PAYING THE PRICE FOR UNRELIABLE POWER SUPPLIES: GENERATION OF ELECTRICITY BY PRIVATE FIRMS IN AFRICA

**Figure 15 Installed capacity of public utilities and own-generators, by plant size, 2006**

**Figure 16  Installed capacity of public utilities and own-generators, by fuel type, 2006**

<!-- Start of picture text --> 60%<br>50%<br>40%<br>30%<br>20%<br>10%<br>0%<br>Hydro (%) Oil (%) Gas (%) Coal (%) Other (%)<br>Government / Utility Plants Own Generation<br><!-- End of picture text --> Source: UDI World Electric Power Plants Data Base (WEPP).

# 4   What drives firms to generate their own power?

To explain why own generation is more prevalent in some countries than in others, we estimated a crosscountry linear regression model. The share of own generation was expressed as a function of wealth (GNI per capita), public capital (gross fixed capital formation), power sector characteristics (total access to electricity, energy intensity, share of electricity generated by hydroelectric plants, and diesel fuel price), economic structure (share of manufacturing, agriculture, and services in GNI), conflict status, and regional controls. The results are reported in table 2.

**Table 2  Share of  own generation in national installed capacity**

Linear regression results

|Variable|Estimated<br>coefficient|P-value|
|---|---|---|
|GNI per capita (USD, log)|–0.058<br>*|0.07|
|Gross fixed capital formation (% GNI)|–0.005|0.13|
|Total access to electricity (% population)|0.002|0.25|
|Energy intensity, (btu / USD, log)|0.024|0.37|
|Price of diesel fuel (USD / liter)|–0.001|0.41|
|Share of hydro plants in total generation ( percent)|0.058|0.55|
|Share of agriculture in GNI ( percent)|–0.003|0.27|
|Share of manufacturing in GNI ( percent)|0.005<br>***|0.01|
|Region: SADC|–0.064|0.30|
|Region: ECOWAS|–0.022|0.65|
|Region: EAC|0.038|0.64|
|Conflict or postconflict country (1=“Yes”)|–0.100<br>**|0.04|
|Constant|0.369|0.30|
|_F-Statistic_|2.58<br>***|0.01|
|_R_<br>_2_|0.49||
|_N_|45||

The estimated regression has an *** statistically significant at 1 percent level; ** statistically significant at 5 percent; acceptable goodness of fit (the _R_<sup>_2_</sup> is level; * statisticallyevel; * statisticallyvel; * statisticallyel; * statisticallyl; * statistically; * statistically * statisticallystatisticallyisticallysticallyicallycallyllyy <u>significantignificantgnificantnificantcantntt at 10 100 percent level rcent level cent level nt level t level level evel vel el l</u> equal to 49 percent), and is significant overall (the p-value associated with the F-statistic is 0.01). Although almost all estimated coefficients have the expected signs, only three statistically significant relationships were found. GNI per capita and conflict status were found to be negatively related to the

*** statistically significant at 1 percent level; ** statistically significant at 5 percent; level; * statisticallyevel; * statisticallyvel; * statisticallyel; * statisticallyl; * statistically; * statistically * statisticallystatisticallyisticallysticallyicallycallyllyy <u>significantignificantgnificantnificantcantntt at 10 100 percent level rcent level cent level nt level t level  level evel vel el l</u>

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