Measuring output-based technical efficiency of Indian coal-based thermal power plants

Abstract

Purpose The purpose of this paper is to measure technical efficiency of Indian thermal power sector employing the recent by-production approach. Design/methodology/approach The by-production approach is used in conjunction with data from the Central Electricity Authority (CEA) of India to compute the output-based Färe, Grosskopf, Lovell (FGL) efficiency index and its decomposition into productive and environmental efficiency indexes for the ITPPs Findings The authors show that given the aggregated nature of data on coal reported by CEA, CEA’s computation of CO2 emissions through a deterministic linear formula that does not distinguish between different coal types and the tiny share of oil in coal-based power plants, the computed output-based environmental efficiency indexes are no longer informative. Meaningful measurement of environmental efficiency using CEA data is possible only along the dimension of the coal input. Productive efficiency is positively associated with the engineering concept of thermodynamic/energy efficiency and is also high for power plants with high operating availabilities reflecting better management and O&M practices. Both these factors are high for private and centrally owned as opposed to state-owned power-generating companies. The example of Sipat demonstrates the importance of (ultra)supercritical technologies in increasing productive and thermodynamic efficiencies of the ITPPs, while also reducing CO2 emitted per unit of the net electricity generated. Originality/value This paper uses the by-production approach for the first time to measure technical efficiency of ITPPs and highlights how the nature of the Indian data impacts on efficiency measurement.