(2016-03) Power It Up Strengthening the Electricity Sector

International Monetary Fund • 2016 • 36 pages

Summary — This paper analyzes the electricity sector in low-income countries, focusing on Haiti and Nicaragua. It proposes models to account for different equilibria in the electricity sector and examines how policy choices affect investment, efficiency, and economic activity, particularly addressing electricity theft and regulatory frameworks.

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Key Findings

Policy choices significantly impact long-term equilibria in the electricity sector.
Credible enforcement reduces electricity theft, leading to increased investment and lower tariffs.
Poor management affects cash flow and solvency prospects, hindering investment.
Cross-subsidies embedded in tariffs can constrain economic activity.
Haiti's electricity sector suffers from inadequate management, high costs, and insufficient supply.

Full Description

The paper proposes theoretical models for the electricity sector, illustrating implications with the experiences of Haiti and Nicaragua. The models assess how solvency prospects, dispatching rules, and generation costs affect long-term investment and electricity supply. It demonstrates how credible regulation and enforcement to reduce electricity theft result in larger investment, lower subsidies, and lower tariffs, while non-credible promises lead to insufficient investment, high tariffs, and high distribution losses. The paper reviews Haiti's challenges and Nicaragua's gradual transition to a better equilibrium.

Topics

Geography

Time Coverage

2000 — 2016

Keywords

Electricity sector, electricity theft, economic efficiency, economic infrastructure, Haiti, Nicaragua, regulation, investment, tariffs, distribution losses, subsidies, enforcement

Entities

IMF, World Bank, World Economic Forum, Gabriel Di Bella, Francesco Grigoli, Électricité d'Haïti (EDH), ENATREL, Nicaraguan Electricity Institute (INE)

Notes

IMF Working Paper (WP16-85)