Meanwhile, rapidly advancing technologies are disrupting the status quo of power sector economics and institutions. This context presents a challenge for any global prescriptions of sector institutions.

**The paper aims to answer several questions on the political economy of power sector reforms.** The questions are addressed in corresponding sections of the paper, as follows.

- _Section 2 concerns the history and theory of market-oriented reforms in the power sector._ What are the origins of these reform ideas? What problems have the reforms tried to solve, including market failures and governance risks? How have political economy concerns been addressed by reformers and advocates, including development partners?

- _Section 3 examines 1990s model reforms in practice._ What interests and ideas have driven key actors to pursue or question reforms? Were these ideas aligned with the theoretical benefits of reform? What factors have shaped how resulting institutions and policies address the market failures and governance risks?

- _Section 4 discusses development outcomes following 1990s model reforms._ What have model reforms achieved in technical, financial, and socio-economic terms? Are model reforms compatible with broader socio-economic goals, especially expanding electricity access for low-income households, and reducing negative environmental impacts? Do new technologies and global development priorities change the outlook on these questions?

- _Section 5 concludes with a synthesis of key findings from preceding sections._ Are 1990s model reforms still relevant? What future work could help relevant actors better ‘think and work politically’ to address ongoing sector challenges?

The remainder of Section 1 introduces the concept of political economy, and the sources and methods of the literature review.

# 1.2   Defining political economy

**In simple terms, ‘political economy’ is politics and economics considered together.** There are several ways to explain and analyze political economy, with common elements but no standard formulation in the literature. Many scholars regard politics and economics as interrelated topics that cannot be understood in isolation.<sup>2</sup> Indeed, past practice of economics has been criticized for “purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with other social sciences” (Piketty 2014: 36), particularly in the mid-twentieth century in the United States of America (US).<sup>3</sup> This

> 2 World Bank (2008: 4) defines political economy as “analysis that studies the linkages between politics and economics, drawing on theories of economics, law as well as political and social sciences”. O’Hara (2009: 853) considers political economy, and economics, both at base “attempts to understand how societies provide for their members and how goods and services are distributed”. Economics is integral to Leftwich’s (2007: 3) definition of politics as “all the activities of cooperation, conflict and negotiation involved in decisions about the use, production and distribution of resources”.

> 3 When the term first appeared, in 18th century English, ‘political economy’ meant the _conditions of production organization in nation-states_ , including political aspects. The same subject became known simply as ‘economics’ from the late 19<sup>th</sup> century (World Bank 2008: 4). However, in the second half of the 20<sup>th</sup> century, dissatisfaction with an increasing “narrowness of economic analysis” led to revival of ‘political economy’ as a now distinct term in recognition of the “psychological, sociological and political forces that affect individual behavior and economic performance” (O’Hara 2009: 853).

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