Electricity Liberalisation in Developing Countries

Abstract

Liberalisation of the electricity sector by unbundling the networks from generation and creating power markets has been promoted to developing countries by the World Bank and others for nearly two decades, in order to stimulate private sector investment. The paper presents cross-country comparisons of progress with liberalisation in the largest developing economies along with investment indicators of generating capacity and access to electricity networks, showing extensive growth in investment regardless of the extent of liberalisation, predominantly by the public sector. The liberalisation model is now losing credibility even in the global north.

Analysis of Restructuring the Mexican Electricity Sector to Operate in a Wholesale Energy Market

“…In developing countries, large technical and non-technical losses in transmission lines, supply interruptions or blackouts, crosssubsidy policies, the establishment of below-cost tariffs, high levels of indebtedness of the incumbent company, and lack of investment in the power sector were observed [18,19]. In addition to the problems of an inefficient monopoly, other factors influenced the restructuring of the sector, such as the reform process in telecommunications, air transport, and railroads sectors, and the pressure from the World Bank and the International Monetary Fund [20]. Technological factors, such as the development of the small-capacity gas turbine and the development of telecommunications technologies, were important in the reform process of the electricity sector [15].…”

The Philippines’ and Singapore’s Journeys towards Liberalised Electricity Supply Industries—Takeaways for Malaysia

“…The year 1988 saw the beginning of independent power producers (IPPs) in response to an executive order from the then President, driven by the need to address the looming electricity shortages in the island [14]. By 1994, more than 40 IPP contracts were accumulated, a number that is more than any other developing countries [15]. Table 1 shows the current generation market share in the Philippines.…”

The effects of market-based reforms on access to electricity in developing countries: a systematic review

“…For example, countries with small electricity systems, such as many small African countries, lacked the necessary degree of competition. As a consequence, liberalisation interventions and private sector involvement like IPPs partly led to low-competition oligopolistic market structures (Nepal and Jamasb 2012;Hall and Nguyen 2017;McCulloch, Ward, and Sindou 2017). Reforms additionally proved much harder to be adopted than originally believed because they failed to take account of the underlying political constraints facing decision makers (McCulloch, Ward, and Sindou 2017; Lee and Usman 2018).…”

“…Today, the large majority of developing countries adopted such reforms, although selectively and by far not to the degree observed in the industrialized world. Reforms often stagnated at an intermediate stage or were partly even reversed (Hall and Nguyen 2017;Foster et al 2017;Urpelainen and Yang 2019).…”