Electricity Market (Opinion) | AlMomento.net

The topic of the electricity crisis in the Dominican Republic is a topic of palpitations that is sustainable over time or that is recurring or even tiresome, annoying, unpleasant, or even business interests or directed against the big majority or against the humblest.

On August 7, 2024, Senior Energy Economist Ms. Elcin Akcura published an article on Power Data on the World Bank Blog, tracking the transformation of the world power market.

In this article, Ms. Akekula points out that the structure of the world electricity market has undergone tremendous changes in recent decades.

He stressed that 40 years ago, the power sector was generally considered to perform utility functions.

Alternative designs for integrated monopoly have since been implemented, including free entry, market competition, and market competition.

The report noted a lack of data when analyzing these organizations in 230 economies between 1989 and 2024.

The purpose of the database is to present the different designs of energy market structures studied worldwide. In addition to this information, the database also records the classification of the industry, the presence of an industry regulator, and the entry of independent power producers.

The available database highlights that many countries adopt different structures to increase the efficiency of the sector while improving access to and affordability of electricity.

Today, 71 economies maintain the same organizational structure as in 1989, Ms. Akcura said. In contrast, 159 economies have used a different structure over the past 35 years.

The dominant trend is towards market designs that, to varying degrees, expand the role of the private sector in the power sector.

In 1989, the vertically integrated utility model (where a single entity performs all functions in the electricity sector) was the dominant market structure in 215 economies.

However, this form of business can lead to delayed investments, lack of competition, poor financial performance, lower efficiency levels and higher losses in some cases.

But some markets that adopt this structure believe that investment decisions and operations can ensure that they are aligned and achieve energy and social protection goals, such as rural electricity.

Currently, the single buyer model is the most commonly used electricity market structure in the world: 89 countries and regions have adopted this model in their power sectors. Under the SBM model, the state authorizes independent power producers (IEPs) in the private sector to generate electricity and sell it to the national power company or wholesale purchasing agency.

This market design allows for limited market competition, with private generators competing for power to central buyers through contracts.

It is relatively easy to implement and adapt to country specific circumstances, however, if the sole buyer is not financially strong and is unable to honour the terms of its contract with the generator, suboptimal outcomes may occur in the sector.

Some countries have further increased competition in the electricity sector by allowing public and private generation companies, distribution and supply companies, and end-users to share the market.

Market-determined electricity prices help achieve price discovery and provide transparent investment signals while providing opportunities for the private sector.

Such competition in the electricity sector exists only in Chile, but has increased to 69 countries.

The authors emphasize that well-designed markets can incentivize investments on the scale needed to achieve widespread integration of renewable energy and access to clean, affordable, and reliable electricity.

The database, which contains Excel versions of around 2,500 countries, provides a wealth of valuable information, including the number of countries with one or another market structure.

Research and Development

The Dominican Republic uses a market structure with state and private sector intervention to spur competition and even clean energy investment, but the system has not been effective because electricity distributors are in state hands, which has led many users to not pay their electricity bills, believing that because it comes from the state, it is free.

The Electricity Distribution Companies or EDES are running a significant financial deficit every month due to low charges for services rendered, a situation exacerbated by the absence of any consequence system to lure the power robbers to the dock.

Recently, the Vice-President of the Republic, Raquel Peña, urged the population to pay their electricity service bills in order to contribute to the changes needed in the electricity sector, recalling that this service implies high costs for the Government and citizens.

The official admitted that the country’s power outages were caused by a lack of investment in the power sector for more than a decade.

He also attributed the blackouts to factors including increased demand, economic growth and an intense heat wave affecting the country.

He however assured that the government through its electricity team was making the necessary investments to guarantee safer and more stable services.

As mentioned before, this crisis situation in the power sector, in addition to the factors mentioned here, is also due to the lack of action by successive governments in the past, including the government that has been in power for more than 20 years. There was not enough responsibility to prevent this desperate disaster.

It is time to realize that this problem has not been solved and should have ended once and for all through effective reforms in which the state and the private sector can put an end to this situation through a joint alliance. Because it is no secret that without a stable electricity system, we cannot talk about sustainable growth and development.

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