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During the 1990s, a new paradigm for power sector reform was put forward emphasizing the restructuring of utilities, the creation of regulators, the participation of the private sector, and the establishment of competitive power markets. Twenty-five years later, only a handful of developing countries have fully implemented these Washington Consensus policies. Across the developing world, reforms were adopted rather selectively, resulting in a hybrid model, in which elements of market orientation coexist with continued state dominance of the sector. This book aims to revisit and refresh thinking on power sector reform approaches for developing countries. The approach relies heavily on evidence from the past, drawing both on broad global trends and deep case material from 15 developing countries. It is also forward looking, considering the implications of new social and environmental policy goals, as well as the emerging technological disruptions. A nuanced picture emerges. Although regulation has been widely adopted, practice often falls well short of theory, and cost recovery remains an elusive goal. The private sector has financed a substantial expansion of generation capacity; yet, its contribution to power distribution has been much more limited, with efficiency levels that can sometimes be matched by well-governed public utilities. Restructuring and liberalization have been beneficial in a handful of larger middle-income nations but have proved too complex for most countries to implement. Based on these findings, the report points to three major policy implications. First, reform efforts need to be shaped by the political and economic context of the country. The 1990s reform model was most successful in countries that had reached certain minimum conditions of power sector development and offered a supportive political environment. Second, countries found alternative institutional pathways to achieving good power sector outcomes, making a case for greater pluralism. Among the top performers, some pursued the full set of market-oriented reforms, while others retained a more important role for the state. Third, reform efforts should be driven and tailored to desired policy outcomes and less preoccupied with following a predetermined process, particularly since the twenty-first-century century agenda has added decarbonization and universal access to power sector outcomes. The Washington Consensus reforms, while supportive of the twenty-first-century century agenda, will not be able to deliver on them alone and will require complementary policy measures
The need for greater efficiency and accountability in the power sector in the Middle East and North Africa has renewed pressure for reforms. A major new World Bank report, Rethinking Power Sector Reform in the Developing World (Foster and Rana 2020), examines how developing countries have attempted to reform their power sector and with what results. Some key lessons point the way forward.
"Driven by ideology, economic reasoning, and early success stories, vast amounts of financial resources and effort have been spent on reforming infrastructure industries in developing countries. It is therefore important to examine whether evidence supports the logic of reforms. The authors review the empirical evidence on electricity reform in developing countries. They find that country institutions and sector governance play an important role in the success and failure of reform. And reforms also appear to have increased operating efficiency and expanded access to urban customers. However, the reforms have to a lesser degree passed on efficiency gains to customers, tackled distributional effects, and improved rural access. Moreover, some of the literature is not methodologically robust and on par with general development economics literature. Further, findings on some issues are limited and inconclusive, while other important areas are yet to be addressed. Until we know more, implementation of reforms will be more based on ideology and economic theory rather than solid economic evidence. "--World Bank web site.
Over the last fifteen years the world's largest developing countries have initiated market reform in their electric power sectors from generation to distribution. This book evaluates the experiences of five of those countries - Brazil, China, India, Mexico and South Africa - as they have shifted from state-dominated systems to schemes allowing for a larger private sector role. As well as having the largest power systems in their regions and among the most rapidly rising consumption of electricity in the world, these countries are the locus of massive financial investment and the effects of their power systems are increasingly felt in world fuel markets. This accessible volume explains the origins of these reform efforts and offers a theory as to why - despite diverse backgrounds - reform efforts in all five countries have stalled in similar ways. The authors also offer practical advice to improve reform policies.
Given the chronic power shortages faced by numerous developing countries, and the need everywhere to keep pace with demand, understanding the drivers of public private partnerships (PPPs) in energy is critical. While many private electricity projects have been delayed and financing costs have increased, the impact of the global financial crisis was less severe than that of previous crises that originated in developing countries. This resilience stems from developing countries’ need to expand generation capacity, electricity sector reforms and better regulatory frameworks, and short-term solutions (such as rental power plants). The study reports the evidence from statistical analysis and a sample of case studies selected based. It proposes a novel analytical approach to model PPPs, using a two-stage procedure based on Heckman’s sample selection distinguishing between those factors that determine whether private investment in energy takes place, and those that influence the volume of investment. The results of the analysis provide the following conclusions: • Both general governance and regulatory instrument primarily affect investors’ decisions to enter the various power sector markets, not the subsequent level of investment – indicating that investors seem to be adequately protected against risks. • Support mechanisms, like feed-in tariffs, are crucial for attracting investors in renewable generation, but they do not succeed in displacing fossil fuel investment and they could play a bigger role in affecting the level of investment in renewables. • There is a significant trade-off between effectiveness and efficiency of alternative instruments for deploying renewables. Feed-in tariffs tended to be quite effective but to be set on the high side, reducing incentives to cut costs and posing significant strains on already stripped national budgets. Competitive auctions, on the other hand have tended to be efficient but initially low and not always the most effective instrument. • Countries can scale up renewables following different paths. For Brazil, the move from feed-in tariffs to auctions enabled it to both reduce costs and deploy additional capacity. Peru followed in Brazil’s path, opting for auctions instead of introducing feed-in tariffs. On the other hand, China’s move from competitive tenders to feed-in tariffs allowed for discovery effects to determine the right level of prices to attract private investment in renewables.
Driven by ideology, economic reasoning, and early success stories, vast amounts of financial resources and effort have been spent on reforming infrastructure industries in developing countries. It is therefore important to examine whether evidence supports the logic of reforms. The authors review the empirical evidence on electricity reform in developing countries. They find that country institutions and sector governance play an important role in the success and failure of reform. And reforms also appear to have increased operating efficiency and expanded access to urban customers. However, the reforms have to a lesser degree passed on efficiency gains to customers, tackled distributional effects, and improved rural access. Moreover, some of the literature is not methodologically robust and on par with general development economics literature. Further, findings on some issues are limited and inconclusive, while other important areas are yet to be addressed. Until we know more, implementation of reforms will be more based on ideology and economic theory rather than solid economic evidence.
This publication evaluates the performance of the World Bank Group (WBG) during the 1990s in promoting private sector development in the electric power sector in 80 countries. Main findings include that where countries showed a commitment to advancing reforms in promoting private sector development and where programmes were properly implemented, the expected benefits were delivered. However, quality of outcomes depended on the objectives pursued and on types of assistance provided, with most countries remaining in the early stages of reform.
Some 25 years have elapsed since international financial institutions espoused a package of power sector reform measures that became known as the Washington Consensus. This package encompassed the establishment of autonomous regulatory entities, the vertical and horizontal unbundling of integrated national monopoly utilities, private sector participation in generation and distribution, and eventually the introduction of competition into power generation and even retail services. Exploiting a unique new data set on the timing and scope of power sector reforms adopted by 88 countries across the developing world over 25 years, this paper seeks to improve understanding of the uptake, diffusion, packaging, and sequencing of power sector reforms, and the extent to which they were affected by the economic and political characteristics of the countries concerned. The analysis focuses on describing the patterns of reform without judging their desirability or evaluating their impact. The paper finds that following rapid diffusion during 1995-2005, the spread of power sector reforms slowed significantly in 2005-15. Only a small minority of developing countries fully implemented the reform model as originally conceived. For the majority, reforms were only selectively adopted according to ease of implementation, often stagnated at an intermediate stage, and were sometimes packaged and sequenced in ways unrelated to the original logic. Country characteristics such as geography, income group, power system size, and political economy all had a significant influence on the uptake of reform. Moreover, a significant number of countries experienced reversals of private sector participation, or were unable to follow through with reform plans that were officially announced. Overall, power sector reform in the developing world lags far behind what was achieved in the developed world during the same time period. Yet, even in the developed world, the full package of reforms does not seem to have been universally adopted.
A worldwide trend began in the 1980s in both developed & developing countries to restructure their power sectors & reform their regulatory framework. The motivation in developed countries to restructure & reform was mainly to improve sector efficiency, while in the developing countries, it was to move the sector away from reliance on scarce public resources to more private sector financing. Since the Asian Development Bank was involved in restructuring & regulatory reform in many of Asia's developing countries, this report takes stock of the progress made to date in these countries, reviews the relevant experience in some developed countries & Latin America, & identifies the key issues that could have a bearing on its operations in Asia.