Total-factor energy efficiency with congestion

Total-factor energy efficiency (TFEE) assessment has received increasing attention in both operations research and energy economics communities. Earlier TFEE studies implicitly assume that production activity lies in the economic area, which precludes the possibility that the production activity lies in the non-economic area and thus suffers from congestion. This paper contributes to develop TFEE index by taking into account congestion effect. It starts with the definition of congested production technology, based on which several data envelopment analysis models are proposed to construct TFEE index with congestion. The models for quantifying energy inefficiency caused by congestion effect are also developed. We apply the proposed index to evaluate the energy efficiency performance of Chinese industrial sectors at province level in 2010-2012. It is found that TFEE with congestion can yield useful insights about the choice of proper ways to achieve energy efficiency improvement. A comparison with the empirical results under congestion-free production technology indicates that ignoring congestion effect may lead to significantly different TFEE scores when congestion effect does exist.