Efficiency and environmental factors in the US electricity transmission industry

Abstract

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Does environmental heterogeneity affect the productive efficiency of grid utilities in China?

“…With regard to the external variables in the pre-truncated inefficiency component, we get positive coefficients for annual precipitation, wind speed and mountain rates, which illustrates that bigger observed values would generate lower levels of efficiency; similar results have also been obtained by Llorca et al(2016). It is somewhat surprising to find that the temperature range gains a negative sign, indicating that for utilities that are operated in a region with a larger temperature range, it is easy to achieve higher efficiency.…”

“…In general, adverse weather conditions may block the improvement of efficiency, whereas the policy and grid design seem to have the ability to offset the negative effects of cold weather. As for the time trend, it seems that the negative value through the input distance function of TREH2 cannot counterbalance its negative value for the pre-truncation mean of inefficiency, which is also consistent with Llorca et al(2016). In general, the efficiency we get is a little lower than that of , which may be due to their ignoring several provinces with adverse environmental conditions and, accordingly, lower efficiency.…”

“…As for the environmental variables, Domijan et al(2005) found that weather conditions, such as rainfall and wind, are the most significant factors affecting the power outages. According to Llorca et al(2016), it is more difficult to manage a firm operating in a region with bad weather where the wind speed and precipitation are high and the minimum temperature is low. We include these above mentioned factors such as the temperature range   provinces.…”

“…Kopsakangas-Savolainen and Svento(2011) analyzed the effect of observed and unobserved heterogeneity on distribution utilities in Finland. Galán and Pollitt(2014) found the existence of persistent high inefficiency in the Colombian distribution sector, and Llorca et al(2016) demonstrated the influence of environmental factors on the efficiency of the US electricity transmission industry. As can be seen, most of the studies have just focused on the transmission or distribution sector; this study will explore whether their results are applicable to the integrated power grid system in China.…”

Using stochastic frontier analysis to measure the impact of weather on the efficiency of electricity distribution businesses in developing economies

“…Some find that weather does influence efficiency (Jamasb et al, 2012, Growitsch et al, 2010, Llorca et al, 2016, others find that weather does not produce any effect on efficiency (Nillesen and Pollitt, 2010;Korhonen and Syrjänen, 2003) and still others suggest that specific variables may act as proxies for the effect of weather on efficiency (Yu et. al, 2009a).…”