Performance Assessment of Power Plants under Environmental Regulation

Recently, consistency in government policies between economic efficiency and environmental protection becomes increasingly important for electric power companies. In particular, the problem of consistency influences a decision-making process in management for a utilization of power plants and a fuel mix. This study is interested in the performance assessment of power plants under U.S. environmental regulation. For the purpose, this study proposes a use of Data Envelopment Analysis (DEA) that is a methodology of performance assessment. In responding to various environmental issues, many researchers have applied DEA as a research tool. Using the proposed DEA models, this study conducts the performance evaluation of fossil fuel power plants in PJM. We discuss how environmental factors, such as an amount of greenhouse gas emissions, are incorporated into the DEA approach for measuring unified (operational and environment) efficiency. This study describes two types of disposability which originates from corporate strategy for environmental protection.