Environmental Assessment on Energy and Sustainability by Data Envelopment Analysis

25COMMON MULTIPLIERS

25.1 INTRODUCTION

Returning to Chapter 7 (on SCSCs) and Chapter 11 (on DEA‐DA), this chapter¹ discusses how to evaluate the performance of Japanese electric power companies by the combined use of DEA/SCSCs with DEA‐DA. Here, DEA/SCSCs implies DEA equipped with SCSCs.

This chapter discusses their performance assessment only under natural disposability so that we can exclude the undesirable outputs from the proposed application. This type of DEA application often exists in the assessment of an electric power industry. For example, renewable energy sources (e.g., solar and wind) and nuclear power do not produce GHGs such as CO₂ when they generate electricity. Therefore, many people are interested in the full use of renewable energy. As an extension of Chapters 7 and 11, this chapter documents DEA assessment for ranking analysis whose result contains a single efficient DMU and the remaining others are inefficient.

From the perspective of DEA, the purpose of this chapter is to document how to overcome the following five difficulties, all of which are widely observed in its applications in energy sectors.

1. Reducing the number of many efficient DMUs: A difficulty of DEA applications is that they usually produce many efficient DMUs in terms of operational efficiency (OE). For example, 90% of DMUs become efficient and the remaining 10% are inefficient. The result is mathematically acceptable, but managerially problematic, because of so many efficient DMUs. This type of problem ...