REPP - Dr. Keith Kozloff - Electricity Sector Reform in Developing Countries: Implications for Renewable Energy

Table 2: Summary Implications of Power Sector Reforms for
Renewable Energy Markets

Key: + = favorable
- = unfavorable
0 = depends on implementation details

Reform Effects In Bulk
Power Markets Effects In Distributed
Power Markets

Commercialization Greater attention to environmental implications of power generation (+) Greater sensitivity to cost recovery favors grid support and demand side applications (+)

Privatization Higher discount rate favors fuel-cost-intensive generation options (-)
Power purchase terms favor development of nonrenewable generation (-)
Decreased interst by utility in serving unelectrified rural areas (-)
Tariff reform improves end-user price signals to consider off-grid and demand side applications (+)

Unbundling Contract terms may or may not allow renewables greater transmission access (0) Ability to capture system benefits from deploying distributed resources depends on structure and tariff regulations (0)

Wholesale Competition Short-term markets not oriented toward renewable generation characteristics (-) Greater uncertainty in future cost of grid power may discourage investment in distributed applications (-)

Retail Competition Retail suppliers want to minimize fixed costs to reduce competitive exposure, which reduces interst in capital-intensive renewables (-) Incentive to maximize kilowatt-hour sales and maintain competitive rates discourages retail supplier investment in DSM (-) unless suppliers offer DSM to distinguish from competitors (+)

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Reform	Effects In Bulk Power Markets	Effects In Distributed Power Markets
Commercialization	Greater attention to environmental implications of power generation (+)	Greater sensitivity to cost recovery favors grid support and demand side applications (+)
Privatization	Higher discount rate favors fuel-cost-intensive generation options (-) Power purchase terms favor development of nonrenewable generation (-)	Decreased interst by utility in serving unelectrified rural areas (-) Tariff reform improves end-user price signals to consider off-grid and demand side applications (+)
Unbundling	Contract terms may or may not allow renewables greater transmission access (0)	Ability to capture system benefits from deploying distributed resources depends on structure and tariff regulations (0)
Wholesale Competition	Short-term markets not oriented toward renewable generation characteristics (-)	Greater uncertainty in future cost of grid power may discourage investment in distributed applications (-)
Retail Competition	Retail suppliers want to minimize fixed costs to reduce competitive exposure, which reduces interst in capital-intensive renewables (-)	Incentive to maximize kilowatt-hour sales and maintain competitive rates discourages retail supplier investment in DSM (-) unless suppliers offer DSM to distinguish from competitors (+)