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Falling Short : A Global Survey of Electricity Tariff Design

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  • Foster,Vivien
  • Witte,Samantha Helen

Abstract

This paper provides a comprehensive overview of electricity pricing practices and tariff structure design in more than 60 developed and developing countries worldwide as of 2015-16. It evaluates the performance of electricity tariff designs according to a variety of important dimensions, notably cost recovery, vertical equity (affordability), and horizontal equity (or price differentiation). It also reflects on the extent to which current electricity tariff designs are well-suited to incentivize efficient adoption of emerging technologies, such as distributed generation and storage, electric vehicles, and demand-side participation. The results of the survey indicate that electricity tariffs stand at $0.13 per kilowatt-hour (when fully averaged across countries and customer groupings); but differ hugely across jurisdictions by a factor of 40:1. Electricity tariffs are far from recovering limited capital costs and have not kept up with inflation over time. Substantial price differentiation is the norm, and affordability remains a significant concern. Most countries'tariff structures are ill-adapted to emerging technological disruption in the sector, due to the scant use of load-related charges to cover the fixed costs of the network, the continued preponderance of increasing block tariffs for residential customers, and the limited application of time-of-use pricing.

Suggested Citation

  • Foster,Vivien & Witte,Samantha Helen, 2020. "Falling Short : A Global Survey of Electricity Tariff Design," Policy Research Working Paper Series 9174, The World Bank.
    • Handle: RePEc:wbk:wbrwps:9174
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    References listed on IDEAS

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    1. Foster, Vivien & Yepes, Tito, 2006. "Is cost recovery a feasible objective for water and electricity ? The Latin American experience," Policy Research Working Paper Series 3943, The World Bank.
    2. Mohan Munasinghe, 1980. "An Integrated Framework for Energy Pricing in Developing Countries," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-30.
    3. Huenteler,Joern Torsten & Hankinson,Denzel J. & Rosenthal,Nicole & Balabanyan,Ani & Kochnakyan,Arthur & Nguyen,Tu Chi & Rana,Anshul & Foster,Vivien, 2020. "Cost Recovery and Financial Viability of the Power Sector in Developing Countries : Insights from 15 Case Studies," Policy Research Working Paper Series 9136, The World Bank.
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    5. Marco Antonio Hernández Oré & Luis Álvaro Sánchez & Liliana D. Sousa & Leopoldo Tornarolli, 2017. "Fiscal and Welfare Impacts of Electricity Subsidies in Central America," World Bank Publications - Books, The World Bank Group, number 28504, December.
    6. repec:ebl:ecbull:v:9:y:2007:i:4:p:1-7 is not listed on IDEAS
    7. Diego Angel-Urdinola & Quentin Wodon, 2007. "Do Utility Subsidies Reach the Poor? Framework and Evidence for Cape Verde, Sao Tome, and Rwanda," Economics Bulletin, AccessEcon, vol. 9(4), pages 1-7.
    8. Huenteler,Joern Torsten & Dobozi,Istvan & Balabanyan,Ani & Banerjee,Sudeshna Ghosh & Huenteler,Joern Torsten & Dobozi,Istvan & Balabanyan,Ani & Banerjee,Sudeshna Ghosh, 2017. "Cost recovery and financial viability of the power sector in developing countries : a literature review," Policy Research Working Paper Series 8287, The World Bank.
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    2. Lisa Bagnoli & Salvador Bertomeu-Sanchez & Antonio Estache & Maria Vagliasindi, 2023. "Does the ownership of utilities matter for social outcomes? A survey of the evidence for developing countries," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 26(1), pages 24-43, January.
    3. El Gohary, Fouad & Stikvoort, Britt & Bartusch, Cajsa, 2023. "Evaluating demand charges as instruments for managing peak-demand," Renewable and Sustainable Energy Reviews, Elsevier, vol. 188(C).
    4. Harilal Krishna & Yash Kashyap & Dwarkeshwar Dutt & Ambuj D. Sagar & Abhishek Malhotra, 2023. "Understanding India’s low-carbon energy technology startup landscape," Nature Energy, Nature, vol. 8(1), pages 94-105, January.
    5. Covington, Hannah & Woo-Shem, Brian & Wang, Chenli & Roth, Thomas & Nguyen, Cuong & Liu, Yuhong & Fang, Yi & Lee, Hohyun, 2024. "Method for evaluating fairness of electricity tariffs with regard to income level of residential buildings," Applied Energy, Elsevier, vol. 353(PB).
    6. Hendam, Mohamed & Schittekatte, Tim & Abdel-Rahman, Mohamed & Kamh, Mohamed Zakaria, 2022. "Rethinking electricity rate design: Fostering the energy transition in North Africa," Energy Policy, Elsevier, vol. 169(C).
    7. Stikvoort, Britt & El Gohary, Fouad & Nilsson, Anders & Bartusch, Cajsa, 2024. "Serving two masters – How dual price signals can undermine demand flexibility," Energy Policy, Elsevier, vol. 185(C).

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