Ben Solis* lectricity services are essential for private sector development, as they support production, foster newbusiness creation, and enhance competitiveness. Using data from the World Bank Enterprise Surveys,this Brief underscores the importance of reliable electricity services for firms and the coping mechanismsthey employ to stay competitive. Detailed analysis shows that ownership of generators increases in areaswith unreliable electricity. However, factors such as firm size and type of economic activity also play a role, evenin countries with more reliable electricity services.EPublic Disclosure Authorized In response to unreliable electricity supply, firms frequentlyresort to using generators, which requires significant upfrontinvestment. The average capacity of generators owned by firms inAfrican economies ranges from 23 kW in Cabo Verde to 353 kWinthe Arab Republic of Egypt,with an overall average ofapproximately 50 kW (Steinbucks and Foster 2010). Even suchlow-capacity diesel equipment requires an approximate upfrontpayment of US$10,000, which is often unaffordable for small orinformal firms that lack access to credit markets. For dieselgenerators of 250 KW, costs can be as high as US$200,000(Ericsonand Olis 2019;Lazard 2017).Additionally,highoperational costs associated with self-generation can diminishcompetitiveness.Consequently,althoughgeneratorshelpbusinesses remain operational, they cannot fully buffer the negativeimpact on productivity caused by outages (Abeberese, Ackah, andAsuming 2021; Sosi and Atitianti 2021). Impacts of unreliable electricity services onbusinesses Although many economies are on track to meet the SustainableDevelopmentGoal(SDG)of achieving universal access toelectricity, only 45 percent of the population in low-incomeeconomies has such access (Sachs, Lafortune, and Fuller 2024).Reliable electricity is critical for the private sector, as it allows firmsto grow, create jobs, and drive economic growth. In the short term,unreliable electricity services can interrupt business operations andlead to financial losses. For instance, shortages in India have beenshown to reduce manufacturing firms’ revenues by at least 5percent (Allcott, Collard-Wexler, and O’Connell 2016). Sales offirms in 14 economies in Sub-Saharan Africa would increase by 85percent if outages were reduced to the levels observed in SouthAfrica, Cole et al. (2018) estimate.Public Disclosure Authorized Outages might also force businesses to modify productionprocessesby operating fewer hours,changing productionschedules, and using less electricity-intensive techniques, reducingtheir competitiveness. In Ghana—where outages occur 10 days permonth, on average—labor productivity of manufacturing smalland medium enterprises (SMEs) could increase by 10 percent ifservicedisruptions were eliminated,Abeberese,Ackah,andAsuming (2021) estimate. Other strategies employed by firms tominimize productivity losses in a context of unreliable electricityinclude outsourcing production of intermediate inputs or storinginputs, as evidenced in China, Ethiopia, and India (Fisher-Vanden,Mansur, and Wang 2015; Abdisa 2018; Allcott, Collard-Wexler,and O’Connell 2016).Public Disclosure Authorized Unreliable electricity services can have profound long-termeffects on the competitiveness, innovation, and composition ofentire industries (Rentschler et al. 2019). By creating uncertainty inthe business environment, electrical outages discourage new firmsfrom entering the market and hold back investment by incumbentbusinesses (Abeberese 2020). This lack of dynamism reduces jobopportunities, as evidenced in Africa, where unreliable electricityservices have been associated with reductions in non-agriculturalandskilled employment(Mensah 2024).Electricity-intensivesectors in countries that have constant outages tend to have a lowershare of small firms (Alby, Dethier, and Straub 2013) becausepower outages take a larger toll on smaller firms (Abdisa 2018;Adenikinju 2003; Moyo 2012; Osei-Gyebi and Dramini 2023). Moreover, constant power outages (blackouts) and voltagefluctuations(brownouts)can damage firms'equipment.InTanzania, for instance, brownouts damaged appliances in aboutone-third of firms (Bensch et al. 2017). Such unreliable electricityservices lead to higher replacement and corrective maintenancecosts for firms (Blimpo and Cosgrove-Davies 2019). Unreliable electricity as a constraint for businessesoperations worldwide Aroundthe world,46.6 percent of firms report havingexperienced at least one outage in the last year, but only 30.2 percent consider electricity issues to be a major or very severeobstacle for their operations. This gap is consistently observedacross regions, with the exception of the Middle East and NorthAfrica (see figure 1). In some economies, the frequency andduration of outages might not be severe enough to be considered asignificant obstacle. In others, firms may have adapted by using lesselectricity-intensive pro