Growth potential of energy sector reforms: new evidence on EU and Southeast European countries by exploring impact on electricity generation

Abstract

The aim of this research is to investigate the impact of energy sector reforms on electricity generation and thus economic growth in EU and Southeast European countries. The paper aims at clarifying whether the impact of energy sector reforms on generation efficiency differs among countries according to their level of development and regional characteristics. Our hypothesis is that the EU reform model is not appropriate for all Member States and Southeast European countries since it does not improve efficiency in electricity generation in all countries and therefore, it can hamper economic growth. For testing the defined hypothesis the panel regression model with fixed effects has been used. The research results show that unlike in the EU-15 (old Member States), energy sector reforms in the EU-12 (new Member States), and selected Southeast European countries (Energy Community contracting parties) have no significant impact on electricity transmission and distribution losses. These evidences imply that the uniform EU reform model does not improve efficiency of electricity generation in less developed countries. On the contrary it can even hamper economic growth and therefore it cannot be appropriate for all Member States. The reason lies in the fact that successful reform model requires adequate level of institutional resources that are missing in most transition and post-transition countries.