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[en] Sueyoshi et al. (2009) have examined a synergy effect between electricity and gas services in the US electric utility industry. They have compared electricity-specialized firms with diversified utility firms in their financial performance and corporate value. A problem of their study is that it has not empirically measured the operational performance of the electric utility firms. As an extension of the preceding study, this research investigates the operational performance of 104 US electric utility firms (1990-2004) by fully utilizing DEA (Data Envelopment Analysis). This study finds the three new policy implications. First, the synergy effect has not existed in the operational performance of diversified utility firms before and after the deregulation on the US electricity markets. Thus, core business concentration is more effective for electric utility firms than corporate diversification to enhance their operational performance under the current US deregulation policy. Second, the operational performance has had an increasing trend until 1996 and a decreasing trend after 1996. Thus, the US deregulation policy has been influential on their operational performance. Third, the enhancement in operational performance of electric utility firms has improved their financial performance. The improvement in financial performance has increased their corporate value. Thus, this study finds the business causality among operational performance, financial performance and corporate value in the US electric utility industry. (author)
[en] This study compares among fossil fuel power plants in PJM and California ISO by their unified (operational and environmental) performance. DEA (Data Envelopment Analysis) is used as a methodology. For comparative analysis, DEA incorporates strategic concepts such as natural and managerial disposability into the computational process. This study explores both how to measure Returns to Scale (RTS) under natural disposability and how to measure Damages to Scale (DTS) under managerial disposability. This empirical study obtains two implications on US energy policy. One of the two policy implications is that California ISO outperforms PJM in terms of the three unified efficiency measures. The result implies that strict regulation on undesirable outputs, as found in California, is important in enhancing the performance of US fossil fuel power plants. Thus, it is necessary for federal and local governments to regulate the fossil fuel power plants under the strict implementation of environmental protection. Under such a policy direction, it is possible for US fossil fuel power plants to attain economic prosperity (by enhancing their operational efficiencies) and to satisfy environmental regulation (by enhancing their environmental efficiencies). The other policy implication is that coal-fired and gas-fired power plants in PJM and California ISO need to reduce their operational sizes or introduce technology innovation on desirable and undesirable outputs and/or new management for environmental protection within their operations. Meanwhile, oil-fired power plants may increase their operational sizes if they can introduce technology innovation and new management on undesirable outputs. - Highlights: • This study compares fossil fuel power plants in PJM and California ISO. • California ISO outperforms PJM in terms of their unified efficiency measures. • Regulation by Clean Air Act is important for environmental protection. • Fossil fuel power plants need technology innovation for environmental protection
[en] Climate change and global warming become a major policy issue in the world. Economic activities produce not only desirable outputs (e.g., electricity) but also undesirable outputs (e.g., CO2 emission). The important policy issue is how each nation can balance between economic development and environmental protection to attain a sustainable society. In attaining the sustainable society, environmental assessment is increasingly important because it can serve as an initial step toward the green growth of each nation. For the purpose, this study proposes a new use of DEA (Data Environment Analysis) for environmental assessment in a time horizon. The proposed use of DEA incorporates Malmquist index to examine the degree of a frontier shift among multiple periods. The frontier shift indicates a technology progress and/or managerial innovation during an observed period. The index is conceptually separated into six subcomponents, which are further divided into twelve different subcomponents (six subcomponents × two disposability concepts) under the natural and managerial disposability. In the index measurement, it is necessary for us to consider a frontier crossover among different periods because technology innovation usually has a time lag until it really appears. As an empirical application, this study utilizes the proposed approach to identify the relationship among fuel mix, electricity and CO2 of ten industrial nations. This study finds three important empirical findings. First, there is a time lag in technology innovation on electricity generation and CO2 emission reduction. Consequently, it is necessary to consider the existence of a frontier crossover in assessing the electric power industry. Second, nuclear generation, as found in France, as well as hydro and renewable energy, as found in Netherlands, are important for the development of a sustainable society although the former is associated with a very high level of risk and the latter has a limited generation capacity. Finally, the electric power industry has been making a corporate effort to reduce the amount of CO2 emission by utilizing nuclear and renewable energy. - Highlights: • This study discusses DEA for the environmental assessment in a time horizon. • The proposed use of DEA incorporates the Malmquist index. • A time lag exists in technology innovation on electricity generation and reduction of CO2 emission. • Nuclear generation and hydro and renewable energy are important for a sustainable society. • The electric power industry has been making an effort to reduce CO2 emission
[en] Energy policy depends on a proper use of methodology in guiding a large energy issue such as the global warming and climate change. DEA is one of such methodologies that are often used for preparing environmental policy, which is closely linked to various energy issues. Unfortunately, the use of DEA applied to environmental policy is insufficient, often misguiding policy makers and other individuals who are involved in energy issues. This study provides three guidelines for a use of DEA in preparing environmental assessment. First, it is important to prepare both primal and dual formulations to confirm whether information regarding all production factors (i.e., inputs, desirable and undesirable outputs) is fully utilized in DEA assessment. Second, DEA has model variations in radial and non-radial measurements. It is necessary for us to examine environmental issues by different models in order to avoid a methodological bias existing in those empirical studies. Finally, DEA environmental assessment needs to incorporate the concept of natural and managerial disposability. The natural disposability indicates that a firm negatively adapts a regulation change on undesirable outputs. In contrast, the managerial disposability indicates that a firm positively adapts the regulation change because the firm considers the regulation change as a new business opportunity. - Highlights: ► This study proposes three disable procedures. ► The disposability is separated into natural and managerial disposability. ► All extensions have large applicability in energy policy.
[en] This study proposes a use of Data Envelopment Analysis (DEA) for environmental assessment. All organizations in private and public sectors produce not only desirable (good) but also undesirable (bad) outputs as a result of their economic activities. The proposed use of DEA determines the level of unified (operational and environmental) efficiency of all the organizations. A contribution of this study is that it explores how to measure not only RTS (Returns to Scale) on desirable outputs but also a new concept regarding “DTS: Damages to Scale” (corresponding to RTS for undesirable outputs). This study discusses how to measure RTS under natural disposability and DTS under managerial disposability by DEA. The measurement of RTS and DTS is formulated by incorporating “Strong Complementary Slackness Conditions (SCSCs)”. As a result, this study can handle an occurrence of multiple reference sets and multiple projections in the RTS/DTS measurement. The incorporation of SCSCs makes it possible both to restrict DEA multipliers in a specific range without any prior information and to identify all possible efficient organizations as a reference set. Using the unique capabilities of SCSCs, this study discusses the use of DEA environmental assessment by exploring how to classify the type of RTS/DTS with SCSCs. Such analytical capabilities are essential, but not previously explored in DEA environmental assessment for energy industries. As an illustrative example, this study applies the proposed approach for the performance evaluation of Japanese manufacturing industries. This study finds that these firms need to introduce technology innovation to reduce an amount of greenhouse gases and wastes. The empirical result confirms the importance of measuring RTS/DTS in DEA environmental assessment.
[en] A balance between industrial pollution prevention and economic growth becomes a world-wide issue to develop a sustainable society in many industrial nations. To discuss the issue, this study proposes a new use of DEA environmental assessment to determine how to effectively allocate capital for developing regional industries. The amount of capital is used to invest for technology innovation for both local economic growth and environmental protection. In this study, the proposed approach separates outputs into desirable and undesirable categories. Inputs are also separated into two categories, one of which indicates an amount of investment on capital assets. The other category is used for production activities. The proposed approach unifies them by two disposability concepts. This study has evaluated the performance of manufacturing industries in 47 prefectures (local government units in Japan) by Unified Efficiency under Natural disposability (UEN), Unified Efficiency under Managerial disposability (UEM) and Unified Efficiency under Natural and Managerial disposability (UENM). The UENM is further separated into its two cases: with and without a possible occurrence on desirable congestion, or technology innovation, on undesirable outputs. This study has empirically confirmed that Japanese manufacturing industries need to make their efforts to reduce greenhouse gas emissions and air pollution substances by investing in technology innovation. Furthermore, most of economic activities are currently located at metropolitan regions (e.g., Tokyo) in Japan. To develop a sustainable society, Japan needs to allocate capital into regions with a high level of investment effectiveness by shifting the manufacturing industries from the metropolitan regions to much promising local areas identified in this study. Such a shift, along with technology innovation, makes it possible to reduce air pollutions in the entire Japan by balancing economic growth and pollution prevention. This empirical study confirms that the proposed approach is useful in both guiding regional planning and developing a sustainable society. It is easily envisioned that the proposed approach is useful for not only Japan but also the other industrial and developing nations. - Highlights: • Japan effectively reduces greenhouse gas emissions and air pollution substances. • Japan needs to allocate capital in regions with high investment effectiveness. • Technology innovation makes it possible to balance economic growth and pollution prevention. • The proposed approach is useful in guiding regional development of a sustainable society
[en] have examined a synergy effect between electricity and gas services in the US electric utility industry. They have compared electricity-specialized firms with diversified utility firms in their financial performance and corporate value. A problem of their study is that it has not empirically measured the operational performance of the electric utility firms. As an extension of the preceding study, this research investigates the operational performance of 104 US electric utility firms (1990-2004) by fully utilizing DEA (Data Envelopment Analysis). This study finds the three new policy implications. First, the synergy effect has not existed in the operational performance of diversified utility firms before and after the deregulation on the US electricity markets. Thus, core business concentration is more effective for electric utility firms than corporate diversification to enhance their operational performance under the current US deregulation policy. Second, the operational performance has had an increasing trend until 1996 and a decreasing trend after 1996. Thus, the US deregulation policy has been influential on their operational performance. Third, the enhancement in operational performance of electric utility firms has improved their financial performance. The improvement in financial performance has increased their corporate value. Thus, this study finds the business causality among operational performance, financial performance and corporate value in the US electric utility industry. - Research Highlights: →The synergy effect has not existed in the operational performance of diversified utility firms before and after the deregulation on the US electricity markets. →Core business concentration is more effective for electric utility firms than corporate diversification to enhance their operational performance under the current US deregulation policy. →The operational performance has had an increasing trend until 1996 and a decreasing trend after 1996. →The US deregulation policy has been influential on their operational performance. →The enhancement in operational performance of electric utility firms has improved their financial performance. →The improvement in financial performance has increased their corporate value.
[en] This study compares Photovoltaic (PV) power stations between Germany and the United States to examine which country more efficiently provides renewable energy in their usages. For the comparative analysis, this study utilizes Data Envelopment Analysis (DEA) as a methodology to evaluate the performance of PV power stations from the perspective of both solar and land usages. A total of one hundred sixty PV power stations (eighty in Germany and eighty in the United States) are used for this comparison. The demand for sustainable energy and energy security has been rapidly increasing over the past decade because of concerns about environment and limited resources. PV solutions are one of many renewable technologies that are being developed to satisfy a recent demand of electricity. Germany is the world's top installer and consumer of PV power and the United States is one of the top five nations. Germany leads the way in installed PV capacity even though the nation has less solar resources and land area. Due to limited solar resources, low insolation and sunshine, and land area, the United States should have a clear advantage over Germany. However, the empirical result of this study exhibits that PV power stations in Germany operate more efficiently than those of the United States even if the latter has many solar and land advantages. The surprising result indicates that the United States has room for improvement when it comes to utilizing solar and land resources and needs to reform the solar policy. For such a purpose, Feed-In Tariff (FIT) may be an effective energy policy at the state level in the United States because the FIT provides investors such as utility companies and other types of energy firms with financial incentives to develop large PV power stations and generation facilities for other renewable energy. It may be true that the FIT is a powerful policy tool to promote PV and other renewable installation and support a reduction of an amount of greenhouse gases. However, the FIT poses a large financial burden to consumers with a massive increase in renewable energy installation like in Germany and Spain. Therefore, it is necessary for the United States to consider how to align a policy with a speed of technology innovation to balance between the benefit and the cost derived from the policy implementation on renewable energy. In addition, this study discusses policy issues regarding cost allocation due to FIT among stakeholders related to the electric power industry. At the end, this study proposes a new type of wholesale electricity market that provides simultaneous trading on electricity and greenhouse gas emissions by fully utilizing modern computer science technology that exists in universities and national laboratories of the United States. - Highlights: • This study compares photovoltaic power stations in Germany and the United States. • A total of one hundred sixty PV power stations are used for the international comparison. • Germany is more efficient than the United States in terms of solar and land usages. • Feed-In Tariff (FIT) may be effective at the state level in the United States
[en] The main purpose of this study is to examine the impacts of deregulation on technical efficiency and its changes over time for large-scale U.S. electric power utilities during the period from 1992 through 2000. We analyze the efficiency of three individual functions, i.e., generation, transmission/distribution, and general administration, and the deregulatory impacts on each of them. In order to implement the analysis, we estimate an input distance function by using a stochastic frontier analysis. The results indicate that there is a significant impact of deregulation on efficiency in the generation and general administration functions, while no effects are observed in the transmission/distribution function
[en] Data Envelopment Analysis (DEA) has been widely used for performance evaluation of many organizations in private and public sectors. This study proposes a new DEA approach to evaluate the operational, environmental and both-unified performance of coal-fired power plants that are currently operating under the US Clean Air Act (CAA). The economic activities of power plants examined by this study are characterized by four inputs, a desirable (good) output and three undesirable (bad) outputs. This study uses Range-Adjusted Measure (RAM) because it can easily incorporate both desirable and undesirable outputs in the unified analytical structure. The output unification proposed in this study has been never investigated in the previous DEA studies even though such a unified measure is essential in guiding policy makers and corporate leaders. Using the proposed DEA approach, this study finds three important policy implications. First, the CAA has been increasingly effective on their environmental protection. The increased environmental performance leads to the enhancement of the unified efficiency. Second, the market liberalization/deregulation was an important business trend in the electric power industry. Such a business trend was legally prepared by US Energy Policy Act (EPAct). According to the level of the market liberalization, the United States is classified into regulated and deregulated states. This study finds that the operational and unified performance of coal-fired power plants in the regulated states outperforms those of the deregulated states because the investment on coal-fired power plants in the regulated states can be utilized as a financial tool under the rate-of-return criterion of regulation. The power plants in the deregulated states do not have such a regulation premium. Finally, plant managers need to balance between their environmental performance and operational efficiency. (author)