Chapter 22. Distinctive regulatory challenges in developing countries

Despite substantial efforts, many Low and Middle Income Countries (LMICs) lack a comprehensive regulatory framework for the power sector and have struggled to develop adequate regulatory capacity. From 1990-2010, most countries ‘ticked the boxes’ by putting in place the necessary laws and regulations for tariff-setting, licensing and technical standards. While numerous regulatory institutions were also created, their effectiveness has been limited by the poor capacity of regulators. Furthermore, the scope of regulation has also been circumscribed to the distribution subsector, with limited development on transmission regulation, even less on wholesale electricity market. Only one in five LMICs has a wholesale market in place, as remaining countries fall short of meeting basic preconditions, and their impact is often limited due to poor liquidity. Although there are some bright spots, such as the successful introduction of auctions for renewable energy, the absence of electricity markets has hampered decarbonization efforts on the whole.