A data envelopment analysis of the levels and determinants of coal-fired electric power generation performance

Abstract Greater levels of competition in electric power markets offer the promise of increased efficiency, with lower costs to consumers. Yet despite these perceived benefits, little empirical work has been conducted to quantify existing power plant performance characteristics. In the past, empirical work has focused on average determinations of cost performance, and their associated scale implications, and not on measures of best practice (i.e., cost efficiency). This paper attempts to measure cost efficiency opportunities for coal-fired electric generation facilities. We apply non-parametric measurement techniques to plant-specific information. Our approach also partitions cost efficiency into its component parts and considers the influence that fuel type, technology, vintage and size has on operating efficiency. Our results show considerable opportunities for cost reduction in the industry that could result in price reductions to electricity consumers.