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Challenges for Sustainable Energy Sectors in Developing Countries

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Challenges for Sustainable Energy Sectors in Developing Countries EED--1 l°rt7 Regine Andersen Challenges for Sustainable Energy Sectors in Developing Countries - with Case Studies from Zambia, Zimbabwe, India and Thailand EED Report 1/1997 The Fridtjof Nansen Institute and the International Energy Initiative carry out a joint project on energy sector reform in developing countries. The project is supported by NORAD and runs for three years from 1994 through 1996. © The Fridtjof Nansen Institute Published by the Fridtjof Nansen Institute I would like to thank Gesine Hasselmeier, MA studentfrom the Free University of Berlin, for her extensive and kind assistance in collecting data for this report. DISCLAIMER Portions of this document may be illegible in electronic image products. Images are produced from the best available original document. FRIDTJOF NANSENS INSTITUTT THE FRIDTJOF NANSEN INSTITUTE Tittel/Title Sider/Pages Challenges for Sustainable Electricity Sectors in Developing Countries - 79 with Case Studies from Zambia, Zimbabwe, India and Thailand Publikasjonstype/Publication Type Nummer/Number EED Report 1/1997 Forfatter(e)/Author(s) ISBN Regine Andersen 82-7613-216-2 Program/Programme ISSN Global Environmental And Resource Problems 0802-9458 Prosj ekt/Proj ect Sustainable Electricity Strategies, Co-operation Project with the International Energy Initiative, Bangalore Sammendrag/Abstract The power sectors in the majority of developing countries are stuck in deep problems which represent severe constraints on economic development. In this report, the technical and financial situation of the sectors is analyzed from a sustainable electricity strategies perspective. An analysis of political and insti­ tutional barriers to reforms towards sustainable electricity strategies is conducted and conclusions regar­ ding development co-operation are drawn. The analysis is based on a categorization of developing countries into four categories, and a selection of one case country from each category. For the purpose of generalization, information from other developing countries has been utilized for cross-checking with the results from the case studies. The core problem of electricity sectors in developing countries has been found to be the severe lack of energy efficiency at all levels from end use to generation. The current emphasis on private participation in new electricity generation projects not only fails to solve the core problem, but diverts attention from the real challenge. As long as weak power sector structures remain, this policy is in the long term most likely to prove a costly exercise for the already highly indebted state economies. An arm's length relationship between governments and utilities is focal to a sound power sector performance. However, more autonomous power sector decisions, such as reformed tariff structures, might contribute to inflation and political unrest. This is one of the main barriers to steps towards power sector autonomy. Lack of institutional capacity - despite overstaffed utilities - is another barrier with several components. Most important is the fact that the organizational structures are designed for supply-side management and that the incentive structures for good performance are often weak. The case of Thailand shows that it is possible to develop end-use efficiency to a considerable extent through incentives and regulations, and that transparency was an important precondition for achieving this success. The real challenge for development co-operation is to support the improvement of energy efficiency at all levels and the institutional and financial preconditions. In addition, it is a central challenge to support developing countries in preparing for future utilization of viable new renewable energy carriers. Apart from this, it is important to continue the work for environmental impact assessments of planned power projects, and to support measures for minimising the environmental impacts of old power plants. Stikkord/Key Words Energy, Electricity, Sustainability, Developing Countries, Zambia, Zimbabwe, India, Thailand. Bestilling til/Orders to: Fridtjof Nansen Institute, Postboks 326, N-1324 Lysaker, Norway. Tel: (47)6711 1900 Fax: (47) 6711 1910 Email: [email protected] Table of Contents 1 INTRODUCTION................................................................................................................... 1 1.1 Why this focus?.................................................................................................................. 1 1.2 What is a 'sustainable electricity sector'? Definitions and delimitation .................................... 2 1.3 Method ............................................................................................................................... 5 1.3.1 General methodological issues..................................1......................................................................... 5 1.3.2 Methodological issues regarding the comparative approach.............................................................. 8 2 ELECTRICITY DEMAND AND CONSUMPTION IN DEVELOPING COUNTRIES.......... 11 2.1 Patterns of demand and consumption in the weakest developing countries..............................11 2.2 Patterns of demand and consumption in weak developing countries in transition ................... 13 2.3 Patterns of demand and consumption in technically and regulatorily more competent developing countries in transition...................................................................................... 15 2.4 Patterns of demand and consumption in stronger developing countries................................. 16 2.5 Concluding remarks regarding patterns of demand and consumption......................................18 3 TECHNICAL PERFORMANCE OF THE POWER SECTORS........................................... 19 3.1 Performance of generation ..................................................................................................19 3.1.1 Performance of generation in the weakest developing countries...................................................... 20 3.1.2 Performance of generation in weak developing countries in transition .............................................21 3.1.3 Performance of generation in technically and regulatorily more competent developing countries in transition ......................................................................................................................................... 23 3.1.4 Performance of generation in stronger developing countries.............................................................25 3.1.5 Concluding remarks regarding the performance of generation .........................................................27 3.2 Performance of transmission and distribution.......................................................................28 3.2.1 Performance of transmission and distribution in Zambia.................................................................. 28 3.2.2 Performance of transmission and distribution in Zimbabwe..............................................................29 3.2.3 Performance of transmission and distribution in India...................................................................... 29 3.2.4 Performance of transmission and distribution in Thailand ................................................................ 29 3.2.5 Concluding remarks regarding the performance of transmission and distribution......................... 30 4 FINANCIAL PERFORMANCE OF THE UTILITIES........................................................... 31 4.1 Tariff structures.................................................................................................................31 4.1.1 Tariff structures in the weakest developing countries.......................................................................31 4.1.2 Tariff structures in weak developing countries in transition ............................................................. 32 4.1.3 Tariff structures in technically and regulatorily more competent developing countries in transitions 3 4.1.4 Tariff structures in stronger developing countries.............................................................................35 4.1.5 Concluding remarks regarding tariff stmcturcs in developing countries......................................... 35 4.2 Financial situation of the utilities.......................................................................................36 4.2.1 Financial situation of the utilities in Zambia.................................................................................... 36 4.2.2 Financial situation of the utilities in Zimbabwe................................................................................. 37 4.2.3 Financial situation of the utilities in India..........................................................................................37 4.2.4 Financial situation of the utilities in Thailand .................................................................................... 38 4.2.5 Concluding remarks regarding the financial situation of the utilities in the case countries............ 39 5 MAIN CHALLENGES FOR THE TECHNICAL AND FINANCIAL PERFORMANCE....... 41 6 POLITICAL AND REGULATORY FRAMEWORKS FOR POWER SECTORS IN DEVELOPING COUNTRIES............................................................................................. 43 6.1 Political and regulatory framework for the power sector in Zambia....................................... 43 6.2 Political and regulatory framework for power sector in Zimbabwe.......................................
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