The impacts of the coal-electricity price linkage on the profit efficiency of China’s thermal power plants

Abstract

Under the dual track mechanism of 'market coal and plan electricity', China's power price cannot be adjusted in a timely manner according to the changes in the coal price. The authorities put forward the policy of coal electricity linkage to overcome this dilemma in 2004 and updated the relevant details in 2016. Based on the directional distance function, this study measured the profit efficiency of over 1300 thermal power plants in China during 2002-2011 and investigated the impacts of the linkage policy using scenario analysis. We implemented the bootstrap method to analyse the sensitivity of the estimators of efficiency to sample variation and the impacts of plant-specific factors. The empirical results show that: First, compared to the predetermined directional vector approach, the generalised endogenous projection vectors made the estimated inefficiency scores perform better in objectivity, feasibility, and differentiation. Second, technical inefficiency was the primary cause of the profit inefficiency during the study period rather than allocative inefficiency. The large generation groups attained higher profit efficiencies than the power plants not affiliated to them. Finally, in straightening out the relationship between the coal and power prices, the linkage mechanism could only be a transitory step to the electricity market-oriented reform.

Analysing drivers of efficiency in the leather industry: a two-stage double bootstrap DEA approach

“…Simar and Wilson (2007) introduced a double bootstrap procedure to describe a DGP that provides a confidence interval for efficiency estimates and a consistent inference of factors affecting efficiency. Several studies have used Simar and Wilson’s (2007) double bootstrap DEA method for analysing efficiency determinants in DEA approach (see Balcombe et al , 2008; Wijesiri et al , 2015; Jebali et al , 2017; Duan et al , 2019; Khan and Gulati, 2019). Following Simar and Wilson’s (2007) algorithm 2, the truncated regression is carried as below.where θi^ is the bias-corrected efficiency obtained from bootstrap DEA, α is a constant, Zi is a vector of independent variables and italicϵi is statistical noise term.…”

A Review of Energy Industry Chain and Energy Supply Chain

“…Many researchers have developed a series of simulated models, such as game model [80], computable general equilibrium models [81], Stackelberg game model [82] and complex supply chain networks model to establish the dynamic linkage of coal and electricity prices. It is also proven that the price transmission network model can help alleviate the serious contradiction between China's coal price marketization and national electricity price [83,84]. From the perspective of institutional design, the coal-electricity linkage mechanism can indeed reduce the profit loss of coal-fired power generation enterprises and improve business performance when the coal price is increasing [85].…”

The dynamics of Indian energy mix: a two-phase analysis

“…Using the directional distance function, an approach on the lines of DEA, Duan et al (2019) measured the profit efficiency of thermal power plants in China during 2002–11 and investigated the impacts of the linkage policy using scenario analysis. Alizadeh et al (2020) used a dynamic network-based DEA for the Iranian power sector and showed that privatization of the distribution sector resulted in substantial efficiency gains.…”