The Effects of Electricity Prices on Productive Efficiency of States’ Wind Power Performances in the United States

Abstract

Wind power is the largest renewable energy source which produces a negligible amount of greenhouse gas (GHG) emissions, has gained enormous attention in the electricity generation sector over the past decade in the United States. In this study, a Data Envelopment Analysis (DEA) is implemented to quantitatively evaluate the relative efficiencies of the 39 states’ wind power productivity for the electricity generation. Eight output-oriented CCR (Charnes, Cooper, and Rhodes) models are developed with different combinations of pre-determined four input and five output variables to investigate the effect of electricity prices on the productive efficiency and to test the robustness of the DEA models. The DEA results indicate that two-thirds of the states operate wind power efficiently. Although the high retail price of electricity has a significant contribution to the productive efficiency of the six states, it does not affect the relative efficiency scores of the nineteen states. The location and the size of operation are not advantages or disadvantages for operating wind power at the most productive scale.

Keywords: Data Envelopment Analysis (DEA), Electricity Prices, Multi-Criteria Decision Making, Productive Efficiency, Wind Power

JEL Classification: C61, C63, C67, Q42