Abstract
This paper presents a study aimed at measuring the efficiency of the transmission segment of the US natural gas industry from an economic perspective. The gas transmission infrastructure is modeled as an economic production function and a multi-stage modeling approach based on the implementation of Data Envelopment Analysis is employed to obtain an efficiency measure in a two-dimension performance space, i.e., cost and revenue-efficiency. This approach allows taking into account conflicting business goals. The study also performs cluster analysis to uncover homogeneous efficiency profiles relative to the gas transmission systems to explore determinants of efficiency rates, and trade-off situations. A sample containing 80 US gas transmission systems is used in the analysis. Results indicate that the transmission segment of the US gas industry has considerable inefficiencies, while average cost and revenue-efficiency scores are 0.324 and 0.301, and only three transmission systems achieve high scores on both efficiency dimensions. Cluster analysis identified seven configurations. In three of them there are no trade-off situations between cost and revenue efficiencies. However, only in one of them gas transmission systems have high efficiencies. The remaining four configurations exhibit trade-off situations having different intensity. Such trade-offs can be determined by the gas transmission infrastructure size.
Highlights
About one quarter of the United States energy needs depend on natural gas supply
Data Envelopment Analysis (DEA) is a nonparametric method based on the adoption of linear programming techniques commonly used to evaluate the efficiencies of a set of units denominated programming techniques commonly used to evaluate the efficiencies of a set of units denominated
The primary objective of the study presented in this paper was to measure efficiency of the transmission segment of the US natural gas industry
Summary
About one quarter of the United States energy needs depend on natural gas supply. According to estimates from the US Energy Information Administration, the total natural gas consumption in 2016 was 27,485,517 million cubic feet [1]. Since the beginning of the 2000s the supply of natural gas is playing an important role in the energy strategy of US, ensuring that the economy of the country relies more and more on diversified mix of energy sources. Between 2001 and 2015, the production of natural gas in US has increased by more than 40%, whereas its price (city-gate price) diminished by about 25% making natural gas a more competitive source in the energy market [3,4]. The transmission segment of the natural gas industry is regulated both at the federal and local levels.
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