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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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    File URL: http://documents.worldbank.org/curated/en/568181583337584393/pdf/Falling-Short-A-Global-Survey-of-Electricity-Tariff-Design.pdf
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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.
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    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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