# **1. Context**

During the 1990s, the World Bank, and other international financial Institutions, became prominent advocates of power sector reform in the developing world; in what became known as the “Washington Consensus”. According to this view, the main objectives of power sector reform were to improve economic efficiency and attract private sector investment. Although founded largely on economic principles, the reform model also drew heavily on the experience of two pioneering countries that reformed their power sectors during the 1980s: Chile and the United Kingdom.

According to the 1990s view, the power sector reform process should encompass four distinct reform actions. The first is _“regulation”_ , which involves the creation of an autonomous regulatory entity to provide some degree of political independence for the sector and hold utilities accountable for their operational and financial performance. The second is “ _restructuring”_ , which involves steps towards the eventual full vertical and horizontal unbundling of the incumbent state‐owned monopoly. The third is _“private sector participation”_ , which brings in private management and capital into the sector as a means to boost operational efficiency and investment. The fourth is _“competition”_ , which initially allows generators to compete to supply a monopoly utility and eventually allows customers to negotiate their supply contracts directly with power producers and traders supported by a power exchange.

Some 25 years have passed since the earliest power sector reforms, and accumulated developing country experience has shown that the model is much harder to adopt than originally believed. Even advanced reformers, a quarter of all developing countries, have taken many years to fully implement the process. Many others, roughly 35 percent of the sample, have encountered obstacles and even reversals – due to the complex political economy dynamics of the sector – and as a result have only partially adopted sector reforms. A significant number constituting 40 percent of developing countries remain largely unreformed.

It therefore seems timely to update the World Bank’s last major global stock‐taking of power sector reform uptake in the developing world (Besant‐Jones, 2006), by examining recent global trends in power sector reform. While the future of the power sector may look significantly different to the past, due to technological shifts, it remains important to distill the lessons of the standard approach to power sector reform experience to date, so as to better understand the limitations to further uptake.

To that end, this paper aims to answer a number of questions. To what extent have developing countries pursued the 1990s power sector reform model and how far did they get with it? What patterns of power sector reform can we now observe around the world? Is there continuing power sector reform momentum? How have country characteristics influenced the uptake of the different elements of power sector reform, and which types of countries have been able to go furthest with the model? Emerging answers to these questions can be previewed as follows.

Overall, power sector reform in the developing world lags far behind what was implemented in the developed world during the same time period. Closer inspection shows that the most significant differences lie in the area of vertical and horizontal unbundling, which is twice as common in OECD as in developing countries, as well as implementation of wholesale power markets, which is ten times more likely in OECD than developing countries. Nonetheless, full power sector reform has not been universal even in developed countries. The percentage of countries that have implemented some degree of private sector participation in either generation or distribution hovers around 70 percent for _both_ developed and developing countries, although the depth of private sector participation tends to be significantly greater 3