Bensch, G., Sievert, M., Langbein, J. and N. Kneppel (2016). The Effects of Market-based Reforms on Access to Electricity in Developing Countries: A Systematic Review of the Evidence on Effectiveness and Mechanisms, 3ie Systematic Reviews, 31. London: International Initiative for Impact Evaluation (3ie).Link to Source
Headline Findings: a summary statement
Electricity sector reforms are no panacea on their own but need a strong collaboration between actors from the technological, economic and political sector. The review exposed large knowledge gaps in terms of absolute and relative reform costs as well as reform effectiveness.
Included studies for the quantitative analysis needed to be analyzing a market-based reform in a low- or middle income country using higher-quality causal inference design. For the inclusion of qualitative studies any approach with factual evidence instead of higher-quality cause inference design was included. Since not many studies addressed electricity market sector reforms directly, any indicator playing a role in the causal chain underlying the intervention was included. These indicators are efficiency, labour force, supply and investment, quality as well as tariffs and costs. These criteria reduced the number of studies to 26 for quantitative studies and 34 for qualitative studies from an original search of 14384 studies. The studies included in the quantitative analysis were conducted to a large part in Latin America and Asia but also cross-country, in which Sub-Saharan Africa countries and Eastern Europe countries were included. Studies in the qualitative analysis also included those conducted in Sub-Sahara Africa and Oceania.
Implications for policy and practice
In order to address policy relevant findings clear indications coming out of the analysis of the primary studies are needed. However, both quantitative and qualitative evidence demonstrated that there was much heterogeneity across reform designs and implementation as well as the effectiveness of reforms. Thus, the findings merely suggest that electricity sector reforms are no panacea on their own.
Implications for further research
Considerable knowledge gaps were found in terms of absolute and relative reform costs as well as reform effectiveness. This can be traced back to a lack of sufficiently detailed and internationally comparable data creating difficulties for the analyzing researcher and the inherent methodological challenge to develop a convincing rigorous framework to empirically isolate reform effects from confounding factors. To tackle the lack of comparable data, it is important that the researchers clearly articulate their data need, i.e. the type and quality of data needed, so the international organisations, regulators and ministries are motivated to provide this data in a comparable way. When it comes to the data analysis, a consistent application of best practice panel estimations is needed. This is particularly important in this context since instrumental variables do not seem to be a good solution. Researchers should better focus on considering the appliance of mixed methods.
More than 1.1 billion people lack electricity access worldwide, with negative implications for the livelihood of people as well as for the economic performance of a country. The majority of households without electricity is in Sub-Saharan Africa (55 percent), followed by South Asia. One potential pathway to increase the share of households with access to electricity are market-based reforms. It is expected that reforms of this kind, such as privatization, liberalization, private sector involvement or regulatory instigate improvements in the technical and financial efficiency of the electricity sector through competition and profit orientation, which may go along with adjustments in the labour force. Increased efficiency and the opening of the market to new, private investors may then ramp up system supply. This, in turn, is supposed to affect quality, costs and tariffs and eventually the welfare of existing electricity consumers and lead to increased connections of new customers. However, given the strong techno-economic and political complexities of the electricity sector, this causal chain is far from certain and net effects of reform measures are hard to predict.
Systematic examination of the impacts of market-based reforms on access to electricity in developing countries. The focus of the review is particularly on different market-based reforms, their effects on electricity system parameters and electricity access for different groups of populations in developing countries as well as the mechanisms, which help to explain these differences. Lastly, cost-effectiveness of the reforms is analyzed.
Only studies conducted in low and middle income countries were eligible for this review. This definition was slightly adapted by excluding the former Soviet Union, former Yugoslavia and Turkey since these countries are virtually fully electrified. The types of intervention considered in the review include privatisation, liberalisation, private sector involvement, regulation and decentralisation. Primary outcomes looked at are household welfare and electricity acces. The analysed secondary outcomes are technical and financial efficiency or inefficiency in utilities, the generation process or transmission and distribution of electricity, labour force, indicated by the number of employees, private investment, supply and quality of electricity, electricity costs and tariffs as well as industrial-residential price ratios or price-cost ratios.
Only higher-quality causal inference design was considered for the quantitative evidence, including experiments, matching, regression and (within-country and cross-country) panel data methods, difference-in-differences, instrumental variable estimations, regression discontinuity designs, as well as interrupted time series desings. Any approach based on factual evidence was eligible to be included in the qualitative analyses where questions on mechanisms behind observed reform effects or reform costs only were analysed. These studies had to be of high-quality according to critical appraisal meaning they had to score «high» for either the methodology or analysis criterion and at least «medium» for both.The search was conducted in June / July 2013 and July 2015 and covers all studies, published or reported, between 1 January 1980 and 30 June 2015. Studies published in any language were eligible, regardless of their publication type. With regards to the search a total of eight international databases were systematically searched, namely ABI/INFORM Global, British Library for Development Studies, Business Source Complete, Econlit, Energy Citation Database, PAIS International, World Wide Political Science Abstracts and Google Scholar. In addition, websites of development aid organisations were manually searched as well as the literature provided by the advisory group members. As a final step of the search we conducted bibliographic back-referencing and citation tracking. For the quantitative analysis using meta-regressions, the data were synthesized along the outcomes and the intervention type. Due to a lack of observations some outcomes were grouped together in the analysis so the final outcomes analysed are efficiency, labour force, supply and investment, quality, tariffs and cost as well as household welfare. The methodology on answering questions on the mechanism using a qualitative approach included an iterative logic model approach. This meant synthesizing on the mentioned intervention types and the above described outcomes.