A comprehensive eco-efficiency analysis of wastewater treatment plants: estimation of optimal operational costs and greenhouse gas emissions.

Producción CientíficaThe transition to a neutral carbon and sustainable urban water cycle requires improving eco-efficiency in wastewater treatment processes. To support decision-making based on eco-efficiency evaluations, reliable estimations are fundamental. In this study, the eco-efficiency of a sample of 109 WWTPs was evaluated using efficiency analysis tree method. It combines machine learning and linear programming techniques and therefore, overcomes overfitting limitations of non-parametric methods used by past research on this topic. Results from the case study revealed that optimal costs and greenhouse gas emissions depend on the quantity of organic matter and suspended solids removed from wastewater. The estimated average eco-efficiency is 0.373 which involves that the assessed WWTPs could save 0.32 €/m3 and 0.11 kg of CO2 equivalent/m3. Moreover, only 4 out of 109 WWTPs are identified as eco-efficient which implies that the majority of the evaluated facilities can achieve substantial savings in operational costs and greenhouse gas emissions.Junta de Castilla y León - UE-FEDER (CL-EI-2021-07

Regulatory price performance, excess cost indexes and profitability:how effective is price cap regulation in the water industry?

In this study we apply an index number approach to allow for cross sectional comparisons of relative profitability, productivity and price performance of the regulated Water and Sewerage companies (WaSCs) in England and Wales during the years 1991-2008. In order to better analyse the impact of regulation on WaSC performance, we decompose actual economic profits into spatial multilateral Fisher productivity (TFP) index, the inverse of which is demonstrated to be a regulatory excess cost index that measures the deviation of a firm’s actual costs from benchmark costs, and a newly developed regulatory total price performance (TPP) index, which measures the excess of regulated revenues relative to benchmark costs. Increases (decreases) in regulatory price performance are indicative of the loosening (tightening) of price cap regulation. Moreover, we also show that the relationship between actual economic profitability, regulatory excess costs and regulatory price performance indices can be used to categorize regulatory price caps as “weak”, “powerful” or “catch-up promoting”. The results indicated that throughout the entire 1991-2008 period, price caps were never “powerful”, in the sense that they required less productive firms to immediately and fully catch-up to the most productive firm to regain economic profitability. More specifically, during the years 1991-2000 price caps were “weak” as prices were high enough for the firms to achieve economic profits despite their low productivity levels. However, after 2001 prices became “catch up promoting” as they required less productive companies to eliminate at least some excess costs in order to eliminate economic losses. Finally, we emphasize that as our results also clearly demonstrated a much closer alignment between allowed revenues and benchmark costs after 2001, Ofwat’s approach during this period was not only appropriate, but should also be continued in the 2009 price review

Productivity change and its drivers for the Chilean water companies: a comparison of full private and concessionary companies

The privatization of the water industry has aroused interest in comparing the performance of public vs. private water companies. However, little research has been conducted to compare the performances of full private (FPWCs) and concessionary water companies (CWCs). This study estimates and compares the productivity growth and its drivers (efficiency, technical and scale change) for a sample of Chilean FPWCs and CWCs over the 2007–2015 period using the input distance function. Both types of water companies showed deteriorations in productivity growth, with CWCs exhibiting higher rates of negative productivity growth than FPWCs. For FPWCs, any gains in efficiency and scale were outstripped by negative technical change. CWCs did not improve their performance in any of the three components of productivity change. The comparison of productivity change between FPWCs and CWCs is essential to support decision-making therefore, this study is of great interest for policymakers worldwide who are developing policies aimed at privatizing water companies

Price-cap regulation in the English and Welsh water industry:a proposal for measuring productivity performance

Privately owned water utilities typically operate under a regulated monopoly regime. Price-cap regulation has been introduced as a means to enhance efficiency and innovation. The main objective of this paper is to propose a methodology for measuring productivity change across companies and over time when the sample size is limited. An empirical application is developed for the UK water and sewerage companies (WaSCs) for the period 1991-2008. A panel index approach is applied to decompose and derive unit-specific productivity growth as a function of the productivity growth achieved by benchmark firms, and the catch-up to the benchmark firm achieved by less productive firms. The results indicated that significant gains in productivity occurred after 2000, when the regulator set tighter reviews. However, the average WaSC still must improve towards the benchmarking firm by 2.69% over a period of five years to achieve comparable performance. This study is relevant to regulators who are interested in developing comparative performance measurement when the number of water companies that can be evaluated is limited. Moreover, setting an appropriate X factor is essential to improve the efficiency of water companies and this study helps to achieve this challenge

Cost and quality of service performance in the Chilean water industry: A comparison of stochastic approaches

Producción CientíficaThe evaluation of efficiency can be of great value to water companies and regulators to adopt policies and design incentives to enhance performance. This study delves into the implications of employing distinct methodologies, namely the classical Stochastic Frontier Analysis (SFA), Bayesian SFA, and Stochastic non-parametric Envelopment of Data (StoNED), to evaluate cost and quality of service efficiency within the water industry. Chilean water companies reported average efficiencies of 0.623, 0.583, and 0.522 using the SFA, BSFA, and StoNED approaches, respectively. Furthermore, the SFA analysis suggested that the performance of water companies experienced a decline of −0.59% per year from 2010 to 2018. In contrast, the BSFA and StoNED estimations indicated an opposite trend, with annual performance improvements of 0.51% and 0.17% respectively, over the same period. These findings underscore the critical role of selecting appropriate methodologies when interpreting and comparing efficiency results for making informed long-term decisions

Monetary valuation of unsorted waste: A shadow price approach

Producción CientíficaImproving the management of municipal solid waste (MSW) is fundamental to promote circular economy and sustainability. Unsorted waste involves negative environmental impacts which often are ignored in economic feasibility studies due to its difficult valuation. In this study the shadow price of unsorted waste using the directional distance function was estimated. This methodological approach also allowed us to compute eco-efficiency scores of a set of municipalities in the provision of MSW services. The empirical application focused on a sample of 119 Chilean municipalities. The results showed that the average shadow price of unsorted waste was 297.66 €/ton which means that the environmental cost of left waste as unsorted was 297.66 € per ton. A regression tree model illustrated that population density, tourism intensity and the generation of waste per capita significantly influenced the shadow price of unsorted waste. Moreover, it was illustrated that Chilean municipalities were very inefficient in the management of MSW since the average eco-efficiency score was 0.272. The findings from this study reveal that additional and alternative policies should be adopted to improve the management of MSW and increase its recycling rate.Agencia Nacional de Investigación y Desarrollo -Fondo Nacional de Desarrollo Científico y Tecnológico (project 1210077

Are Frontier Effiency Methods Adequate to Compare the Effiency of Water Utilities for Regulatory Purposes?

[EN] Frontier efficiency methods have been recurrently used in the water sector to assess the performance of water utilities. These methods are also used for yardstick regulation, with greater efficiency being sought by creating competition between the utilities, which can have an impact on decision-making processes, such as tariff setting. This study analyzes the adequacy and limitations of these methods for regulatory purposes, particularly how they deal with data uncertainty and their capacity to manage large number of variables. In order to achieve this, two representative methods¿a nonparametric technique (data envelopment analysis) and an econometric one (stochastic frontier analysis)¿are applied to an audited sample of 194 water utilities. Results will show that the results from the methods may not be considered conclusive in the water sector and their application should be carried out with considerable reservations.Estruch-Juan, E.; Cabrera Rochera, E.; Molinos-Senante, M.; Maziotis, A. (2020). Are Frontier Effiency Methods Adequate to Compare the Effiency of Water Utilities for Regulatory Purposes?. Water. 12(4):1-16. https://doi.org/10.3390/w12041046S116124Posner, R. A. (1969). Natural Monopoly and Its Regulation. Stanford Law Review, 21(3), 548. doi:10.2307/1227624Shleifer, A. (1985). A Theory of Yardstick Competition. The RAND Journal of Economics, 16(3), 319. doi:10.2307/2555560Eficiencia y su Medición en Prestadores de Servicios de Agua Potable y Alcantarillado http://hispagua.cedex.es/sites/default/files/hispagua_documento/documentacion/documentos/eficiencia_agua_potable_alcantarillado.pdfAbbott, M., & Cohen, B. (2009). Productivity and efficiency in the water industry. Utilities Policy, 17(3-4), 233-244. doi:10.1016/j.jup.2009.05.001Ferro, G., Lentini, E. J., Mercadier, A. C., & Romero, C. A. (2014). Efficiency in Brazil’s water and sanitation sector and its relationship with regional provision, property and the independence of operators. Utilities Policy, 28, 42-51. doi:10.1016/j.jup.2013.12.001Byrnes, J., Crase, L., Dollery, B., & Villano, R. (2010). The relative economic efficiency of urban water utilities in regional New South Wales and Victoria. Resource and Energy Economics, 32(3), 439-455. doi:10.1016/j.reseneeco.2009.08.001Thanassoulis, E. (2000). The use of data envelopment analysis in the regulation of UK water utilities: Water distribution. European Journal of Operational Research, 126(2), 436-453. doi:10.1016/s0377-2217(99)00303-3Pourhabib Yekta, A., Kordrostami, S., Amirteimoori, A., & Kazemi Matin, R. (2018). Data envelopment analysis with common weights: the weight restriction approach. Mathematical Sciences, 12(3), 197-203. doi:10.1007/s40096-018-0259-zDe Witte, K., & Marques, R. C. (2010). Influential observations in frontier models, a robust non-oriented approach to the water sector. Annals of Operations Research, 181(1), 377-392. doi:10.1007/s10479-010-0754-6Berg, S., & Marques, R. (2011). Quantitative studies of water and sanitation utilities: a benchmarking literature survey. Water Policy, 13(5), 591-606. doi:10.2166/wp.2011.041Worthington, A. C. (2013). A review of frontier approaches to efficiency and productivity measurement in urban water utilities. Urban Water Journal, 11(1), 55-73. doi:10.1080/1573062x.2013.765488Aigner, D., Lovell, C. A. K., & Schmidt, P. (1977). Formulation and estimation of stochastic frontier production function models. Journal of Econometrics, 6(1), 21-37. doi:10.1016/0304-4076(77)90052-5Meeusen, W., & van Den Broeck, J. (1977). Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error. International Economic Review, 18(2), 435. doi:10.2307/2525757Cullmann, A. (2010). Benchmarking and firm heterogeneity: a latent class analysis for German electricity distribution companies. Empirical Economics, 42(1), 147-169. doi:10.1007/s00181-010-0413-4Ferro, G., & Mercadier, A. C. (2016). Technical efficiency in Chile’s water and sanitation providers. Utilities Policy, 43, 97-106. doi:10.1016/j.jup.2016.04.016Saal, D. S., Parker, D., & Weyman-Jones, T. (2007). Determining the contribution of technical change, efficiency change and scale change to productivity growth in the privatized English and Welsh water and sewerage industry: 1985–2000. Journal of Productivity Analysis, 28(1-2), 127-139. doi:10.1007/s11123-007-0040-zMolinos-Senante, M., Porcher, S., & Maziotis, A. (2017). Impact of regulation on English and Welsh water-only companies: an input-distance function approach. Environmental Science and Pollution Research, 24(20), 16994-17005. doi:10.1007/s11356-017-9345-2Kuosmanen, T. (2011). Stochastic Semi-Nonparametric Efficiency Analysis of Electricity Distribution Networks: Application of the StoNED Method in the Finnish Regulatory Model. SSRN Electronic Journal. doi:10.2139/ssrn.1806867Jamasb, T., Orea, L., & Pollitt, M. (2012). Estimating the marginal cost of quality improvements: The case of the UK electricity distribution companies. Energy Economics, 34(5), 1498-1506. doi:10.1016/j.eneco.2012.06.022ERSAR—Relatório Anual dos Serviços de Águas e Resíduos em Portugal http://www.esgra.pt/ersar-relatorio-anual-dos-servicos-de-aguas-e-residuos-em-portugal/Marques, R. C., Berg, S., & Yane, S. (2014). Nonparametric Benchmarking of Japanese Water Utilities: Institutional and Environmental Factors Affecting Efficiency. Journal of Water Resources Planning and Management, 140(5), 562-571. doi:10.1061/(asce)wr.1943-5452.0000366Pinto, F. S., Costa, A. S., Figueira, J. R., & Marques, R. C. (2017). The quality of service: An overall performance assessment for water utilities. Omega, 69, 115-125. doi:10.1016/j.omega.2016.08.006Matos, R., Cardoso, A., Duarte, P., Ashley, R., Molinari, A., & Schulz, A. (2003). Performance indicators for wastewater services - towards a manual of best practice. Water Supply, 3(1-2), 365-371. doi:10.2166/ws.2003.0126Alegre, H., Baptista, J. M., Cabrera, E., Cubillo, F., Duarte, P., Hirner, W., … Parena, R. (2016). Performance Indicators for Water Supply Services: Third Edition. Water Intelligence Online, 15(0), 9781780406336-9781780406336. doi:10.2166/9781780406336Cabrera, E., Estruch-Juan, E., & Molinos-Senante, M. (2018). Adequacy of DEA as a regulatory tool in the water sector. The impact of data uncertainty. Environmental Science & Policy, 85, 155-162. doi:10.1016/j.envsci.2018.03.028Molinos-Senante, M., Donoso, G., & Sala-Garrido, R. (2016). Assessing the efficiency of Chilean water and sewerage companies accounting for uncertainty. Environmental Science & Policy, 61, 116-123. doi:10.1016/j.envsci.2016.04.003Picazo-Tadeo, A. J., Sáez-Fernández, F. J., & González-Gómez, F. (2008). Does service quality matter in measuring the performance of water utilities? Utilities Policy, 16(1), 30-38. doi:10.1016/j.jup.2007.10.001Berg, S., & Lin, C. (2008). Consistency in performance rankings: the Peru water sector. Applied Economics, 40(6), 793-805. doi:10.1080/00036840600749409Ferro, G., & Romero, C. A. (2011). Setting performance standards for regulation of water services: Benchmarking Latin American utilities. Water Policy, 13(5), 607-623. doi:10.2166/wp.2011.042Molinos-Senante, M., & Maziotis, A. (2019). Productivity growth and its drivers in the Chilean water and sewerage industry: a comparison of alternative benchmarking techniques. Urban Water Journal, 16(5), 353-364. doi:10.1080/1573062x.2019.1669196Corton, M. L., & Berg, S. V. (2009). Benchmarking Central American water utilities. Utilities Policy, 17(3-4), 267-275. doi:10.1016/j.jup.2008.11.00

A comprehensive assessment of energy efficiency of wastewater treatment plants: An efficiency analysis tree approach

Wastewater treatment plants (WWTPs) are energy intensive facilities. Controlling energy use in WWTPs could bring substantial benefits to people and environment. Understanding how energy efficient the wastewater treatment process is and what drives efficiency would allow treating wastewater in a more sustainable way. In this study, we employed the efficiency analysis trees approach, that combines machine learning and linear programming techniques, to estimate energy efficiency of wastewater treatment process. The findings indicated that considerable energy inefficiency among WWTPs in Chile existed. The mean energy efficiency was 0.287 suggesting that energy use should cut reduce by 71.3 % to treat the same volume of wastewater. This was equivalent to a reduction in energy use by 0.40 kWh/m3 on average. Moreover, only 4 out of 203 assessed WWTPs (1.97 %) were identified as energy efficient. It was also found that the age of treatment plant and type of secondary technology played an important role in explaining energy efficiency variations among WWTPs

Understanding water energy nexus in drinking water provision: an eco-efficiency assessment of water companies

Producción CientíficaUnderstanding water-energy nexus in the provision of drinking water services is a challenge which has outstanding relevance in the current climatic emergency. Environmental efficiency and eco-efficiency assessment of water companies are two useful tools to address this challenge. In this study, we estimated hyperbolic and enhanced hyperbolic distance functions to compute the potential reduction in greenhouse gas (GHG) emissions and energy costs in the provision of drinking water. The empirical application focused on the English and Welsh water companies over 2011-2019. Average environmental efficiency and eco-efficiency scores were 0.920 and 0.962, respectively which indicates that water companies performed well but there is room for improvement. Moreover, due to the economies of scale, the cost of reducing GHG emissions was higher for water and sewerage companies than for water only companies. The results and conclusions of this study allow better understanding of the relationship between the provision of drinking water, energy costs and GHG emissions

Eco‑efficiency assessment under natural and managerial disposability : an empirical application for Chilean water companies

Getting a good understanding regarding the economic and environmental performance of water utilities is of great importance to achieve the goal of an efcient and sustainable industry. In this study, we apply the range adjusted measure (RAM) data envelopment analysis (DEA) model to evaluate the integrated (production and environmental) efciency of several water utilities located in Chile. Integrated efciency is evaluated using the concepts of natural and managerial disposability. This approach further allows us to quantify the contribution of each input and undesirable product on efciency scores. The results highlighted that the Chilean water industry showed high levels of production and environmental efciency over time. Under natural disposability, water utilities could control production costs to reduce water leakage and unplanned water supply interruptions by 3.3% on average. Under managerial disposability, water utilities could further cut down undesirable outputs by 1.4% on average by adopting best managerial practices. On average, potential savings in operating costs, employment, water leakage, and unplanned water supply interruptions were higher for concessionary utilities as they showed slightly lower efciency scores than full private utilities