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Improvement restriction data envelopment analysis for new energy in Japan

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  • Soushi Suzuki

Abstract

Japan is faced with "the Fukushima' problem," in which a single nuclear accident has led to drastic electrical power shortages. Owing to the strong backlash of public opinion, almost all of Japan's 54 nuclear plants suspended operations. An intensive search has started for alternative forms of energy, ranging from fossil fuels to new energy, such as solar, wind, geothermal, small-scale hydroelectric and biomass energy. There is no clear-cut direction for energy policy, as each option involves costs and CO2 consequences and Japan has even withdrawn from the Kyoto protocol. A policy that balances energy and the environment is difficult to achieve in the short term; therefore, there is an urgent need for a comprehensive efficiency analysis of new energy in Japan. A popular tool for judging the efficiency of a Decision Making Unit (DMU) is Data Envelopment Analysis (DEA). The development of multiple efficiency improvement solutions based on DEA has progressed in recent years. An example is the Distance Friction Minimisation (DFM) method, based on a generalised distance function, which serves to improve a DMU's performance by tracing the most appropriate movement towards the efficiency frontier. To produce a more realistic improvement plan for low efficiency DMUs, we proposed a Target-Oriented (TO) DFM model that allows reference points that remain below the efficiency frontier. TO-DFM model specifies a Target-Efficiency Score (TES) for inefficient DMUs. This model is able to compute an improvement projection that an input reduction value and an output increase value in order to achieve a TES, even though in reality these values may have an infeasible case, for example Net-Working Rate may be required more than 100% in improvement projection, but it exceed a physical limit. This paper aims to present a newly developed adjusted DEA model, emerging from a blend of the TO-DFM and the Improvement Restriction (IR) approach, for generating an appropriate efficiency-improving projection model. The IR approach specifies a restriction input/output items based on absence or presence of the DMU's improvement limit. This approach can compute an input reduction value and an output increase value in order to achieve a TES that maintains an improvement restriction. The above-mentioned Improvement Restriction TO-DFM model will be applied to an efficiency analysis and will produce a realistic efficiency-improvement projection for new energies in Japan.

Suggested Citation

  • Soushi Suzuki, 2014. "Improvement restriction data envelopment analysis for new energy in Japan," ERSA conference papers ersa14p223, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa14p223
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    File URL: https://www-sre.wu.ac.at/ersa/ersaconfs/ersa14/e140826aFinal00223.pdf
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    References listed on IDEAS

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    1. Tarja Joro & Pekka Korhonen & Jyrki Wallenius, 1998. "Structural Comparison of Data Envelopment Analysis and Multiple Objective Linear Programming," Management Science, INFORMS, vol. 44(7), pages 962-970, July.
    2. Pekka Korhonen & Margareta Soismaa & Aapo Siljamäki, 2002. "On the Use of Value Efficiency Analysis and Some Further Developments," Journal of Productivity Analysis, Springer, vol. 17(1), pages 49-64, January.
    3. Merja Halme & Tarja Joro & Pekka Korhonen & Seppo Salo & Jyrki Wallenius, 1999. "A Value Efficiency Approach to Incorporating Preference Information in Data Envelopment Analysis," Management Science, INFORMS, vol. 45(1), pages 103-115, January.
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    More about this item

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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