Eco-efficiency change in power plants: Using a slacks-based measure for the meta-frontier Malmquist-Luenberger productivity index

Malmquist–Luenberger index is a popular index deployed for evaluating eco-efficiency and productivity change over a certain period when both desirable and undesirable factors are jointly produced in some production processes. However, conventional data envelopment analysis (DEA) models used for computing this index are unable to distinguish the various technologies employed by the decision making units. When heterogeneity exists in the technology, the meta-frontier Malmquist–Luenberger approach is adopted to evaluate eco-efficiency and productivity change over a period when undesirable outputs are incorporated in the analysis of efficiency. In this paper, a new slacks-based DEA measure is developed and used to compute the meta-frontier Malmquist–Luenberger productivity index. This approach is then deployed to evaluate 48 Iranian thermal power plants productivity change in three different categories – steam, gas, and combined cycle – over an eight year period of restructuring in the power industry. This technique enables the calculation of eco-efficiency change of thermal power plants operating under different technologies as well as the technology gap ratios and measures the extent to which the efficiency frontiers of individual categories of power plants deviate from the meta-frontier. The results reveal that the last years of the restructuring period saw a greater rate of productivity growth compared to the initial years; and evidence of significant eco-efficiency improvements over the period in all the three types of the thermal power plants. Finally, it is expected that the findings in this study aid policy makers and power industry regulators in developing sustainable energy policies towards environmental protection and planning power plant operations.