Technical efficiency in electricity generation - the impact of smallness and isolation of island economies

This paper conducts a comparative technical efficiency analysis of electricity generators in 16 small island economies using panel data, and two methodologies: data envelopment analysis (DEA) and stochastic frontier analysis (SFA). The results indicate neither apparent differences in the production structure between islands and non-islands electric utilities, nor any evidence suggesting that they are less technically efficient. At a theoretical level, our results suggest that benchmarking of small islands, using non-island generating utilities as comparators, is both feasible and desirable given the lack of historical generation data for most small islands. On a more empirical basis, our study bridges an important gap in research on the efficiency of small and interconnected electricity systems.