High Voltage Economy (Book Review: Cost Recovery and Financial Viability of the Power Sector in Developing Countries [Text] / J. Huenteler, I. Dobozi, A. Balabanyan, S. Ghosh Banerjee. – Washington, DC : World Bank, 2017. – 52 p.)

Abstract

The paper is dedicated to the review of “Cost Recovery and Financial Viability of the Power Sector in Developing Countries” book published by the World Bank in 2017. The authors show that Russia and Kazakhstan face a policy tradeoff between full cost coverage and financial stability in the electric power industry. Various institutional, methodological and financial obstacles on the way to creating a rational income and expense model in the power sector of both countries are analyzed. The concerns about inflation and life quality risks in case of setting the energy price at its market equilibrium level are proven inconsistent. Long-term risks of setting energy price under its full economic costs that include generation and transportation are also discussed. The reviewed publication is criticized for the lack of criteria for the economically justified and efficient cost level. Without such criteria the full cost coverage model will lower energy companies’ incentives for continuous production and transportation optimization. This issue is especially urgent in Russia and Kazakhstan because of the dominance of state ownership in the energy sector.