDP is the single output. Increasing the use of renewable energy improves an economy's technical efficiency. Conversely, increasing the input of traditional energy decreases technical efficiency. Compared to non-OECD economies, OECD economies have higher technical efficiency and a higher share of geothermal, solar, tide, and wind fuels in renewable energy. However, non-OECD economies have a higher share of renewable energy in their total energy supply than OECD economies.     

Regulatory reforms and productivity: An empirical analysis of the Japanese electricity industry

The Japanese electricity industry has experienced regulatory reforms since the mid-1990s. This article measures productivity in Japan's steam power-generation sector and examines the effect of reforms on the productivity of this industry over the period 1978–2003. We estimate the Luenberger productivity indicator, which is a generalization of the commonly used Malmquist productivity index, using a data envelopment analysis approach. Factors associated with productivity change are investigated through dynamic generalized method of moments (GMM) estimation of panel data. Our empirical analysis shows that the regulatory reforms have contributed to productivity growth in the steam power-generation sector in Japan.     

Impact of technological change on labor productivity in U.S. coal mines—Evidence from time series and cross sectional data

In this paper, we examine the impact of technological change (TC) on labor productivity in underground and surface mines. TC in the underground mines is the replacement of continuous machines for conventional miners between 1951 and 1970 and the recent penetration of longwall machines. In surface mines, TC consists of substitution of medium and large sized power shovels and draglines (PS&DLs) for smaller counterparts. Impact of these capital stocks vis-à-vis such other explanatory variables as seam thickness or strip ratio, utilization of capacity, captive vs non-captive mines, skilled labor, large sized mines and a dummy variable for coal mine regulations, on labor productivity is analysed by regressing the effects of these explanatory variables on labor productivity. The data used for the analysis include time series, as well as cross section data for mines in the Energy Information Administration's tapes for 1977. The analysis shows that adoption of newer technologies increases labor productivity in both mine types. Other variables that explain increases in productivity are increased seam thickness (in underground mines), exploitation of non-captive mines, use of skilled labor, and use of large mines. The variables explaining decreases in productivity are increased use of semi-skilled labor, strip ratio (in surface mines), mine accidents, and coal mine regulations.     

Estimation of global rebound effect caused by energy efficiency improvement

Rebound effect refers to the phenomenon that the actual reduction in energy use and emissions is less than the expected reduction caused by an energy efficiency improvement due to induced behavior adjustment of relevant economic agents. This article studies the global rebound effects on energy use and related emissions caused by an energy efficiency improvement. We adopt a global computable general equilibrium (CGE) model to design a scenario of energy efficiency improvement, which is compared to a business-as-usual (BAU) scenario to identify the global rebound effect. Our results show very large rebound effect on energy use (70%) and related emissions (90%) in 2040 at the global level with regional and sectoral differences. Important determinants, among others, are induced labor movement among economic activities and labor supply, and substitution elasticity between energy and other goods. Labor mobility has a marked impact on both rebound effects and on fuel mix. The global rebound effect is still considerable even with a low substitution elasticity between energy and other goods. The effect of capital accumulation over time contributes marginally to the global rebound effect as it is utilized to promote economic growth by using energy input more efficiently.