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The role of regulatory governance in driving PPPs in electricity transmission and distribution in developing countries : a cross-country analysis

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  • Vagliasindi, Maria
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    Abstract

    This paper presents new global evidence on the key determinants of public-private partnership investment in electricity transmission and distribution, based on a panel data analysis of 105 developing countries over a period of 16 years from 1993 to 2008. It aims to identify the key factors affecting the private investor's decision to enter electricity transmission and distribution, through a probit analysis and the amount of investment sunk in this market segment, based on Heckman's sample selection analysis. One of the key results of the analysis is that sector regulatory governance affects only the entry of private investors in electricity transmission and distribution. It is not significantly linked to higher investment in transmission and distribution. The result implies that the power of the incentive has not been so strong as to affect the volume of investment. Similarly, economy-wide governance factors, including control for corruption and degree of political competition, are factored in by private investors only in the initial stage of the game when the decision to enter into the transmission and distribution market is taken. This reinforces the expectation that private investors seem to be adequately protected against risks, so that once they have entered the market, they can accommodate the governance environment. Finally, the introduction of renewables in the power system enhanced overall public-private partnership investment in transmission and distribution. Renewable-based energy also requires technical and regulatory certainty about the availability of renewable-ready transmission resources.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6121.

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    Date of creation: 01 Jul 2012
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    Handle: RePEc:wbk:wbrwps:6121

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    Keywords: Energy Production and Transportation; Emerging Markets; Investment and Investment Climate; Economic Theory&Research; Debt Markets;

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    1. Gutierrez, Luis Hernando, 2003. "The Effect of Endogenous Regulation on Telecommunications Expansion and Efficiency in Latin America," Journal of Regulatory Economics, Springer, vol. 23(3), pages 257-86, May.
    2. Paul Levine & Paul Levine & Jon Stern & Francesc Trillas, 2003. "Independent Utility Regulators: Lessons from Monetary Policy," School of Economics Discussion Papers 0403, School of Economics, University of Surrey.
    3. Jamasb, Tooraj & Pollitt, Michael, 2007. "Incentive regulation of electricity distribution networks: Lessons of experience from Britain," Energy Policy, Elsevier, vol. 35(12), pages 6163-6187, December.
    4. Grobman, Jeffrey H. & Carey, Janis M., 2001. "Price caps and investment: long-run effects in the electric generation industry," Energy Policy, Elsevier, vol. 29(7), pages 545-552, June.
    5. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
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