Undesirable congestion under natural disposability and desirable congestion under managerial disposability in U.S. electric power industry measured by DEA environmental assessment

Abstract

This study discusses a new use of DEA environmental assessment to measure a possible occurrence of desirable congestion, or eco-technology innovation, in electric power plants. The phenomenon is compared with an occurrence of undesirable congestion in this study. The identification of undesirable congestion is important to avoid a cost increase and a shortage of generation. However, the identification of desirable congestion is much more important than that of undesirable congestion from the perspective of environmental assessment. This study looks for a sustainable economic growth by identifying eco-technology innovation that can be effectively used to reduce the amount of air pollution so that electric power companies satisfy a governmental standard on environmental protection. The proposed approach is applied to evaluate the performance of coal-fired power plants in the United States. This study finds two policy implications. First, power plants operated by bituminous coal (i.e., black coal) outperform those with sub-bituminous coal (i.e., brawn coal). The result implies that power plants with sub-bituminous coal should be replaced by bituminous coal. Second, the undesirable congestion, due to a line limit between points of power generation and consumption, may occur on most of coal-fired power plants. In contrast, desirable congestion, due to eco-technology innovation, may occur on a limited number of power plants. Thus, the identification of desirable congestion assists us in selecting which technology, or the type of power plant, should be invested to facilitate eco-technology innovation and its related engineering management for a future sustainable economic growth.