Competition, regulation, and energy efficiency options in the electricity sector: Opportunities and challenges in developing countries

This dissertation explores issues related to competition in and regulation of electricity sectors in developing countries on the backdrop of fundamental reforms in their electricity sectors. In most cases, electricity sector reforms promoted privatization based on the rationale that it will lower prices and improve quality. In Chapter 2, I analyze this rationale by examining the stated capital cost of independent (private) power producer's (IPPs) power projects in eight developing countries and find that the stated capital cost of projects selected via competitive bidding is on an average about 40% to 60% lower than that of the projects selected via negotiations, which, I argue, represents the extent to which the costs of negotiated projects are overstated. My results indicate that the policy of promoting private sector without an adequate focus on improving competition or regulation has not worked in most cases in terms of getting competitively priced private sector projects.; Given the importance of facilitating effective competition or regulation, In Chapter 3, I examine the challenges and opportunities of establishing a competitive wholesale electricity market in a developing country context. I model a potential wholesale electricity market in Maharashtra (MH) state, India and find that it would be robustly competitive even in a situation of up-to five percent of supply shortage, when opportunities for demand response are combined with policies such as divestiture and requiring long-term contracts. My results indicate that with appropriate policies, some developing countries could establish competitive wholesale electricity markets.; In Chapter 4, I focus on the demand side and analyze the cost effectiveness of improving end-use efficiency in an electricity sector with subsidized tariffs and electricity shortages and show that they offer the least expensive way of reducing shortages in Maharashtra State, India. In Chapter 5, I examine the costs of reducing carbon dioxide emissions in the Indian power sector and find that the costs are higher than those in the US because of mark-ups in the Indian gas based power projects. Overall, this dissertation shows the importance of facilitating effective competition and regulation and pursuing end-use efficiency improvements in electricity sectors of developing countries.