National Productivity Week 27th November 2023 | Visit Website

A diverse community of
leading experts, policymakers
and practitioners

The Institute’s key research themes
are led by ten academic partners
spread across the UK.

Businesses are crucial to solving
the UK’s productivity problems.

We’re a UK-wide research
organisation exploring what
productivity means for business

Businesses are crucial to solving
the UK’s productivity problems.

Research

Measurement of productivity growth in the regulated energy, water and transport sectors in the presence of increasing quality, engagement and environmental targets

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)

Collaborators Victor Ajayi, Karim Anaya, Geoffroy Dolphin

University Of Cambridge