The Political Economy of Electric Power Sector Reforms in Developing Countries

Session Submission Type: Full Paper Panel

Session Description

Electric power sector reforms have been at the core of economic reforms pursued by many developing countries over the past three decades. These market-oriented or “Washington-Consensus” type reforms became a global standard in the 1980s and 1990s as part of a shift in economic theory and policy away from state control in the power sector. At the core of these reforms was a series of policy changes in four broad categories: unbundling utilities into core functions of generation, transmission and distribution; maximizing private participation; establishing an independent regulator to ensure prices reflect costs and creating competitive power markets. The reforms’ primary objectives were to improve efficiency of utilities and attract private investments to the sector. They did not directly focus on broader energy sector objectives, such as rural electrification, environmental concerns, clean cooking fuels and security of fuel supplies. It was expected that the core reform objectives of technical efficiency and financial viability would place power utilities in a better position to pursue extended secondary objectives of electrification and environmental sustainability. Reform advocates did not take political economy issues into full consideration.

However, the experiences of many countries in pursuing these market reforms have varied greatly due to political economy factors. In many cases, the reality of implementing technical reforms was not divorced from socio-political motives of policy makers to pursue broader objectives of addressing energy security concerns, extending the electricity grid, providing low and subsidized electricity tariffs to citizens as well as addressing fiscal pressures. These political economy factors include both geopolitical factors, as well as donor influences; structural factors in terms of resource endowments, income levels and system size; domestic pressures for electricity access as well as popular pressure for cheap electricity as a public good.

This panel therefore examines the political economy of power sector reforms in developing countries building on research in three key papers. The first paper will, at a broad level, examine the substance of these market reforms in terms of the history of their formulation, the key ideas and interests that have shaped their global diffusion, the electricity sector outcomes they seek to achieve and how their implementation has been shaped by various interests, motivations and constraints. This paper draws on statistical analyses, multi-country case studies, and development practice publications. Second, the panel will zoom in more closely to examine the specific country experiences in implementing these Washington Consensus type power sector reforms. In this regard, a second paper is a case study on Morocco, a country that has made little progress in implementing the 1990s “textbook” reforms but has liberalized electricity generation and distribution sub-sectors and made impressive strides in broader energy sector objectives of extending electricity access to 100% of households, clean cooking technologies and renewable energy. A third paper, argues that in Sub-Saharan Africa (SSA), achieving the primary reform objective of financial viability is in fact linked to broader energy sector initiatives such as the provision of reliable electricity. Using econometric analysis, the paper shows that electrification is positively correlated with tax compliance attitudes in 36 SSA countries, and thus, the financial returns associated with public investments toward improving access to and reliability of electricity could improve the sector’s financial viability.

A key theme that emerges from this discussion is that within a context of global policy shifts towards advancing clean energy technologies as part of the Paris Climate Deal and achieving Sustainable Development Goal (SDG) 7 on universal electrification, the dichotomy between narrow reform objectives and broader energy sector goals may no longer be relevant. Policy makers and reform advocates will have to take this into account.

Sub Unit

• DIVISION 12: Comparative Politics in Developing Countries

Individual Presentations

• The Political Economy of Power Sector Reforms in Developing Countries: a Review - Alan Lee, World Bank; Zainab Usman, World Bank

• Learning from Power Sector Reform Experiences: The Case of Morocco - Zainab Usman, World Bank

• Electricity Provision and Tax Mobilization in Africa - Moussa P Blimpo, World Bank; Ken Ochieng' Opalo, Georgetown University

Chair

• Zainab Usman World Bank

Discussants

• Paasha Mahdavi University of California, Santa Barbara

• Alan Lee World Bank