Does environmental heterogeneity affect the productive efficiency of grid utilities in China?
Bai-Chen Xie and
Michael Pollitt ()
Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
China’s electricity industry has experienced a reform whereby the generation sector is being opened up to competition but the transmission and distribution sectors are still regulated. Efficiency and benchmarking analyses are widely used for improving the performance of regulated segments, and the impact on efficiency of observable environmental factors, together with unobservable characteristics, has gained increasing attention in recent years. This study uses alternative stochastic frontier models combined with input distance functions to study the productive efficiency of 29 grid firms of China over the period 1993–2014 and investigates the effect of observed environmental factors and unobserved heterogeneity. The results indicate that efficiency is sensitive to model specification and illustrates the presence of observed and unobserved heterogeneity. The number of customers, power delivered and network length are demonstrated to have positive impacts on the utilities’ efficiency while adverse environmental conditions harm the operation of grid utilities, but policy regulations may offset the negative impact. Finally, we suggest that there is room for efficiency improvement in the distribution grid, which could be encouraged by incentive regulation, even taking due account of environmental heterogeneity.
Keywords: Grid industry; Efficiency estimation; Stochastic frontier analysis; Environmental heterogeneity; China (search for similar items in EconPapers)
JEL-codes: L94 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff, nep-ene, nep-env and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Working Paper: Does environmental heterogeneity affect the productive efficiency of grid utilities in China? (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:1838
Access Statistics for this paper
More papers in Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
Bibliographic data for series maintained by Jake Dyer ().