A Financially Sustainable Power Sector

The report establishes a framework for evaluating the financial viability of power sectors through four key criteria: cost recovery, ability to meet demand, investment capacity, and adherence to social and environmental norms. It details specific metrics such as Levelized Cost of Electricity (LCOE), system losses, and the 'price-gap approach' for measuring subsidies. The analysis highlights global variances, noting that 82% of 87 analyzed countries provided electricity subsidies in 2011 and that power outages cause significant economic losses, averaging 19% of annual sales for affected firms. The framework also emphasizes the tension between achieving full cost recovery and maintaining affordability for low-income households, particularly in African nations.

• A power sector is defined as financially sustainable if it can provide sufficient electricity, invest to meet future demand, generate revenues to cover costs, and operate according to social and environmental norms.
• Electricity costs vary significantly by region; in Africa, unit costs range from US$0.06 per kWh in South Africa to US$0.34 per kWh in Mali.
• Technical losses in transmission and distribution vary widely globally, with 2010 data showing a range from 2% in Bangladesh to 83% in the Republic of Congo.
• Electricity subsidies are widespread, with the IMF estimating that 82% (71 out of 87) of analyzed countries provided some level of electricity subsidy in 2011.
• Power outages represent a major economic burden; 46% of 138 countries reported more than 20 outages per month, resulting in an average loss of 19% of annual sales for firms.
• Investment in capacity often fails to keep pace with demand growth; between 2005 and 2009, only 27% of countries with positive demand growth had a capacity-to-demand growth ratio higher than 1.
• There is a critical trade-off between cost recovery and affordability; in countries like Ethiopia, Malawi, and Niger, raising tariffs to full unit costs would leave fewer than 50% of households able to afford 50 kWh per month.
• Global electricity generation remains heavily reliant on fossil fuels, with 61% of 136 countries deriving more than 50% of their electricity from these sources as of 2010.

APA

Nguyen, T. C., Bridle, R., & Wooders, P. (2014). A Financially Sustainable Power Sector. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/financially_sustainable_power_sector.pdf

Chicago

Nguyen, Tu Chi, Richard Bridle, and Peter Wooders. A Financially Sustainable Power Sector. International Institute for Sustainable Development, 2014. https://www.iisd.org/system/files/publications/financially_sustainable_power_sector.pdf.

Wikipedia

{{cite report |last1=Nguyen |first1=Tu Chi |last2=Bridle |first2=Richard |last3=Wooders |first3=Peter |title=A Financially Sustainable Power Sector |publisher=International Institute for Sustainable Development |date=March 2014 |url=https://www.iisd.org/system/files/publications/financially_sustainable_power_sector.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{nguyen2014financially, author = {Nguyen, Tu Chi and Bridle, Richard and Wooders, Peter}, title = {{A Financially Sustainable Power Sector}}, institution = {International Institute for Sustainable Development}, year = {2014}, month = mar, url = {https://www.iisd.org/system/files/publications/financially_sustainable_power_sector.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }