Power It Up Strengthening the Electricity Sector

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.