Cost Recovery and Financial Viability of the Power Sector in Developing Countries : A Literature Review
The financial viability of the power sector is a prerequisite for attracting the investment needed to ensure reliable energy supply, meet universal access targets, and hasten the clean energy transition. Adequate pricing of electricity to allow for...
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World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/896141513777558023/Cost-recovery-and-financial-viability-of-the-power-sector-in-developing-countries-a-literature-review http://hdl.handle.net/10986/29077 |
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okr-10986-290772021-06-08T14:42:47Z Cost Recovery and Financial Viability of the Power Sector in Developing Countries : A Literature Review Huenteler, Joern Dobozi, Istvan Balabanyan, Ani Banerjee, Sudeshna Ghosh ELECTRICITY PRICING POWER SECTOR ELECTRICITY TARIFFS TARIFFS COST RECOVERY SUBSUDIES The financial viability of the power sector is a prerequisite for attracting the investment needed to ensure reliable energy supply, meet universal access targets, and hasten the clean energy transition. Adequate pricing of electricity to allow for cost recovery is also important to minimize the power sector’s negative macroeconomic, fiscal, environmental, and social impacts. This paper takes stock of the empirical and conceptual literature on the financial viability and cost recovery of the power sector in developing countries. Time-series data across countries are relatively scarce, but comparing the findings from 21 studies suggests that under-recovery of costs remains pervasive despite decades of efforts by governments and development institutions. Large electricity subsidies continue to burden governments, especially in the Middle East, South Asia, Central Asia, and Sub-Saharan Africa. Reviews by the World Bank and International Monetary Fund on outcomes of their own engagement also conclude that progress on cost recovery in supported countries has been limited. Although the aggregated view obscures fluctuation within individual countries over time, the available evidence suggests that countries progressing toward cost recovery may find themselves backsliding within a few years. As for understanding the circumstances under which progress can be made, a handful of studies point toward a correlation between sector reforms and cost recovery, although few of the studies address obvious endogeneity problems. To provide more solid guidance for future efforts to improve cost recovery, more research is needed on: (i) the determinants and enabling conditions of progress on cost recovery; (ii) tariff reform sequencing; and (iii) institutional arrangements, policies, and regulations that enable countries to sustain cost recovery once it is reached. 2017-12-21T20:57:46Z 2017-12-21T20:57:46Z 2017-12 Working Paper http://documents.worldbank.org/curated/en/896141513777558023/Cost-recovery-and-financial-viability-of-the-power-sector-in-developing-countries-a-literature-review http://hdl.handle.net/10986/29077 English Policy Research Working Paper;No. 8287 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
ELECTRICITY PRICING POWER SECTOR ELECTRICITY TARIFFS TARIFFS COST RECOVERY SUBSUDIES |
| spellingShingle |
ELECTRICITY PRICING POWER SECTOR ELECTRICITY TARIFFS TARIFFS COST RECOVERY SUBSUDIES Huenteler, Joern Dobozi, Istvan Balabanyan, Ani Banerjee, Sudeshna Ghosh Cost Recovery and Financial Viability of the Power Sector in Developing Countries : A Literature Review |
| relation |
Policy Research Working Paper;No. 8287 |
| description |
The financial viability of the power
sector is a prerequisite for attracting the investment
needed to ensure reliable energy supply, meet universal
access targets, and hasten the clean energy transition.
Adequate pricing of electricity to allow for cost recovery
is also important to minimize the power sector’s negative
macroeconomic, fiscal, environmental, and social impacts.
This paper takes stock of the empirical and conceptual
literature on the financial viability and cost recovery of
the power sector in developing countries. Time-series data
across countries are relatively scarce, but comparing the
findings from 21 studies suggests that under-recovery of
costs remains pervasive despite decades of efforts by
governments and development institutions. Large electricity
subsidies continue to burden governments, especially in the
Middle East, South Asia, Central Asia, and Sub-Saharan
Africa. Reviews by the World Bank and International Monetary
Fund on outcomes of their own engagement also conclude that
progress on cost recovery in supported countries has been
limited. Although the aggregated view obscures fluctuation
within individual countries over time, the available
evidence suggests that countries progressing toward cost
recovery may find themselves backsliding within a few years.
As for understanding the circumstances under which progress
can be made, a handful of studies point toward a correlation
between sector reforms and cost recovery, although few of
the studies address obvious endogeneity problems. To provide
more solid guidance for future efforts to improve cost
recovery, more research is needed on: (i) the determinants
and enabling conditions of progress on cost recovery; (ii)
tariff reform sequencing; and (iii) institutional
arrangements, policies, and regulations that enable
countries to sustain cost recovery once it is reached. |
| format |
Working Paper |
| author |
Huenteler, Joern Dobozi, Istvan Balabanyan, Ani Banerjee, Sudeshna Ghosh |
| author_facet |
Huenteler, Joern Dobozi, Istvan Balabanyan, Ani Banerjee, Sudeshna Ghosh |
| author_sort |
Huenteler, Joern |
| title |
Cost Recovery and Financial Viability of the Power Sector in Developing Countries : A Literature Review |
| title_short |
Cost Recovery and Financial Viability of the Power Sector in Developing Countries : A Literature Review |
| title_full |
Cost Recovery and Financial Viability of the Power Sector in Developing Countries : A Literature Review |
| title_fullStr |
Cost Recovery and Financial Viability of the Power Sector in Developing Countries : A Literature Review |
| title_full_unstemmed |
Cost Recovery and Financial Viability of the Power Sector in Developing Countries : A Literature Review |
| title_sort |
cost recovery and financial viability of the power sector in developing countries : a literature review |
| publisher |
World Bank, Washington, DC |
| publishDate |
2017 |
| url |
http://documents.worldbank.org/curated/en/896141513777558023/Cost-recovery-and-financial-viability-of-the-power-sector-in-developing-countries-a-literature-review http://hdl.handle.net/10986/29077 |
| _version_ |
1764468436579123200 |