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Performance effects of network structure and ownership: The norwegian electricity distribution sector
RISE Research Institutes of Sweden, Safety and Transport, Measurement Technology.
Copenhagen Business School, Denmark.
Copenhagen Business School, Denmark.
2021 (English)In: Energies, E-ISSN 1996-1073, Vol. 14, no 21, article id 7160Article in journal (Refereed) Published
Abstract [en]

Transmission and distribution networks are capital intensive segments of the electricity sector and are generally considered natural monopolies. Due to their non-competitive nature, these are subject to independent regulation to prevent the abuse of monopolistic power and to induce competitive behaviour. Effective economic regulation of the electricity networks has become a key target in most developed economies after the 1980s. In Norway, incentive regulation and efficiency benchmarking were introduced in 1997. In Norway, the electricity grid is divided into three levels, namely, central, regional and distribution networks. In this paper, we study two overlooked aspects when analysing the performance of electricity networks: vertical integration and ownership structure. We use a stochastic frontier analysis approach to analyse the performance of Norwegian electricity distribution utilities for the period 2007–2014. We observe that vertical integration between distribution and regional transmission implies higher cost inefficiencies. This indicates that the efficiency gains due to separate management of the networks exceed the economies of coordination from vertical economies of scope. In addition, we find that council ownership entails higher efficiencies. This could be explained by the state having an interest in high-voltage electricity networks, rather than low-voltage ones, and the decentralised model from which the now centralised system was once developed. © 2021 by the authors. 

Place, publisher, year, edition, pages
MDPI , 2021. Vol. 14, no 21, article id 7160
Keywords [en]
Heteroscedastic stochastic cost frontiers, Norwegian electricity distribution, Ownership structure, Regional transmission, Vertical integration, Costs, Efficiency, Electric industry, Electric power system interconnection, Electric utilities, Integration, Transmissions, Cost frontier, Electricity distribution, Electricity networks, Heteroscedastic, Heteroscedastic stochastic cost frontier, Stochastics, Stochastic systems
National Category
Economics
Identifiers
URN: urn:nbn:se:ri:diva-56914DOI: 10.3390/en14217160Scopus ID: 2-s2.0-85118530264OAI: oai:DiVA.org:ri-56914DiVA, id: diva2:1613468
Note

Funding text 1: The authors want to acknowledge the support of The Norwegian Water Resources and Energy Directorate (NVE) in collecting the data. Financial support from the Copenhagen School of Energy Infrastructure (CSEI) is acknowledged. The activities of CSEI are funded jointly by Copenhagen Business School and energy sector partners.

Available from: 2021-11-22 Created: 2021-11-22 Last updated: 2023-08-28Bibliographically approved

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CiteExportLink to record
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