This study analyses original panel data from 90 countries between 1985 and 2004. Econometric methods were used to identify the effects of different policy devices and power sector reforms on transmission and distribution loss (T & D loss) ratio, installed capacity per capita, and operation rates in the countries analyzed. From these results two conclusions could be made:
i) The introduction of foreign IPP, privatization, and unbundling all contribute to the build up of efficient assets for electricity generation. Though these factors increase installation capacity and operation rates in many regions, installation capacity decreases in developed countries as there must be a combination of the build up of new generation facilities and the disposing of old ones in order to raise operation rates. On the other hand, in developing countries, the rapid increase in demand leads to an increase in installation capacity per capita.
ii) The introduction of competition to the retail sales section has been effective in decreasing T & D loss in developed countries, countries of the former Soviet Union, and of Eastern Europe.
This study suggests that the secret to successful reform of the power sector is that, any public power company occupying a oligopolistic/monopsonistic position should be unbundled into several private companies.; thus allowing the process of competition to remove inefficiencies, leaving efficiently managed companies to further increase efficiency through investment in efficient assets, decreases of T & D loss, and increased operation rates. While these changes can be seen prominently in developed countries, it is in developing countries and countries with transitional economies that the problem of how to manage the transitional period in a flexible and yet prompt manor is highlighted.
View full abstract