Electricity Sector Restructuring in Transition Economies: What Does It Mean for Energy Efficiency?

M. Evans, International Energy Agency
J. Zeman, SEVEn, o.p.s., The Czech Energy Efficiency Center

Keywords

Abstract

Transition economies have experienced dramatic changes in their electricity sectors since 1990, yet few studies have looked at the impact of this restructuring on energy efficiency. The Czech Republic, Russia, Ukraine and Kazakhstan had centralized electric monopolies in 1990 with set, subsidized rates and utility sponsored energy efficiency programs were unheard of. Today, the electricity sectors in each country are in various stages of privatization, restructuring, and planning for competition. The Czech government has gradually removed subsidies and it is introducing open access to the grid for competitors since the beginning of 2002. Kazakhstan has privatized its power generators and has introduced tariffs designed to recover full costs, but retail competition does not yet exist. Ukraine has privatized much of its power sector and has wholesale competition, but nonpayments have been a major impediment to real competition. In Russia, single power company, RAO EES, still produces and supplies the overwhelming majority of power in Russia. All these countries currently have significant excess power capacity, and they are planning to bring new capacity on line.

The paper assesses several characteristics of the power systems in each of the three countries considered: ownership status, pricing, and competition between different types of energy sources. The paper then assesses qualitatively how these changes have impacted energy use and efficiency. For example, competition may help improve supply-side efficiency and ensure that power companies do not invest in uneconomic power projects. The paper concludes with a brief evaluation of lesson learned and recommendations on ways to improve incentives for energy efficiency through electricity sector restructuring.