Although developing countries typically deal with the challenge of mobilizing investments for adding new generation and transmission capacity to cope with high demand growth, there are often opportunities to enhance operation of existing generators and extract significant cost reduction as well as the ability to meet greater demand.

This paper by Tom Remy and Deb Chattopadhyay at the World Bank, used a dispatch analysis model to show that merit-order based dispatch within the current constraints can yield an annual benefit of $29 million or 4% of variable costs. With the removal of physical availability constraints around plants and gas supply, benefits increase by an order of magnitude to $309 million, or 19% of total annual costs. If it is possible to get rid of the uneconomic take-or-pay obligations, benefits would further increase to $579 million or over 30% of total annual costs. These are major findings especially if we consider these in the context of tremendous financial stress in the power sector.

This paper has been published by ScienceDirect.