IV.1 Assessment of Electricity supply and Demand Management Options
Scoping Paper - Terms of Reference

1.0 BACKGROUND

1.1 Perspectives and Current Status

There is a strong link between the use of primary energy resources, energy conversion and use, and sustainable development. Various public debates have occurred in recent decades in industralized economies over energy efficiency and energy supply futures. Much greater attention is now being paid to these issues in developing economies. The debates are generally about the comparative economic, environmental and social trade-offs, and public acceptability of the various nuclear, thermal, hydro, and alternative generation options; and increasingly, about the potential role and contribution of demand management options. Other questions are technology and/or country-specific. These types of issues increasingly being debated include macroeconomic and consumer affordability dimensions, poverty alleviation impacts, and social, institutional and political implications of centralized versus decentralized energy supply approaches. Electricity supply and demand management issues are similarly prominent in the global dams’ debate.

The purpose of this thematic review is to provide a concise summary of the main trends, issues, characteristics and outlook for different electricity supply and demand management options in different regions of the world. And secondly, consider these trends in respect to the WCD mandate concerning practices in energy resource planning, options assessment, energy and electricity sector planning and decision-making, project implementation, social and environment implications, and sustainable development practices. However, it is not the intention to provide comprehensive review of all options and energy futures. Other international bodies are more directly addressing these issues in-depth.

Electricity is a rapidly growing end-use in global terms. Highest rates of demand growth are in developing and transitional economies. Nevertheless, large variations in per capita electricity use exist in different regions of the world. Similar large variations exist in the end-uses for electricity, and absolute levels of electricity consumption between cities and rural areas in developing economies. The UNDP reports that between 1.5 and 2 billion people have no access to electricity, mostly in rural areas. These populations must rely on other traditional energy sources and systems - where the energy-poverty nexus is a central issue in sustainable development.

Global statistics indicate the average per capita consumption of electricity is 7,500 kWh/yr. in OECD counties as compared to 482 kWh/yr. in Asia (excluding China, which is 822 kWh/yr.), 490 kWh/yr. in Africa, and 1,402 kWh/yr. in Latin America. However, these figures mask variations in the number of people in a particular society with electricity access, and actual use per person, household or industry. Various estimates suggest global capital investments in energy resource development to supply modern sectors of the world’s economies will amount to between 17 and 30 $US trillion between 1990-2020. Current "business as usual" scenarios relying on forecast of the growth in the modern sectors suggest that the expansion of electricity sector will account for about half of this investment.

Conventional electricity supply options include thermal generation (e.g. by coal, oil and gas, and biomass primary energy sources), nuclear generation, and hydropower of different scales. Global statistics indicate that today , thermal sources account for about 62% of installed electricity generation, hydraulic sources 20%, nuclear 17% and all other sources 1%.

A technology rapidly growing in use today is the high-efficiency combined-cycle turbines using natural gas and premium quality fuel oils as the primary energy source. Recent efficiency improvements have led to dramatic reductions in the operating costs. Other technologies being explored for more widespread use include systems to produce electricity from the incineration of urban waste, coal and biomass gasification, and solar electric (photovoltaic) technologies. Co-generation, geothermal energy, and wind farms for grid-feeding and isolated applications make a minor but increasing contribution to generation. Other electricity generation options in use for many years include small hydroelectric projects and biomass systems. Emerging technologies and energy systems such as fuel cells, and tidal and ocean thermal systems for coastal countries, are in early stages of prototype development. Though research and development is proceeding on many fronts, and despite the promise, statistics show that non-conventional sources as a proportion of total electricity generation has been diminishing globally, and in many countries. This is after the initial strong interest in the 1970’s and early 1980’s motivated by the oil price shocks.

Plans to develop conventional and renewable energy sources for electricity generation are influenced by a range of factors. These include the indigenous resource endowment of a country; energy self-reliance goals; related policies on risk aversion, such as to reduce the vulnerability to price fluctuations in internationally traded energy commodities; the presence or absence of emission credit trading schemes, and regulations on land, water and air pollution.

The technical characteristics of the different generation options are also important considerations for the utility from the perspective of electricity system operation and reliability. The different generation technologies have different levels of reliability and play different roles in isolated supply and in centralized grid supply, such as for multi-year, seasonal and daily base, mid-range and peaking generation.

In rural areas of developing economies, where the bulk of the world population reside, kerosene and traditional energy sources including forest biomass, dung, and agriculture wastes play an overwhelming role in the energy demand-supply situation , which is dominated by household and farm energy needs. In both monetized and non-monetized settings, traditional energy systems are under increasing pressure due to a range of demographic, social and environmental factors.

Various demand-side management (DSM) measures are being implemented for electricity conservation and end-use efficiency. Improvements in end-use energy efficiency in the modern sectors of the economy are accomplished using policy tools such as tariffs, direct control and voluntary measures and longer-term measures. Perspectives on the DSM issue vary. They range from positions that demand side management can and should play a major role as an alternative to supply development - to more conservative considerations of the potential for demand management. The perspectives take into account the stage of development of the country’s energy economy, electricity end-use patterns, and the relative per capita electricity consumption levels. Among the country-specific conditions affecting achievement of demand side management goals include consumer awareness and end-user affordability issues; the availability of efficient end-use devices in the market place for motors, lighting and cooking end-uses; and institutional, standards and regulatory situations.

1.2 The main issues

11. The nature of the concern about electricity supply and demand management, and the manner these concerns enter into the debate on dams varies within developed, transitional and developing economies. Among the broader concerns include:

• Energy resource potential, and specifically primary energy sources for electricity generation, globally and regionally;
• Extraction, production, transmission and end-use characteristics of the options;
• The role and contribution of different electricity supply and demand options in sustainable development;
• Technical, environmental, social, financial characteristics of supply and demand management options for electricity grid-feeding, isolated and rural supply;
• Trends in technology development for "clean" or "green" energy sources;
• Trends in public acceptance of different options;
• The manner in which different supply options are treated in system generation expansion planning studies;
• The extent to which demand side management is now or can in future be brought into power sector planning;
• The economic loss associated with load shedding as a result of supply constraints;
• The extent to which system planning tools and techniques account for alternative generation;
• Transparency, public participation and institutional influences in power sector decision-making;
• The environmental consequences of different conventional and alternative electricity supply options in respect to land, air and water pollution and climate change;
• The value of electricity in the low income traditional rural economies where traditional energy systems dominate;
• The extent to which demand side management and supply development can meet needs in economies where per capita consumption is low and growth rates in electricity demand are high.
• The extent to which alternative options are disadvantaged in terms of hidden subsidies to conventional electricity supply options;
• The extent to which the benefits from demand-side management accrue at the national level, the utility level and the consumer level, and the impacts on consumer affordability;
• The extent to which energy-efficient equipment and small-scale micro and mini-hydro can be made available to communities and consumers in low income situations;
• Community energy planning approaches in developing economies;
• The allocation of national resources to electricity supply development for modern sectors of the economy (e.g. mainly focusing on manufacturing, commercial and services and urban centres ) versus the rural poor with no access to electricity;
• The impact of self-reliance policies on choice of electricity generation options;
• Roles and responsibilities for monitoring and evaluation during construction and operation phases of supply projects.
• Institutional capacity.

2.0 SCOPE OF WORK

12. Among the topics and issues to be analyzed in this paper include:

• energy resources assessments previously made for different regions;
• major trends in using hydropower, conventional and non-conventional supply options in the electricity generation mix globally and regionally;
• major trends, technologies and practices in demand-side management;
• summary information on the current status and evolution of sub-regional and regional power exchange networks, and the role of options in this context;
• cost, technical capabilities, and efficiency of hydropower and other electricity generation options reflecting life-cycle principles; and indications of significant changes anticipated for "next generation" technologies;
• environmental impacts (locally, regionally and globally), and cultural and other factors affecting public acceptance of different electricity supply and DSM options;
• methodologies for electricity demand forecasting;
• methodologies for electricity generation options and DSM assessment including the technical, economic, financial, social, environmental and other merits of the options, and considered within policy setting, power system planning and decision-making processes;
• trade-offs (based on sustainable development principles) in deciding among hydropower dams of different scales and types (e.g. large, medium, small, mini and micro hydro);
• trade-offs expected in deciding between hydropower dams and other electricity supply and DSM options; also in respect to their role in local/isolated supply, and in national and regional electricity systems;
• key legislative, regulatory, planning, decision-making and other institutional hurdles for choosing and implementing DSM programs, and non-conventional generation options, reflecting regional differences;
• legislative, regulatory, economic and other institutional hurdles for options development (including inter-fuel substitution);
• the role of electricity in the rural energy context of developing economies where traditional energy sources are dominant;
• examples of good practice in power system planning, decision-making, and life-cycle experience with demand side management and alternative electricity supply options;
• economic, fiscal, institutional, capacity, socio-cultural and other "enabling conditions" required for successful selection, development, operation and public acceptance of non-conventional supply options and DSM programmes.

3.1 Linkage to Focal Dam/Basin Case Studies and 150+ Cross Check Survey

13. It is anticipated that some of the case studies will provide information and experience, which will be used in this thematic. This relates to hydropower experience from the perspectives noted above.

3.2 Linkage to other Thematic Reviews

14. This thematic review will provide specific information on policy, planning, decision-making and environmental and social factors associated with electricity supply and demand management options to inform the work in other thematic reviews. The results are expected to be particularly relevant for the following thematic reviews ( III.1 Economic, financial and distribution analysis; V.1 Planning approaches; V.2 Environmental and social impact assessment for large dams; and V.3 Consultation and decision making process.)

3.3 Linkage to Outputs

15. This thematic review has implications primarily for Outputs 2 and 3. For Output 2, "good practice" for electricity options assessment and for supply and demand management planning that reflect sustainable management principles, will be identified. Policy issues will be provided for consideration in Output 3.

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