EP 14

Preetum Domah

Technical Efficiency in Electricity Generation – The Impact of Smallness and Isolation of Island Economies

EP 14  | Non-Technical Summary | PDF

Abstract: This paper conducts a comparative technical efficiency analysis of electricity generators in 16 small island economies using panel data, and two methodologies: data envelopment analysis (DEA) and stochastic frontier analysis (SFA). The results indicate neither apparent differences in the production structure between islands and non-islands electric utilities, nor any evidence suggesting that they are less technically efficient. At a theoretical level, our results suggest that benchmarking of small islands, using non-island generating utilities as comparators, is both feasible and desirable given the lack of historical generation data for most small islands. On a more empirical basis, our study bridges an important gap in research on the efficiency of small and interconnected electricity systems.

Keywords: Electricity; SFA; Malmquist DEA; small islands