Electricity sector reforms and cost efficiency: The case of small electricity systems in Sub-Sahara Africa

Adwoa Asantewaa, Tooraj Jamasb and Manuel Llorca

Economic Analysis and Policy, 2023, vol. 80, issue C, 880-893

Abstract: The financial viability of Sub-Sahara Africa (SSA) electricity sectors has become a central energy policy issue in recent years. This follows persistent under-recovery of costs which are amongst some of the highest in the world. Discussions, however, focus on tariff and utility reforms and inadequately on costs efficiency and the role of broader sector reforms in persistently high costs. Through a synthesis of reform theories and case studies and using small electricity systems as a surrogate for liberalized electricity sectors without competitive markets, this paper examines the connection between sector reforms and costs. It brings an economic perspective to the discussion on utility financial performance in SSA electricity systems and the need for a holistic policy approach for sustainable cost-recovery. In this, we recommend the promotion of mobile power plants to facilitate contestability in generation and need for non-island small systems to participate in regional power markets to neutralize the scale limitations of their autarkic demand. Utilities and regulatory agencies should form platforms to share information on cost opportunities and possibilities to inform procurement designs and regulatory benchmarks. Regional markets could partner with national governments to develop subsidy schemes such as Contracts for Differences to remove rigidities imposed by national power purchasing contracts to promote deeper participation of small systems in regional power markets. Yardstick competition in the distribution segment remains viable in many small electricity systems and should be pursued at the regional level in the short run to medium term and at the national levels in the long term following deconcentration and the introduction of private sector participation.

Keywords: Small electricity systems; Sub-Saharan Africa; Cost recovery; Cost-efficiency; Electricity prices; Power distribution utilities; Electricity sector reforms; Competition; Hybrid electricity sectors (search for similar items in EconPapers)
JEL-codes: D47 D52 D61 E13 L97 P18 P41 P48 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0313592623002084
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:80:y:2023:i:c:p:880-893

DOI: 10.1016/j.eap.2023.09.001

Access Statistics for this article

Economic Analysis and Policy is currently edited by Clevo Wilson

More articles in Economic Analysis and Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().