Evaluating power plant efficiency: a hierarchical model

In this paper, we investigate the relative operating efficiencies of a set of electric power plants, and of the individual power units that make up those plants. This two-stage “hierarchy” is a special case of the general hierarchical structure to which our model can be applied. The model views the plants at the highest level in the hierarchy as the decision-making units whose performance is optimized. Part of the output from the optimization is a set of performance measures for the components of those top level decision-making units. We use the data on 40 power units grouped under eight plants to demonstrate the model.