IDEAS home Printed from https://ideas.repec.org/a/eco/journ2/2015-04-12.html
   My bibliography  Save this article

The Impact of Electricity Competitive Market Establishment on Technical Efficiency of Thermal Power Plants in Iran

Author

Listed:
  • Mohammad Ali Motafakker Azad

    (Department of Economics, University of Tabriz, Tabriz, Iran,)

  • Mohsen Pourebadollahan Covich

    (Department of Economics, University of Tabriz, Tabriz, Iran,)

  • Sakineh Sojoodi

    (Department of Economics, University of Tabriz, Tabriz, Iran.)

Abstract

Power industry like other network industries, due to economies of scale, has monopolistic operation for many years. Over the last three decades, electricity sectors in most countries have experienced major structural changes including entry of private capital and competition increase. Although the effects of such reforms in developed economies are now well documented, in developing countries, a few studies have examined the effects of these changes due to a variety of reasons. In Iran, structural problem is one of the main problems in the energy sector, which has had an important role in low efficiency of this sector. To solve this problem, in two past decades, restructuring and promoting competition have been in the forefront of government policy and programs in the energy sector. So that substantial reforms occurred in electricity industry structure after establishing power market in 2003. After a decade of reforms in power market, it is necessary to investigate the effects of these reforms on electricity supplier performance, since it will be helpful for progress of electricity industry restructuring and implementing similar reforms in other network industries. The aim of this study, given its real importance in the issue, is examining the effects of market restructuring on technical efficiency in thermal power plants of Iran. For this purpose, technical efficiency of 35 thermal power plants has been calculated in the period 1999-2011 using Data Envelopment Analysis method, then the impact of market restructuring on technical efficiency has been estimated by applying panel data Tobit model. The results indicated that market restructuring has had positive effects on technical efficiency of power plants.

Suggested Citation

  • Mohammad Ali Motafakker Azad & Mohsen Pourebadollahan Covich & Sakineh Sojoodi, 2015. "The Impact of Electricity Competitive Market Establishment on Technical Efficiency of Thermal Power Plants in Iran," International Journal of Energy Economics and Policy, Econjournals, vol. 5(4), pages 1010-1015.
    • Handle: RePEc:eco:journ2:2015-04-12
    as

    Download full text from publisher

    File URL: http://www.econjournals.com/index.php/ijeep/article/download/1439/899
    Download Restriction: no
    File URL: http://www.econjournals.com/index.php/ijeep/article/view/1439/899
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. W. Erwin Diewert & Alice O. Nakamura, 1999. "Benchmarking and the measurement of the best practice efficiency: an electricity generation application," Canadian Journal of Economics, Canadian Economics Association, vol. 32(2), pages 570-588, April.
    2. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-746, August.
    3. Yin-Fang Zhang & David Parker & Colin Kirkpatrick, 2008. "Electricity sector reform in developing countries: an econometric assessment of the effects of privatization, competition and regulation," Journal of Regulatory Economics, Springer, vol. 33(2), pages 159-178, April.
    4. Barros, Carlos Pestana, 2008. "Efficiency analysis of hydroelectric generating plants: A case study for Portugal," Energy Economics, Elsevier, vol. 30(1), pages 59-75, January.
    5. Pollitt, Michael G, 1996. "Ownership and Efficiency in Nuclear Power Production," Oxford Economic Papers, Oxford University Press, vol. 48(2), pages 342-360, April.
    6. Klaus M. Schmidt, 1997. "Managerial Incentives and Product Market Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(2), pages 191-213.
    7. Sanghoon Ahn, 2001. "Firm Dynamics and Productivity Growth: A Review of Micro Evidence from OECD Countries," OECD Economics Department Working Papers 297, OECD Publishing.
    8. repec:lic:licosd:26210 is not listed on IDEAS
    9. Madhu Khanna & Kusum Mundra & Aman Ullah, 1999. "Parametric and semi-parametric estimation of the effect of firm attributes on efficiency: the electricity generating industry in India," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 8(4), pages 419-430.
    10. J. Dean Craig and Scott J. Savage, 2013. "Market Restructuring, Competition and the Efficiency of Electricity Generation: Plant-level Evidence from the United States 1996 to 2006," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    11. Fan Zhang, 2007. "Does Electricity Restructuring Work? Evidence From The U.S. Nuclear Energy Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 55(3), pages 397-418, September.
    12. Robert D. Willig, 1987. "Corporate Governance and Market Structure," Palgrave Macmillan Books, in: Assaf Razin & Efraim Sadka (ed.), Economic Policy in Theory and Practice, chapter 13, pages 481-503, Palgrave Macmillan.
    13. Kira R. Fabrizio & Nancy L. Rose & Catherine D. Wolfram, 2007. "Do Markets Reduce Costs? Assessing the Impact of Regulatory Restructuring on US Electric Generation Efficiency," American Economic Review, American Economic Association, vol. 97(4), pages 1250-1277, September.
    14. Goto, Mika & Tsutsui, Miki, 2008. "Technical efficiency and impacts of deregulation: An analysis of three functions in U.S. electric power utilities during the period from 1992 through 2000," Energy Economics, Elsevier, vol. 30(1), pages 15-38, January.
    15. L. Dean Hiebert, 2002. "The Determinants of the Cost Efficiency of Electric Generating Plants: A Stochastic Frontier Approach," Southern Economic Journal, John Wiley & Sons, vol. 68(4), pages 935-946, April.
    16. Assaf Razin & Efraim Sadka (ed.), 1987. "Economic Policy in Theory and Practice," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-18584-9.
    17. Vickers, John, 1995. "Concepts of Competition," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 1-23, January.
    18. Sarıca, Kemal & Or, Ilhan, 2007. "Efficiency assessment of Turkish power plants using data envelopment analysis," Energy, Elsevier, vol. 32(8), pages 1484-1499.
    19. Andrew N. Kleit & Dek Terrell, 2001. "Measuring Potential Efficiency Gains From Deregulation Of Electricity Generation: A Bayesian Approach," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 523-530, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. See, Kok Fong & Coelli, Tim, 2014. "Total factor productivity analysis of a single vertically integrated electricity utility in Malaysia using a Törnqvist index method," Utilities Policy, Elsevier, vol. 28(C), pages 62-72.
    2. See, Kok Fong & Coelli, Tim, 2012. "An analysis of factors that influence the technical efficiency of Malaysian thermal power plants," Energy Economics, Elsevier, vol. 34(3), pages 677-685.
    3. Triebs, Thomas P. & Pollitt, Michael G., 2019. "Objectives and incentives: Evidence from the privatization of Great Britain’s power plants," International Journal of Industrial Organization, Elsevier, vol. 65(C), pages 1-29.
    4. Seifert, Stefan & Cullmann, Astrid & von Hirschhausen, Christian, 2016. "Technical efficiency and CO2 reduction potentials — An analysis of the German electricity and heat generating sector," Energy Economics, Elsevier, vol. 56(C), pages 9-19.
    5. Ghosh, Ranjan & Kathuria, Vinish, 2016. "The effect of regulatory governance on efficiency of thermal power generation in India: A stochastic frontier analysis," Energy Policy, Elsevier, vol. 89(C), pages 11-24.
    6. Stefan Seifert & Astrid Cullmann & Christian von Hirschhausen, 2014. "Technical Efficiency and CO2 Reduction Potentials: An Analysis of the German Electricity Generating Sector," Discussion Papers of DIW Berlin 1426, DIW Berlin, German Institute for Economic Research.
    7. Ajayi, Victor & Weyman-Jones, Tom, 2021. "State-level electricity generation efficiency: Do restructuring and regulatory institutions matter in the US?," Energy Economics, Elsevier, vol. 104(C).
    8. Mou, Dunguo, 2014. "Understanding China’s electricity market reform from the perspective of the coal-fired power disparity," Energy Policy, Elsevier, vol. 74(C), pages 224-234.
    9. Alejandro Robinson Cortés, 2013. "Eficiencia Interna y Competencia de Mercado en Oligopolio," Undergraduate theses (Spanish) tesl001, CIDE, División de Economía.
    10. Sugathan, Anish & Malghan, Deepak & Chandrashekar, S. & Sinha, Deepak K., 2019. "Downstream electric utility restructuring and upstream generation efficiency: Productivity dynamics of Indian coal and gas based electricity generators," Energy, Elsevier, vol. 178(C), pages 832-852.
    11. Assaf, A. George & Barros, Carlos Pestana & Managi, Shunsuke, 2011. "Cost efficiency of Japanese steam power generation companies: A Bayesian comparison of random and fixed frontier models," Applied Energy, Elsevier, vol. 88(4), pages 1441-1446, April.
    12. Ajayi, V. & Weyman-Jones, T., 2021. "State-Level Electricity Generation Efficiency: Do Restructuring and Regulatory Institutions Matter in the US?," Cambridge Working Papers in Economics 2166, Faculty of Economics, University of Cambridge.
    13. Nickell, Stephen, 1999. "Product markets and labour markets1," Labour Economics, Elsevier, vol. 6(1), pages 1-20, March.
    14. Chen, Zhongfei & Barros, Carlos Pestana & Borges, Maria Rosa, 2015. "A Bayesian stochastic frontier analysis of Chinese fossil-fuel electricity generation companies," Energy Economics, Elsevier, vol. 48(C), pages 136-144.
    15. Young Bong Chang & Vijay Gurbaxani, 2013. "An Empirical Analysis of Technical Efficiency: The Role of IT Intensity and Competition," Information Systems Research, INFORMS, vol. 24(3), pages 561-578, September.
    16. Giordano, Claire & Giugliano, Ferdinando, 2015. "A tale of two Fascisms: Labour productivity growth and competition policy in Italy, 1911–1951," Explorations in Economic History, Elsevier, vol. 55(C), pages 25-38.
    17. Xuejuan Su, 2015. "Have customers benefited from electricity retail competition?," Journal of Regulatory Economics, Springer, vol. 47(2), pages 146-182, April.
    18. repec:cte:werepe:we056029 is not listed on IDEAS
    19. Yu, Chin-Hsien & Zhao, Jinsong & Qin, Ping & Wang, Shinn-Shyr & Lee, Wen-Chieh, 2022. "Comparison of misallocation between the Chinese thermal power and hydropower electricity industries," Economic Modelling, Elsevier, vol. 116(C).
    20. Nickell, Stephen & Nicolitsas, Daphne & Dryden, Neil, 1997. "What makes firms perform well?," European Economic Review, Elsevier, vol. 41(3-5), pages 783-796, April.
    21. Jacques-Bernard Sauner-Leroy, 2003. "The impact of the implementation of the Single Market Programme on productive efficiency and on mark-ups in the European Union manufacturing industry," European Economy - Economic Papers 2008 - 2015 192, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

    More about this item

    Keywords

    Electricity Industry; Market Restructuring; Technical Efficiency; Thermal Power Plants; Panel Data Tobit;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ2:2015-04-12. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.