As developing countries seek to improve their economic prospects, electricity reform has been widely viewed as a central part of this effort. While the focus of most research to date has been at economy or utility level, there has been much less research on regional outcomes. India presents a unique case, as its states share a common economic and political system, whilst having been given considerable flexibility in how they implement reform, thus allowing a comparative analysis of alternative approaches to reform. This study presents an econometric analysis of the determinants and impact of electricity reform in India, giving special regard to its political economy and regional diversity. It assesses how electricity reform in India has affected key economic variables that determine sectoral efficiency, prices and investment flows. We use panel data for 19 states, spanning 1991-2007, using dynamic panel data estimators. Results show that individual reform measures have affected key economic variables differently; thus the nature of reform in individual states would determine these economic outcomes. Findings suggest that due to political economy factors, outcomes have tended to be adverse in the initial stages of reform, as previously hidden distortions become apparent. The performance of reforms, however, may improve as the reform progresses beyond a ‘baseline’ level. doi: 10.5547/ISSN0195-6574-EJ-Vol33-No1-4

As much of the world pushes ahead with the deployment of renewable energy, resource-rich MENA economies are lagging behind. This paper contends that while the main obstacles to deployment of renewables are grid infrastructure inadequacy, insufficient institutional capacity, and risks and uncertainties, the investment incentives lie on a policy instrument spectrum with two polar solutions: (i) the incentive is provided entirely through the market (removing all forms of fossil fuel subsidies and internalising the cost of externalities); or (ii) the incentive is provided through a full government subsidy programme (in addition to the existing fossil fuel subsidies). However, there is a trade-off between the two dimensions of the fiscal burden and political acceptance across the policy instrument spectrum, which implies that the two polar solutions themselves are not easily and fully implementable in these countries. We propose a new dynamic combinatorial approach (partial subsidy programme and partial fossil fuel price adjustment) that gradually moves towards market-based incentive provision over the medium to long-term where energy subsidies are eventually phased out. The approach balances fiscal sustainability with political stability, enabling the gradual scaling up and development of markets for renewables.

No abstract

Non-OECD Asian economies comprise about 34% of world primary energy demand, 60% of population and 65% of the world's poor, and will account for more than 60% of the total increase in energy consumption between 2015 and 2040. Energy sector reforms in non-OECD Asia are thus significant for global energy use, sustainability and socioeconomic welfare. The region has experienced a slow and difficult reform path and after more than two decades of reform efforts it is time to take stock of their outcomes. Using a novel dataset assembled for this purpose for the period 1990-2013 for 17 non-OECD Asian countries, we apply instrumental variables regression techniques to several electricity sector reform outcome models. We find that the standard reform model has had limited benefits, largely due to sectoral heterogeneity and institutional endowments. We also show empirical evidence of the theoretical trade-offs between technical efficiency, economic and welfare objectives of reforms. The results call for rethinking of the effectiveness of reforms and awareness of the effects of key reform steps on different outcomes. This is useful for balancing the trade-offs among competing reform objectives.

The contents of this paper are the authors' sole responsibility. They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its members.