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Vertical Separation of Transmission Control and Regional Production Efficiency in the Electricity Industry

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  • Yin Chu

Abstract

This study investigates the divestiture of transmission control from vertically-integrated power producers, aimed to maintain non-discriminatory access of the transmission network. I ask whether the vertical separation is sufficient to enhance how efficiently production is allocated among generators (i.e., regional production efficiency). Using a difference-in-difference strategy, I compare the treated region, Southwest Power Pool (SPP), with a control region, where no restructuring activities were implemented. Based on robust empirical results, I fail to find significant market wide evidence of improvement in regional production efficiency associated with the vertical separation of transmission control. However, looking into subgroups of generators, I find mixed evidence of cost savings via reallocation of production resources: (1) coal units are dispatched more efficiently after the restructuring; (2) this is not true for two types of gas units with different combustion technologies and cost efficiency.

Suggested Citation

  • Yin Chu, 2021. "Vertical Separation of Transmission Control and Regional Production Efficiency in the Electricity Industry," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 197-228.
    • Handle: RePEc:aen:journl:ej42-1-chu
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    Cited by:

    1. Hou, Zheng & Roseta-Palma, Catarina & Ramalho, Joaquim J.S., 2024. "Can operational efficiency in the Portuguese electricity sector be improved? Yes, but..," Energy Policy, Elsevier, vol. 190(C).
    2. Chu, Yin & Gao, Juanxia & Li, Haoyang, 2023. "Wind power expansion and regional allocative efficiency among fossil-fuel electricity generators," International Journal of Industrial Organization, Elsevier, vol. 91(C).

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    JEL classification:

    • F0 - International Economics - - General

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