Productivity and efficiency of leading European electricity utilities at a time of economic downturn

Purpose This paper aims to assess the productivity and efficiency of a panel of 42 electricity generation utilities operating in 10 EU countries plus Switzerland during the turbulent period 2003–2011. Design/methodology/approach This paper applies data envelopment analysis in the form of the aggregate–quantity framework of O’Donnell (2012a) to calculate productivity and its components for a selected group of European companies. Findings This paper shows that constant growth in the productivity frontier until 2007 results from rapid technological change and improvements in scale-mix efficiency of magnitudes sufficient to compensate for the fall in technical efficiency. After the height of the financial crisis of 2008, the continued fall in technical efficiency, mainly caused by excess spare capacity, is the primary driver of a pronounced drop in productivity. Practical implications The finding that changes in technical efficiency and scale-mix efficiency have played such an essential role in productivity decline after the height of the financial crisis may be cause for cautious optimism. That is, productivity improvements might depend not solely on further technical change but more prominently on better policies, better management of installed capacity and broader adoption of best practices. Thus, this paper has important implications for subsequent crises, including the one occasioned by the current invasion of Ukraine. Originality/value To the best of the author’s knowledge, this is the first study assessing the financial crisis effect on the European electricity generation firms’ productivity and efficiency.