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We report a social cost-bene¢t analysis of the privatisation and restructuring of the Central Electricity Generating Board which generated and transmitted all public electricity in England and Wales until 1990. The main bene¢ts came from generator e¤ciency gains, switching from nuclear power, and lower emissions. The main costs came from higher prices for imported French electricity, the cost of restructuring and premature investment in new gas-¢red generating plant. Our central estimate is a permanent cost reduction of 5% per year, equivalent to an extra 40% return on assets. Consumers and government lose, and producers gain more than the cost reduction.

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This paper presents a set of policy recommendations for the market design of a future European electricity system characterized by a dominant share of intermittent renewable energy supply (RES), in line with the stated targets of European governments. We discuss the market failures that need to be addressed to accommodate RES in liberalized electricity markets, review the evolution of the EU's RES policy mechanisms, and summarize the key market impacts of RES to date. We then set out economic principles for market design and use these to develop our policy recommendations. Our analysis covers the value of interconnection and market integration, electricity storage, the design of RES support mechanisms, distributed generation and network tariffs, the pricing of electricity and flexibility as well as long-term contracting and risk management. AbstractThis paper presents a set of policy recommendations for the market design of a future European electricity system characterized by a dominant share of intermittent renewable energy supply (RES), in line with the stated targets of European governments. We discuss the market failures that need to be addressed to accommodate RES in liberalized electricity markets, review the evolution of the EU's RES policy mechanisms, and summarize the key market impacts of RES to date. We then set out economic principles for market design and use these to develop our policy recommendations. Our analysis covers the value of interconnection and market integration, electricity storage, the design of RES support mechanisms, distributed generation and network tariffs, the pricing of electricity and flexibility as well as long-term contracting and risk management.

WPS3549 AbstractDriven 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. This paper reviews the empirical evidence on electricity reform in developing countries. We find that country institutions and sector governance play an important role in success and failure of reform. Also, reforms also appear to have increased operating efficiency and expanded access to urban customers. However, they 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.Keywords: Electricity, reform, developing countries JEL Classification: L52, L94, Q48 E El le ec ct tr ri ic ci it ty y S Se ec ct to or r R Re ef fo or rm m i in n D De ev ve el lo op pi in ng g C Co ou un nt tr ri ie es s, , J Ja am ma as sb b, , M Mo ot ta a, , N Ne ew wb be er ry y, , P Po ol ll li it tt t 1 1 IntroductionSince the early 1990s, a large number of developed, transition and developing countries around the world have embarked on electricity sector reform. The pace and the extent of the trend has been remarkable and, by the end of 1990s, the majority of OECD countries and over 70 developing and transition countries had taken some steps toward reforming their electricity sector (Bacon, 1999;Steiner, 2001). This has occurred under a broad paradigm shift from state ownership and centralized organization of infrastructure industries to private ownership, public regulation and market-oriented structures (OECD, 2000). The technological progress and reform pioneered in some countries has encouraged others to follow suit.This trend primarily reflects dissatisfaction with the performance of traditional forms of organisation and a desire to improve efficiency and reduce fiscal drain in the public sector. Added to this is a growing questioning of the theoretical and empirical justification for state-owned enterprise, the development of models of competition within network utilities and theories of incentive regulation of private natural monopolies (see Newbery, 1999).The model adopted for the electricity supply industry (ESI) since the Second World War resulted in the use of costly generation technologies, neglect of customer services and economic inefficiency. Combined with the interruption of demand growth after the oil crisis of the 1970s, the traditional approach to the industry resulted in excess capacity. In addition, the perverse incentives of cost-of-service regulation had received serious criticism (Averch a...