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Case Study

A Quarter Century Effort Yet to Come of Age: A Survey of Power Sector Reforms in Developing Countries

Professor Tooraj Jamasb, Durham University Business School; Rabindra Nepal, The University of Queensland; and Govinda R. Timilsina, Development Research Group, World Bank Group.

It is well over two decades since technological and economic changes triggered a trend for reform in the global power sector. Primarily aimed at introducing competition into what were previously largely or exclusively state-owned sectors, the reforms of the 1990s onwards led, in most cases, to restructuring and independent regulation of the sector, characterised by competing companies and regulated natural monopolies.

The expected outcomes of this shift were that efficiency, service and reliability of supply would all improve, and that there would be widespread availability of cheaper energy – of particular benefit to the poorer sections of society through improving access to electricity. The extent to which these outcomes have actually been achieved, however, need to be explored. Now a research project from the World Bank Group has set out to redress this, through a review of theoretical and empirical literature on the implementation of global energy reforms and their outcomes in the developing world.

Evidence on Global Energy Sector Reform

The variation between different regions and countries (for example, in the developed and developing world), and the number of factors involved, make an evaluation of the overall sector a challenging one to undertake. Energy sector reform is a multi-faceted topic and the existing literature adopts a range of differing approaches, including statistical analysis, cost-benefit assessments and case studies, all of which may be applied to single or multiple countries or regions.

This project reviewed the existing body of evidence and relevant literature. Dividing the work into microeconomic and macroeconomic studies, they considered three key outcomes for each. For the microeconomic scale they looked at impacts on: electricity pricing; the quality of, and access to, services; and productivity and efficiency. For macroeconomic studies, they considered impacts on: economic welfare; economic growth; and poverty alleviation.

The Outcomes of the Reforms

Given the wide range of available information on reforms in different countries and collections of countries, not to mention the varying approaches involved, it is almost inevitable that the results of the studies show a varying pattern. Not all countries have progressed to the same level and there is a range of practical problems in terms of, for example, the availability and comparability of reliable data.

Despite these issues, the researchers were able to produce several summaries of the impacts of reform. These included: identification of a need to adjust prices prior to or at the time of privatisation rather than afterwards; a general trend towards increased operational efficiency following reforms; and the fact that an independent regulator, and a regulatory framework, is crucial if reforms are to succeed. From a social point of view, perhaps the key finding was that reforms alone do not improve access to electricity and that further targeted effort is required to improve access to energy and reduce poverty.

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