Bensch, G., Sievert, M., Langbein, J. and N. Kneppel (2016). The Effects of Market-based Reforms on Access to Electricity in Developing Countries: A Systematic Review of the Evidence on Effectiveness and Mechanisms, 3ie Systematic Reviews, 31. London: International Initiative for Impact Evaluation (3ie).Link to Source
Bensch and colleagues look at the impacts of market-based reforms on access to electricity in low- and middle-income countries.
Headline Findings: a summary statement
There is no robust evidence for a general trend in outcomes due to electricity sector reform, though small improvements are consistently seen in indicators of supply and investment. There is some indication that ownership (i.e. privatisation) has less impact than other market-based interventions and the effect of regulation is very dependent on the rest of the reform package. Electricity sector reforms are no panacea on their own and require a strong collaboration between actors from the technological, economic and political sector. The review exposed large knowledge gaps in terms of absolute and relative reform costs and effectiveness.
Ultimately 26 quanitative and 34 qualitative evidence studies met the inclusion criteria. Most of the studies included in the quanitative analysis were conducted in Latin America and Asia, but there were also a few cross-country studies that included Sub-Saharan Africa and Eastern Europe. Studies in the qualitative analysis came from a more diverse set of countries, including Oceania.
Implications for policy and practice
The authors found that the body of evidence has too much heterogeneity across reform designs, implementation, and their effectiveness to draw any policy relevant conclusions.
Implications for further research
Considerable knowledge gaps were found in terms of absolute and relative reform costs (ultimately no cost-effectiveness analysis could be conducted) as well as on reform effectiveness. There is a lack of comparable data across countries, which could be improved by researchers developing a convincing rigorous framework to isolate reform effects from confounding factors, and defining clear indicators within this. The authors also reccomend that researchers more consistently use a panel approach as this is best practice and instrumental variables do not seem to be a suitable solution in this context. Researchers should also consider using mixed-method approaches.
More than 1.1 billion people lack access to worldwide and this can negatively impact both people's livelihoods and the economic performance of a country. The majority of households without electricity are in Sub-Saharan Africa (55 percent) and South Asia. One potential pathway to increasing the share of households with access to electricity is market-based reform. It is thought that reforms of this kind, such as privatisation, liberalisation, private sector involvement , and regulation improve the technical and financial efficiency of the electricity sector through competition and profit orientation. Increased efficiency and the opening the market to new, private, investors may then ramp up system supply. This, in turn, is supposed to affect quality, costs, tariffs, and eventually the welfare of existing electricity consumers and lead to increased coverage. However, given the strong techno-economic and political complexities of the electricity sector, this causal chain is far from certain and net effects of reform measures are hard to predict.
Systematic examination of the impacts of market-based reforms on access to electricity in developing countries. The focus of the review is particularly on different market-based reforms, their effects on electricity system parameters and electricity access for different groups of populations in developing countries as well as the mechanisms, which help to explain these differences. Lastly, cost-effectiveness of the reforms is analyzed.
The authors searched eigth international databases and conducted bibliographic back-refrencing and citation tracing. Only studies conducted in low- and middle-income countries were eligible for this review. This definition was slightly adapted by excluding the former Soviet Union, former Yugoslavia, and Turkey since these countries are virtually fully electrified. The types of intervention considered in the review include privatisation, liberalisation, private sector involvement, regulation, and decentralisation. Primary outcomes looked at include household welfare and electricity access. Secondary outcomes then include technical and financial efficiency (or inefficiency) in utilities, the generation, transmission, or distribution process of electricity, labour force, private investment, supply and quality of electricity, tarrifs, and price-cost ratios.
For the quantitative evidence, only robust causal inference designs were included, such as randomized control experiments, matching, within-country and cross-country panel data, difference-in-difference, instrumental variable, regression disconitinuity, and interrupted time series methods. For qualitative analyses, any approach based on factual evidence where the mechanisms behind observed reform effects or costs was analysed were included. All qualitative studies were critically appraised and only those of high-quality were included in the final review.
For the meta-regressions, the data was synthesized along the outcomes and intervention types. Due to a lack of observations, some outcomes were grouped together to form the following conglomerate indicators: efficiency, labour force, supply and investment, quality, tariffs, cost and household welfare. The qualitative data was synthesised using an iterative logic model approach.
This is a comprehensive review that utilized high quality review methods including an extensive literature search for published and unpublished literature in any language, clearly detailed inclusion criteria and information on coding and effect size calculations, and the incorporation of qualitative and quantitative literatures. The use of a logic model to assess and incorporate the qualitative information was especially useful and will inform future approaches and research on this topic.
The review has the following minor limitations, some of which may be due to reporting. The full text screening appeared to have multiple stages and was difficult to follow, especially when trying to figure out whether or not it was done in duplicate. All heterogeneity statistics for the meta-analyses were reported in tables although the authors could have done a better job of presenting/interpreting them in the text as there is a fair amount of heterogeneity for many of the main effects and it is not clear from these results that the meta-regressions were always warranted given the few number of individual studies for some of these analyses. Overall, additional attention to interpreting the heterogeneity would have been useful for readers. Finally, it was not clear that their pooling of multiple effects from individual studies in some analyses is appropriate as the weighting may not have been properly addressed, although as described this was difficult to assess. The authors generally seem to present these results with the appropriate cautions for readers, however, so this seems to be a minor issue.