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Poorly implemented energy subsidies are economically costly to taxpayers and damage the environment. This report aims at providing the emerging lessons form a representative sample of case studies in 20 developing countries that could help policy makers to address implementation challenges, including overcoming political economy and affordability constraints. The sample has selected on the basis of a number of criteria, including the country’s level of development (and consumption), developing country region, energy security and the fuel it subsidies (petroleum fuel, electricity, natural gas). The case studies were supported by data collection related to direct budgetary subsidies, fuel and electricity tariffs, and household survey data.The analysis provides strong evidence of the success of reforms in reducing the associated fiscal burden. For the sample of countries, the average energy subsidy recorded in the budget was reduced from 1.8% in 2004 to 1.3%GDP in 2010. The reduction of subsidies is particularly remarkable for net energy importers. Pass-through of international fuel prices was also notable in the case of electricity generated by fossil fuel. For the sample of countries, the average end-user electricity tariff increased by 50%, from USD 6 cents in 2002 to USD 9 cents per kWh in 2010.In spite of the relatively price inelastic demand for gasoline and diesel, fossil fuel consumption in the road sector (per unit of GDP) declined in the 20 countries examined from 53 (44) in 2002 to about 23 kt oil equivalent per million of GDP in 2008 in the case of gasoline (Diesel). The most notable decline in consumption was recorded in the low and lower middle income countries. This reflects the much higher rate of growth in GDP in this group of countries and underlines the opportunities to influence future consumption behavior rather than modifying the existing consumption patterns, overcoming inertia and vested interests. Similar trends are recorded for power consumption.While there is no one-size-fits-all model for subsidy reform, implementation of compensatory social policies and an effective communication strategy, before the changes are introduced, reduces helped with the implementation of reforms.

As the world demand for energy continues to grow, a big question is where will all the energy come from and what will the price tag be. With such enormous sums needed, public-private partnerships (PPPs) could play a big role. But the financial crisis has raised worries about funding, and much is still not known about how best to attract PPPs. This report reviews the evidence to date with sectoral reforms and considers different approaches in varying circumstances to help outline the potential role of the private and public sector in: 1) strengthening the corporate governance of private and public utilities; 2) helping governments to establish legal, regulatory, contractual, and fiscal frameworks; and 3) improved market governance to attract private investment. Chapter one reviews the impact of the recent financial crisis on PPP investment compared with what happened in earlier financial crises. It also looks out the latest projections for additional power sector investment needed because of climate change and the possible sources of financing. Chapter two examines how PPP investment in the power sector has fared. It also gives the results of an econometric study that explores which types of incentives and variables matter most to PPPs when they are weighing entering the power sector, especially in renewables, and what influences the ongoing level of investment. The idea is to provide a powerful benchmarking tool at the sector and country levels against which governments and policy makers can evaluate progress on this issue. Chapter three examines four case studies-in China, Brazil, Peru, and Mexico-to identify, disseminate, and promote best practices on alternative ways to attract PPPs.

The current distribution of power markets around intermediate structures between full integration and unbundling suggests that there has not been a linear path to reform in practice. Instead, many developing countries may retain intermediate structures in the foreseeable future. This possibility exposes a large gap in understanding about power market structures, since most theoretical work has focused on the two extreme structures and there is limited evidence on the impact of unbundling for developing countries.The study reports the evidence from statistical analysis and a representative sample of twenty case studies selected based on the initial conditions, such as income and power system size. It proposes a novel analytical approach to model market structure, together with ownership and regulation, controlling for several variables, as a key determinant of performance across several indicators, including access, operational and financial performance and environmental sustainability. The results of the analysis provide the following conclusions for policy guidance on power market restructuring for developing countries:• There seems to be credible empirical basis for selecting a threshold power system size and per capita income level below which unbundling of the power supply chain is not expected to be worthwhile. Indeed a dichotomy emerges between high income countries characterized by a large system size for which unbundling and other reforms are significantly linked to better performance and low income countries characterized by small system power size for which there is no strong evidence that unbundling and other reforms delivered improvements in performance.• Unbundling deliver consistently superior results across the board of performance indicators when used as an entry point to implement broader reforms, particularly introducing a sound regulatory framework, reducing the degree of concentration of the generation and distribution segments of the market by attracting additional number of both public and private players and encouraging private sector participation. • Partial forms of vertical unbundling do not appear to drive improvements, probably because the owner was able to continue exercising control over the affairs of the sector and hinder the development of competitive pressure within the power market.

Rapid urbanization and economic growth, new demographic trends, and climate change are key challenges that developing countries must face as they strive to meet growing energy demand. The main objectives of this study are to offer: (a) a global taxonomy of the economic and financial incentives provided by renewable support schemes and (b) an economic modeling of the sustainability and affordability of such support schemes. In an attempt to contribute to the lively debate, this study provides a global taxonomy of the economic and financial incentives provided by renewable energy (RE) support schemes. It summarizes economic models of the sustainability and affordability of such support schemes, alongside operational advice on how the regulatory design may need to be modified to minimize the impact on the budget and be affordable to the poor, as well as how to identify and fill the financing gap. This analytical framework: (a) differentiates and illustrates tradeoffs among local, regional, and national impacts, in the short and long run; (b) captures distributional impacts (since subsidies to cover the incremental costs of RE may have very different beneficiaries); and (c) captures externalities and compares (where possible) alternative projects based on equivalent output and cost (comparing, for example, RE and energy efficiency projects against those using fossil fuels). The report is organized as follows: chapter one gives introduction. Chapter two presents the analytical framework that underpins the case studies, and provides the background for the principal research hypothesis of this report, which is better attention to the principles of economic analysis and market efficiency leads to more sustainable and effective policies. Chapters three to ten present country case studies for Vietnam, Indonesia, Sri Lanka, South Africa, Tanzania, Egypt, Brazil, and Turkey. The conclusions of the study are presented in chapter eleven.

The objectives of this power market structure study is to develop a taxonomy of the existing power market structures, as shown by the extent of vertical and horizontal unbundling found among restructured power systems across developing countries; to design an analytical framework for assessing the desirability of unbundling under the variety of economic conditions found among developing countries; and to propose insights for operational guidance on alternative market structures based on relevant criteria, in particular on the initial conditions of a country and its power sector. The study specifically examines whether power system size and coun¬try per capita income can be reliable indicators of initial conditions for guiding policy on power market structure. The results of the analysis carried out for this study confirm the following conclusions: (i) unbundling delivers results in terms of several performance indicators when used as an entry point to implement broader reforms, particularly introducing a sound regulatory framework, reducing the degree of concentration of the generation and distribution segments of the market by attracting additional public and private players and greater private sector participation; and (ii) there seems to be a credible empirical basis for selecting a threshold power system size and per capita income level below which unbundling of the power supply chain is not expected to be worthwhile

Given the chronic power shortages faced by numerous developing countries, and the need everywhere to keep pace with demand, understanding the drivers of public private partnerships (PPPs) in energy is critical. While many private electricity projects have been delayed and financing costs have increased, the impact of the global financial crisis was less severe than that of previous crises that originated in developing countries. This resilience stems from developing countries - need to expand generation capacity, electricity sector reforms and better regulatory frameworks, and short-term solutions (such as rental power plants). The study reports the evidence from statistical analysis and a sample of case studies selected based. It proposes a novel analytical approach to model PPPs, using a two-stage procedure based on Heckman`s sample selection distinguishing between those factors that determine whether private investment in energy takes place, and those that influence the volume of investment. The results of the analysis provide the following conclusions: * Both general governance and regulatory instrument primarily affect investors` decisions to enter the various power sector markets, not the subsequent level of investment - indicating that investors seem to be adequately protected against risks. * Support mechanisms, like feed-in tariffs, are crucial for attracting investors in renewable generation, but they do not succeed in displacing fossil fuel investment and they could play a bigger role in affecting the level of investment in renewables. * There is a significant trade-off between effectiveness and efficiency of alternative instruments for deploying renewables. Feed-in tariffs tended to be quite effective but to be set on the high side, reducing incentives to cut costs and posing significant strains on already stripped national budgets. Competitive auctions, on the other hand have tended to be efficient but initially low and not always the most effective instrument. * Countries can scale up renewables following different paths. For Brazil, the move from feed-in tariffs to auctions enabled it to both reduce costs and deploy additional capacity. Peru followed in Brazil`s path, opting for auctions instead of introducing feed-in tariffs. On the other hand, China`s move from competitive tenders to feed-in tariffs allowed for discovery effects to determine the right level of prices to attract private investment in renewables.

As the world demand for energy continues to grow, a big question is where will all the energy come from and what will the price tag be. With such enormous sums needed, public-private partnerships (PPPs) could play a big role. But the financial crisis has raised worries about funding, and much is still not known about how best to attract PPPs. This report reviews the evidence to date with sectoral reforms and considers different approaches in varying circumstances to help outline the potential role of the private and public sector in: 1) strengthening the corporate governance of private and public utilities; 2) helping governments to establish legal, regulatory, contractual, and fiscal frameworks; and 3) improved market governance to attract private investment. Chapter one reviews the impact of the recent financial crisis on PPP investment compared with what happened in earlier financial crises. It also looks out the latest projections for additional power sector investment needed because of climate change and the possible sources of financing. Chapter two examines how PPP investment in the power sector has fared. It also gives the results of an econometric study that explores which types of incentives and variables matter most to PPPs when they are weighing entering the power sector, especially in renewables, and what influences the ongoing level of investment. The idea is to provide a powerful benchmarking tool at the sector and country levels against which governments and policy makers can evaluate progress on this issue. Chapter three examines four case studies-in China, Brazil, Peru, and Mexico-to identify, disseminate, and promote best practices on alternative ways to attract PPPs