This research studies how environmental targets seeking to promote resource use efficiency, reduction of GHG emissions and low carbon technologies are impacting on measured total factor productivity (TFP) in the regulated electricity and gas sectors. It also evaluates the extent to which proper valuation of success in achieving these targets can and should be used to adjust TFP. The study also looks at how increased emphasis on quality of service for multiple stakeholders (under the regulatory regime known as RIIO), which leads to rising stakeholder satisfaction, impacts measured TFP in regulated sectors.
The research uses growth accounting approaches (following Jorgenson et al., 1987) and Malmquist productivity measures (following Caves et al., 1982), using both ONS and regulatory accounting data from the sector regulator Ofgem. We also examine the prospects for green growth, including by looking at the possible future path of productivity under net zero policies using published projections of inputs and outputs from National Grid Electricity System Operator.
The research also includes separate analysis of electricity and gas sectors, creating original corporate datasets covering the early post-privatisation years (which Ofgem does not have data for) up to the most recent years. This allows separate analysis of both electricity transmission and distribution and gas transmission and distribution, thereby highlighting the nature of the productivity puzzle in electricity and gas sectors.
Project lead Michael Pollitt (The University of Cambridge)
An analysis of the productivity growth of electricity transmission and distribution networks in Great Britain and how changes in incentive mechanism have influenced the measured total factor productivity.