What Does Cost Structure Have to Say about Thermal Plant Energy Efficiency? The Case from Angola

Abstract

This paper analyzes the efficiency of thermal power plants in Angola by means of a two-stage Data Envelopment Analysis (DEA) approach. In the first stage, a novel super-efficiency DEA model for undesirable outputs (CO2 emission levels and discharge of polluted water) is initially used to measure their efficiency levels. Then, in the second stage, relevant cost structure variables frequently used to describe a productive technology are employed as analytical thresholds for assessing energy production performance either in terms of capital or labor-intensity levels. Precisely, bootstrapped regression trees are used to discriminate super-efficiency scores yielding an energy production performance predictive model based on the technology type as proxied by its cost structure and their respective thresholds, since Angolan thermal plants are heterogeneous. Findings suggest that Angolan power plants are old and labor intensive, as some of them date back to the colonial era, and that lack of capital investment should be revised in favor of installing carbon capture devices. The approach developed here consists of a valuable approach for identifying priorities when technologically updating a heterogeneous thermal industry to face pollutant concerns.