Energy Sector Considerations in Long-Term Strategies
The relationship between energy sector plans, policies, and investments with long-term strategies
As it increasingly affects lives of people in countries around the world, combating climate change has become a key global development priority. The increasing intensity and frequency of extreme climate events such as severe droughts and flooding has had negative socioeconomic impacts on almost all sectors of developing economies, including the energy sector, mainly in hydropower generation. The seriousness of the problem has made it imperative that policymakers begin to mainstream climate change in development policies and strategies.
The energy sector, which is particularly critical to national development, both contributes to and is affected by climate change in the short and long term. For example, sectoral actions are essential for enhancing power generation capacity, reinforcing and expanding transmission and distribution networks, enhancing regional trade through interconnection of regional networks, enhancing access to electricity, and promoting renewable energy and introduction of new technologies in electricity generation.
Access to energy is seriously threatened by the progressive depletion of ecosystems as well as the impact of extreme weather events on infrastructure. Mainstreaming the climate-proofing of energy infrastructure is paramount in the short and long term. This can be done in medium- and longer-term plans and various energy management regulations, which are reviewed from time to time. Short-term plans, ideally what we refer to as annual work plans, are drawn from the long-term plans and the national circumstances facing a country during each financial year. In the short term, investment in clean energy must be increased.
Long-term strategies can be designed to shift incentives to value long-term planning by encouraging countries to take advantage of the carbon financing available from several developed countries. Currently, the regulations governing access to climate financing are too rigid to encourage developing countries to access available funds. Due to limited funds, most countries make decisions based on near-term costs and available technologies.
The objective of long-term planning should be to ensure an affordable, competitive, secure, sustainable, and reliable supply of energy to meet a country’s development needs. Appropriate strategies should also be drafted to enhance resilience to climate change and reduce the impact of climate disasters. If energy projects are to be successful, all investments should be based on the existing long-term strategies. Sustainable development should be entrenched in the long-term national strategies that form a country’s economic blueprint.
The process of developing long-term strategies related to the energy sector
Energy sector strategies guide the sector in exploiting investment opportunities, and in bridging gaps in infrastructure development during a defined plan period. The process of preparing such strategies should be undertaken through the preparation of all short-, medium-, or long-term plans, which should be designed to capture the rapidly changing circumstances in the energy sector.
Building on existing policies
To enable the strategies to be prepared, there must be an existing goverment policy from which to draw the strategic objectives of the energy sector in a given country. For the short- and long-term plans and strategies to take effect, there must be an existing policy and climate change act to guide the planning process. Policy guidance and energy planning are usually provided by the government through the ministry in charge of energy.
Stakeholder and international collaboration
Climate change is a transboundary issue that requires international cooperation on different levels. The impacts of climate change in the energy sector cannot be adequately addressed by individual national institutions acting on their own. Collaboration among all stakeholders is needed. Clear and workable frameworks must be established to address climate change challenges in the long term, and comprehensive stakeholder participation and partnership must be sought with the international community.
Elements of the long-term strategy
A number of energy issues need to be addressed in a long-term strategy. Here are some of the most important:
- public-private partnerships and incorporation of all levels of governments in the future planning processes
- capacity development in the energy sector
- research and development
- power supply network automation to enhance reliability, system reinforcement, and use of modern technologies
- enhanced development and use of renewable energy
- increased efficiency in energy consumption
- encouragement of private generators of power, and separation of generation from distribution
- construction of isolated power stations in areas far from the grid
- promotion of wind power generation by independent power producers
- power supply reliability, which will be enhanced through network automation, system reinforcement, and use of modern technologies
- connection of countries to energy-surplus countries in a given region
A long-term strategy can also outline how distribution power lines that cross major towns and their environs can be replaced with underground distribution power lines to reduce vandalism, destruction of trees, and outages, as well as improve aesthetics. In addition, the strategy can guide the preparation of renewable energy resources inventories and resource maps; the formulation of a national strategy for coordinating research in renewable energy; the promotion of the use of municipal waste for energy production; the increased development of appropriate local capacity for the manufacturing, installation, maintenance, and operation of basic renewable technologies such as biodigesters, solar systems, and turbines; and strengthened international cooperation on programs focusing on renewable energy sources and climate change.
The strategy should also include deliberate efforts to adopt new technology to withstand climate disasters. Employment opportunities should also be created. The strategy should encourage implementation of measures to mitigate the impact of climate change, including the reduction of greenhouse gas emissions and use of renewable energy; risk insurance; and tax free renewable energy equipment, such as solar gadgets. Countries should tap into international financial resources and expertise to develop unique technologies for adapting to or mitigating climate change, and to create employment opportunities.
The available capacity and energy for hydropower plants under average and dry conditions should be revised after a given period. Long-term strategies should be based on fixed projects modeled according to medium-term plans, with optimization following in subsequent years. This can help derive an optimal long-term expansion plan after having captured the most likely development path, assuming that projects scheduled for commissioning in the given period are not flexible, due to circumstances beyond the control of project implementers, such as the amount of funding provided or the conditions set by the donor, while the rest of the projects are presented as expansion candidates over the planning horizon.
Strategy can also address sustaining a stable investment climate for private sector participation in energy, developing expanded transmission and distribution networks to deliver power to customers, maintaining a creditworthy off-taker, maintaining cost-reflective tariffs, and reducing inefficiency in the sector to support more affordable end-user tariffs. Decision makers in the energy sector should adopt affordable connection policies to boost the number of customers in rural areas.
Continued institutional reforms in the energy sector should be encouraged, including a strong regulatory framework that encourages private generation of power. The separation of generation from distribution can also be entrenched in the long-term strategies. New sources of energy can be found through exploitation of geothermal power and other renewable energy sources, as well as by connecting countries to energy-surplus countries in their region.
Data and analysis to support strategy development
Medium- or long-term plans already in place in a country should be reviewed and performance data gathered from ongoing projects in the sector.
Data analysis should seek mainly to derive an optimal generation expansion plan for a country for the given period based on the prevailing commitments, available options, and assumptions. The optimal plan can be the reference point for development of the corresponding transmission plan for the period. Short- and medium-term plans should be analyzed with a view to recommending adoption of possible alternatives to mitigate foreseeable challenges relating to the demand-supply imbalance over the course of the long-term plan.
Managing the transition
The objective of a country’s energy policy should generally be to ensure affordable competitive, secure, sustainable and reliable supply of energy to meet the country’s development needs; address the powers and functions of the energy sector entities; promote renewable energies; and explore the regulation, supply and use of geothermal and all energy forms.
The energy policy should address institutional framework changes in the energy sector. This can include the review and expansion of the mandate of an energy regulatory commission and the establishment of a rural electrification and renewable energy body, an energy efficiency and conservation agency, an interministerial committee, and an energy tribunal.
Appropriate strategies can also be undertaken to enhance resilience to climate change and the reduction of disaster impacts. During the implementation of energy projects, deliberate efforts can be made to introduce new technology which can withstand disaster occurrences. Business continuity can be enhanced by developing offsite data management disaster-recovery centers. Redundancy in the power system can be ensured through the development of transmission and distribution lines development, regional power interconnectors projects can be constructed to allow power exchange, and energy sources should be diversified to enhance the security of power supply.
A country can ensure promotion of sustainable development under changing climatic conditions by planning actions to mainstream climate change into sector functions; identify strategic areas of national infrastructure requiring climate proofing; enhance energy conservation, efficiency, and the use of renewable energy in industrial, commercial, transport, and other sectors; strengthen approaches to climate change research and development training and technology transfer; review levels and trends of greenhouse gas emissions; introduce technology and technological innovations relevant to climate change; integrate climate change action plans into sectoral strategies and action plans; and integrate climate risk and vulnerability assessment into all forms of assessment. All investments should also target job creation at all levels of the economy.
Access to adequate and affordable energy for all segments of society translates into wealth, power, and resilience against climate change. Developing countries should explore and adopt all viable financing options from local and international sources for cost-effective use of all their energy resources, and in so doing endeavor to maintain a competitive fiscal investment climate in the country. Long-term planning strategies provide a road map for where a country should expect to be. Short-term strategies are drawn from these long-term strategies.