Performance Effects of Network Structure and Ownership: The Norwegian Electricity Distribution Sector

Transmission and distribution networks are capital intensive segments of the electricity sector and are generally considered natural monopolies. Due to their non-competitive nature, these are subject to independent regulation to prevent the abuse of monopolistic power and to induce competitive behav...

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Autores principales:	Wenche Tobiasson, Manuel Llorca, Tooraj Jamasb
Formato:	article
Lenguaje:	EN
Publicado:	MDPI AG 2021
Materias:	Norwegian electricity distribution regional transmission heteroscedastic stochastic cost frontiers vertical integration ownership structure Technology T
Acceso en línea:	https://doaj.org/article/598ca530c1474dfc99a563818425b3d7
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spelling	oai:doaj.org-article:598ca530c1474dfc99a563818425b3d72021-11-11T15:56:25ZPerformance Effects of Network Structure and Ownership: The Norwegian Electricity Distribution Sector10.3390/en142171601996-1073https://doaj.org/article/598ca530c1474dfc99a563818425b3d72021-11-01T00:00:00Zhttps://www.mdpi.com/1996-1073/14/21/7160https://doaj.org/toc/1996-1073Transmission and distribution networks are capital intensive segments of the electricity sector and are generally considered natural monopolies. Due to their non-competitive nature, these are subject to independent regulation to prevent the abuse of monopolistic power and to induce competitive behaviour. Effective economic regulation of the electricity networks has become a key target in most developed economies after the 1980s. In Norway, incentive regulation and efficiency benchmarking were introduced in 1997. In Norway, the electricity grid is divided into three levels, namely, central, regional and distribution networks. In this paper, we study two overlooked aspects when analysing the performance of electricity networks: vertical integration and ownership structure. We use a stochastic frontier analysis approach to analyse the performance of Norwegian electricity distribution utilities for the period 2007–2014. We observe that vertical integration between distribution and regional transmission implies higher cost inefficiencies. This indicates that the efficiency gains due to separate management of the networks exceed the economies of coordination from vertical economies of scope. In addition, we find that council ownership entails higher efficiencies. This could be explained by the state having an interest in high-voltage electricity networks, rather than low-voltage ones, and the decentralised model from which the now centralised system was once developed.Wenche TobiassonManuel LlorcaTooraj JamasbMDPI AGarticleNorwegian electricity distributionregional transmissionheteroscedastic stochastic cost frontiersvertical integrationownership structureTechnologyTENEnergies, Vol 14, Iss 7160, p 7160 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	Norwegian electricity distribution regional transmission heteroscedastic stochastic cost frontiers vertical integration ownership structure Technology T
spellingShingle	Norwegian electricity distribution regional transmission heteroscedastic stochastic cost frontiers vertical integration ownership structure Technology T Wenche Tobiasson Manuel Llorca Tooraj Jamasb Performance Effects of Network Structure and Ownership: The Norwegian Electricity Distribution Sector
description	Transmission and distribution networks are capital intensive segments of the electricity sector and are generally considered natural monopolies. Due to their non-competitive nature, these are subject to independent regulation to prevent the abuse of monopolistic power and to induce competitive behaviour. Effective economic regulation of the electricity networks has become a key target in most developed economies after the 1980s. In Norway, incentive regulation and efficiency benchmarking were introduced in 1997. In Norway, the electricity grid is divided into three levels, namely, central, regional and distribution networks. In this paper, we study two overlooked aspects when analysing the performance of electricity networks: vertical integration and ownership structure. We use a stochastic frontier analysis approach to analyse the performance of Norwegian electricity distribution utilities for the period 2007–2014. We observe that vertical integration between distribution and regional transmission implies higher cost inefficiencies. This indicates that the efficiency gains due to separate management of the networks exceed the economies of coordination from vertical economies of scope. In addition, we find that council ownership entails higher efficiencies. This could be explained by the state having an interest in high-voltage electricity networks, rather than low-voltage ones, and the decentralised model from which the now centralised system was once developed.
format	article
author	Wenche Tobiasson Manuel Llorca Tooraj Jamasb
author_facet	Wenche Tobiasson Manuel Llorca Tooraj Jamasb
author_sort	Wenche Tobiasson
title	Performance Effects of Network Structure and Ownership: The Norwegian Electricity Distribution Sector
title_short	Performance Effects of Network Structure and Ownership: The Norwegian Electricity Distribution Sector
title_full	Performance Effects of Network Structure and Ownership: The Norwegian Electricity Distribution Sector
title_fullStr	Performance Effects of Network Structure and Ownership: The Norwegian Electricity Distribution Sector
title_full_unstemmed	Performance Effects of Network Structure and Ownership: The Norwegian Electricity Distribution Sector
title_sort	performance effects of network structure and ownership: the norwegian electricity distribution sector
publisher	MDPI AG
publishDate	2021
url	https://doaj.org/article/598ca530c1474dfc99a563818425b3d7
work_keys_str_mv	AT wenchetobiasson performanceeffectsofnetworkstructureandownershipthenorwegianelectricitydistributionsector AT manuelllorca performanceeffectsofnetworkstructureandownershipthenorwegianelectricitydistributionsector AT toorajjamasb performanceeffectsofnetworkstructureandownershipthenorwegianelectricitydistributionsector
_version_	1718432601441566720

Performance Effects of Network Structure and Ownership: The Norwegian Electricity Distribution Sector

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