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Supply and Demand of Electricity in the Developing World

Author

Listed:
  • Madhu Khanna
  • Narasimha D. Rao

    () (Department of Agricultural and Consumer Economics, University of Illinois, Urbana-Champaign, Illinois 61801
    School of Earth Sciences, Stanford University, Stanford, California 94305)

Abstract

This paper reviews the literature that has sought to quantify the determinants of electricity demand and supply efficiency in developing countries. We examine the causal relationship between electricity consumption and economic growth, price and income elasticities of demand, and the barriers to adoption of energy-efficient equipment. We also examine the performance outcomes of economic policies affecting the electricity sector, including institutional reforms such as privatization and regulation. We find that electricity demand is driven by GDP, prices, income, the level and characteristics of economic activity/urbanization, and seasonal factors. The magnitude of their effects differs across countries, time periods, and studies even for the same country. These demand studies suffer from a number of limitations, including data availability and price distortions that limit responsiveness of demand to price signals. The literature is inconclusive on whether reforms, particularly privatization, improved supply efficiency. Effective regulation, competitive markets, and appropriate sequencing of reforms are important factors that influence the outcomes of privatization. There is a need for more quantitative analysis of the social welfare and distributional impacts of privatization of the electricity sector in developing countries.

Suggested Citation

  • Madhu Khanna & Narasimha D. Rao, 2009. "Supply and Demand of Electricity in the Developing World," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 567-596, September.
  • Handle: RePEc:anr:reseco:v:1:y:2009:p:567-596
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev.resource.050708.144230
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    Citations

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    Cited by:

    1. Rowlands, Ian, 2011. "Co-impacts of energy-related climate change mitigation in Africa’s least developed countries: the evidence base and research needs," LSE Research Online Documents on Economics 37575, London School of Economics and Political Science, LSE Library.
    2. Rao, Narasimha D., 2013. "Does (better) electricity supply increase household enterprise income in India?," Energy Policy, Elsevier, vol. 57(C), pages 532-541.
    3. Hochman, Gal & Zilberman, David, 2015. "The political economy of OPEC," Energy Economics, Elsevier, vol. 48(C), pages 203-216.
    4. repec:rss:jnljms:v1i12p2 is not listed on IDEAS
    5. Rao, Narasimha D., 2013. "Distributional impacts of climate change mitigation in Indian electricity: The influence of governance," Energy Policy, Elsevier, vol. 61(C), pages 1344-1356.
    6. repec:spr:eurase:v:7:y:2017:i:3:d:10.1007_s40822-017-0079-8 is not listed on IDEAS
    7. Kabir Malik, Maureen Cropper, Alexander Limonov and Anoop Singh, 2015. "The Impact of Electricity Sector Restructuring on Coal-fired Power Plants in India," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    8. Ian H. Rowlands, 2011. "Co-impacts of energy-related climate change mitigation in Africa�s least developed countries: the evidence base and research needs," GRI Working Papers 39, Grantham Research Institute on Climate Change and the Environment.
    9. Adom, Philip Kofi, 2016. "Electricity Supply and System losses in Ghana. What is the red line? Have we crossed over?," MPRA Paper 74559, University Library of Munich, Germany, revised 11 Nov 2016.
    10. Rosnes, Orvika & Vennemo, Haakon, 2012. "The cost of providing electricity to Africa," Energy Economics, Elsevier, vol. 34(5), pages 1318-1328.
    11. Sanoh, Aly & Kocaman, Ayse Selin & Kocal, Selcuk & Sherpa, Shaky & Modi, Vijay, 2014. "The economics of clean energy resource development and grid interconnection in Africa," Renewable Energy, Elsevier, vol. 62(C), pages 598-609.
    12. Kabir Malik & Maureen Cropper & Alexander Limonov & Anoop Singh, 2011. "Estimating the Impact of Restructuring on Electricity Generation Efficiency: The Case of the Indian Thermal Power Sector," NBER Working Papers 17383, National Bureau of Economic Research, Inc.
    13. repec:eee:enepol:v:116:y:2018:i:c:p:410-421 is not listed on IDEAS
    14. repec:eee:eneeco:v:69:y:2018:i:c:p:19-32 is not listed on IDEAS

    More about this item

    Keywords

    privatization; energy efficiency; elasticities; reforms;

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • P28 - Economic Systems - - Socialist Systems and Transition Economies - - - Natural Resources; Environment
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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