The African Development Bank and the World Bank have launched reports capturing the state of the power sector regulation in Africa and across the developing world. The institutions held a virtual launch event attended by 240 government officials, regulatory entities, development finance institutions and African and international private sector stakeholders.
The African Development Bank’s Electricity Regulation Index (ERI), published since 2018, has been widely adopted by regulators and other stakeholders across the African continent to benchmark electricity regulatory environments and to guide reforms in the sector. This new fifth edition covers 43 of the 45 African countries that host independent regulatory authorities. This year also marks the inaugural edition of Global Electricity Regulatory Index (GERI) 2022, sponsored by the World Bank’s Energy Sector Management Assistance Program (ESMAP) and undertaken in partnership with the African Development Bank. GERI surveys 82 non-OECD countries from across the globe – about half in Sub-Saharan Africa and the rest across Asia, Europe, the Middle East, and Latin America – and forms part of the World Bank’s global effort to promote a robust electricity sector regulatory environment.
Wale Shonibare, Director for Energy Financial Solutions, Policy and Regulation at the African Development Bank noted that the Bank has pioneered efforts to mainstream electricity sector regulation issues in Africa since 2018, supporting the establishment of robust legal and regulatory frameworks and create enabling environments for private sector investment. “This year heralds a crucial new stage for our research thanks to our collaboration with the World Bank This allows us to compare African regulation with that of other developing regions and shows that the ERI has been influential not only in Africa but also the rest of the world”, Shonibare said. “While a lot of progress has been made with the establishment of regulatory frameworks, the Global Electricity Regulatory Index (GERI) report highlights some systematic gaps, particularly with regard to regulatory independence and the practice of tariff regulation,” said Vivien Foster, World Bank Chief Economist for Infrastructure.
Key highlights of the ERI: although still at a low level of development, the average score for the ERI 2022 has improved slightly to 0.495 compared to 0.456 in 2021; this year’s ERI shows that most countries have continued to strengthen their regulatory governance structures and have recorded improvements in technical regulation to enhance regulatory capacity; among other findings, the ERI highlights that, thirty of the forty-three African countries surveyed have either amended their regulatory laws and instruments or have enacted new ones, addressing weaknesses that were identified through the ERI; countries have made strides to implement the recommendations, and many have enacted various reforms and developed codes and regulatory tools to strengthen the level of regulation in their countries.
Key highlights of GERI: the average GERI score was 59 percent in 2021, representing an intermediate stage of development of power sector regulations in developing countries, with considerable room for improvement and the need for further action to strengthen regulatory frameworks; the average scores for the two pillars of GERI stood at 65 percent for Regulatory Governance Index (RGI) and 54 percent for Regulatory Substance Index (RSI); when it comes to regulatory governance, the most prevalent shortcomings are related to regulatory autonomy, with a global average score of 29 percent on regulatory independence from stakeholders. As for regulatory substance, the lower score results from the weak performance of countries globally on economic regulation of tariffs with a global average score of 37 percent. This does not indicate an absence of tariff methodologies, but rather the fact that tariff methodologies are often poorly specified.
