News

Findings of a new report on policy options for power sector market structures was released by the World Bank's Sustainable Energy Department to energy experts at a brainstorming session  held at the World Bank in Washington, DC on June 9. 

The key objective of the analytical framework is to explore the links between alternative market structures and performance (in terms of access, price, quality, technical and financial performance). The results offer alternative options to policy makers based on the lessons learned from the taxonomy of different market structures, tailored to different national peculiarities.

The study specifically examines whether power system size and country per capita income can be reliable indicators of initial conditions for guiding policy on power market structure. Guidance is needed to address issues such as whether there are solid foundations for recommending vertical unbundling for small power systems in low-income countries, particularly in the absence of short term privatization prospects. The proposed policy recommendations therefore have to be tailored to the specific taxonomy of market structures that characterize the electricity sector in developing countries.
 

The results of the analysis carried out for this study confirm the following conclusions for policy guidance on power market restructuring for developing countries:

• Unbundling delivers results when used as an entry point to implement broader reforms, reducing the market concentration on both the generation and distribution sides, by attracting additional players into the market from both the private and public sectors.
   
• There seems to be a threshold power system size and per capita income level below which unbundling of the power supply chain is not expected to be worthwhile.
   
• Partial forms of vertical unbundling do not appear to drive improvements, as centralized control is still likely to hinder the development of market competition.

The report was jointly funded by the World Bank, the Energy Sector Management Assistance Program - ESMAP, and the Public-Private Infrastructure Advisory Facility - PPIAF.

Link to the report:
REVISITING POLICY OPTIONS ON THE MARKET STRUCTURE IN TH E POWER SECTOR, June 2011.