Institutional or structural: lessons from international electricity sector reforms

Abstract

Introduction The widespread privatization of national electricity sectors across both the developing and developed world provides a broad base of experience to assess the relative performance of various countries in attracting private sector participation in the industry. Since 1980, when Chile commenced a radical restructuring, and later privatization program, over sixty countries have introduced reforms in the electricity sector. These reforms have been generally designed with the purpose of increasing the levels of private ownership and investment, thereby reducing the dominance of the state-owned vertically integrated enterprise, the traditional mode of organization. There is substantial variability in the nature of these reforms. Some countries have invited private investment in the generation sector only, financed by long-term supply contracts to state-owned utilities (e.g. China, India, Indonesia, Mexico); some have vertically separated the industry but privatized only part of the sector (e.g. Colombia, El Salvador, Kazakhstan, New Zealand); while others have privatized the entire industry and additionally created competitive generation markets (e.g. Argentina, Chile, United Kingdom). The degree of private sector interest, however, has been markedly mixed across countries. There have been some notable successes in attracting significant levels of private investment in all sectors of the industry (e.g. Argentina, Australia, United Kingdom). On the other hand, private investors have shown little interest in purchasing state-owned enterprises or in financing de novo infrastructure assets in countries such as Mexico, Turkey, or the Ukraine, to name only a few. Indeed some countries, including Hungary and Venezuela, have had to postpone planned privatization programs owing to lack of investor interest.