Cost Benefit Analysis of Power Sector Reform in Haiti

ICER Distinguished Scholar Award Paper

Co-authors: Nicolas Allien, Jay Mackinnon, and Bahman Kashi

This paper argues that to improve the power sector in Haiti, which now constitutes a critical constraint to economic growth, it would be necessary to carry out a significant regulatory and utility governance reform; without these reforms, any physical invest­ment program would be ineffective and unsustain­able. Haiti has the most underdeveloped and ineffi­cient power sector in the Americas. Numerous past attempts to reform it have failed due to lack of politi­cal will. In this paper, we consider a multi-phase pro­gram of reform and assess its feasibility. In the first phase, the Government of Haiti (GOH) carries the corporatization of units of Electricité d’Haïti (EDH); introduces management contracts, leases, and con­cessions; and privatizes EDH units as appropriate. If the first phase succeeds we propose proceeding to later phases that would support EDH. Costs have been estimated based on a similar program imple­mented in Afghanistan by the United States Agency for International Development (USAID). Our estima­tion of economic benefits is based on a projected re­duction in technical losses, valued at the retail price of electricity for average consumers; net gains in consumer surplus resulting from servicing high value customers are excluded from the model due to lack of reliable data to support a quantitative esti­mate. Furthermore, the analysis is conducted based on a 50 percent chance of success for the reform. At these conservative measures of costs and benefits, the project is found to be economically and finan­cially viable (Economic IRR: 15 percent, Economic NPV: 11 Million 2017 USD, Financial IRR: 28 percent, Financial NPV: 78 Million 2017 USD).


Author:

Belt, Juan A. B.

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