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Getting Electricity: Factors affecting the reliability of electricity supply

Author: Doing Business
Publication: Doing Business 2017

Overview

Since 2015 Doing Business, through its getting electricity indicator set, has measured the reliability of supply and the price of electricity, in addition to measuring the ease of getting a new electricity connection for a business. Reliability is measured through quantitative data on the duration and frequency of power outages as well as through qualitative information, which includes—among other things—the mechanisms put in place by the utility for monitoring power outages. These measures are important because a reliable electricity supply is critical for enterprises to operate and grow. According to 2016 World Bank Enterprise Survey data, business owners in around 30% of developing economies perceive unreliable electricity services as a major obstacle to their activities.

This case study focuses on 4 lower middle income economies with varying levels of electricity supply reliability: Guatemala and Indonesia are examples of economies with reliable electricity supply in the main business cities; Cameroon and Pakistan are examples of economies providing an unreliable supply for customers. By comparing different aspects of their energy sectors, it highlights some key elements and actors that drive, or prevent, a reliable energy supply.

Main Findings

  • A broad range of variables impact the reliability of electricity supply. These include the electricity generation adequacy, the condition of power system infrastructure, utility financial and operational performance and energy sector regulation.
  • Evidence from four lower-middle income economies with varying levels of reliability suggests that continuous investment in infrastructure is essential to ensure a reliable electricity supply.
  • Indonesia implemented structural changes to its energy sector, increased investment in infrastructure and introduced regulatory initiatives to improve overall power reliability.
  • Guatemala liberalized its energy sector and adopted different tariff strategies while maintaining incentives to enable cost recovery. These measures, coupled with the presence of an overarching regulatory body, fostered a high level of power reliability in Guatemala City.
  • In the cases of Cameroon and Pakistan, inadequate end-user tariff levels and high transmission and distribution losses had an impact on the overall financial standing of utilities—and, in turn, on the reliability of supply.
  • The experience of these economies suggests that utilities must ensure a healthy financial position so they can invest the necessary resources to increase the reliability of electricity supply.