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Market Restructuring, Competition and the Efficiency of Electricity Generation: Plant-level Evidence from the United States 1996 to 2006

This paper examines the effects of market restructuring initiatives that introduced competition into the United States electricity industry on the thermal efficiency of electricity generation. An empirical model is estimated on annual data for over 950 plants from 1996 to 2006. Model estimates show that access to wholesale electricity markets and retail choice together increased the efficiency of investor-owned plants by about nine percent and that these gains stem from organizational and technological changes within the plant. Although not directly targeted by restructuring initiatives, similar efficiency gains are also found for municipality-owned plants. This result suggests that the potential benefits from competition have spilled over to public electricity generation.

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Energy Specializations: Energy Efficiency; Electricity – Generation Technologies; Electricity – Markets and Prices ; Electricity – Policy and Regulation

JEL Codes: Q40: Energy: General, Q41: Energy: Demand and Supply; Prices, Q35: Hydrocarbon Resources, Q54: Climate; Natural Disasters and Their Management; Global Warming

Keywords: Competition, Efficiency, Electricity generation

DOI: 10.5547/01956574.34.1.1

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Published in Volume 34, Number 1 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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