Promoting competitive energy markets reduces barriers to the development of dynamic industrial and commercial sectors that facilitate energy conservation. Countries in which private sector companies operate in competitive environments are the first to adopt technological innovation. When energy-efficient technologies are transferred to countries without competitive markets, experience shows that energy-efficiency potentials are never fully realized. Because of the importance or energy, a country-specific approach may be needed.
Institutional measures to promote energy-efficient supply and distribution might include such initiatives as restructuring of energy supply utilities and establishment of a transparent regulatory framework between government and energy supply enterprises. One current trend in developing countries is the shift away from large State-owned monopolistic energy utilities towards a decentralized, market-based incentive approach. This approach combined with a transparent regulatory structure provides the opportunity for energy consumers, investors, environmentalists and others to have a voice in policies related to pricing, energy conservation, environmental impacts, reliability of and access to energy services, and many other operational matters.
The technology available to the developing countries, either transferred from the developed countries or developed locally, should be of the highest standard in terms of energy-conversion efficiency. Intermediate or outdated technologies, even when they are cheaper at the stage of initial investment, could in the long run be more expensive because of costlier operation in terms of fuel consumption and its negative impact on the environment. The transfer of technology does not always have to be North-South, but can also be South-South, thereby utilizing the experience gained in other developing countries. One overriding requirement, however, is that all technologies supplied should be well tried and proven.
In rural areas, modernization should be promoted but sometimes in transitional stages. Special consideration should be given to the deforestation and reforestation problems following the use, often overuse, of fuelwood and charcoal in many parts of the world, especially in Africa. Improving the efficiency of cookstoves must be paralleled by the introduction of more modern forms of energy such as electricity, liquefied petroleum gas (LPG) and kerosene, aiming at a substantial reduction in the toll on limited biomass resources.
Technology transfer also requires an understanding of the institutional milieu, as well as physical aspects, of projects in the developing country. In this sense, technology is not just hardware and software, but also the supporting institutional arrangements and incentive structures. Included in this is long-term capacity-building through training of technical and managerial staff. E. Financial requirements and mobilization of resources.
Since capital requirements for developing countries' proposed programmes of investment far exceed the financial resources available, the best short-term option is to meet some of these needs by making better use of the equipment and resources already at hand. It is recommended that developing countries alter their investment priorities to support end-use efficiency, sustainable and reliable operations and maintenance programmes, and private sector initiatives, in addition to traditional investments in supply.
Bilateral and multilateral institutions should study the lack of progress in private sector involvement in the power sector of developing countries. Where possible, such institutions should expand their financing to cover joint ventures in environmentally sound electric power-related technology cooperation. In addition, it would be useful if donors and lending institutions could provide insurance for private sector power projects to enable capital mobilization from commercial and other markets.
Strong and effective energy demand management measures should be put into place. Financial resources should be used for the rehabilitation of existing power-generation capacity, and new equipment should be acquired only when reasonable standards with regard to the availability and efficiency of existing equipment have been met. In support of this, least-cost investment-planning approaches, incorporating the concept of life-cycle cost (LCC), should be developed and implemented in the power sector in order to give equal treatment to improved end-user efficiency, loss reduction in transmission and distribution, and rehabilitation of existing capacity in relation to constructing new generating plants.
A mechanism is needed to channel available financial resources towards energy-efficient equipment in all sectors. It is recommended that international and bilateral financing bodies consider financing joint venture manufacturing in developing countries as well as research and development in energy-efficient technologies and end-use devices. Similarly, it would be useful if funding could be made available to support the availability and delivery of critical spare parts to ensure high system availability.
To achieve such a change of attitude in planning and financing, there is a strong need for coordinated, joint action by both national and international institutions. Differences exist in attitudes and priorities among international and regional financing institutions and bilateral assistance agencies regarding the use of concessional funding for new plants versus modernization and rehabilitation of older plants. Therefore, donor collaboration in support of energy efficiency programmes needs to be developed and strengthened.
For their part, developing country governments should strengthen financial mechanisms, institutions, and associated policies and regulations to provide innovative lending in supply- and demand-side power sector efficiency, including direct lending for private sector initiatives. Financing sector entities, including development financing institutions with portfolios in industrial modernization, agriculture, the environment and housing, are targets for such institutional reforms.
The investor community is increasingly incorporating environmental guidelines in project evaluation; compliance with existing regulations in the country is a basic requirement. In addition, the investor-partner te am can draw upon information and new technologies that promote energy efficiency, which often is accompanied by reduced environmental impact. Since the energy efficiency converts to an economic incentive for the owner-operator, all parties can benefit.
Many developing countries continue to subsidize electricity and/or fuels heavily in the rationale that they are supporting the productive sectors of their economies. However, it is a policy that in the long run counteracts its objectives since low energy prices promote wasteful procedures, cement energy inefficient technologies and undermine any energy-conservation programme. An inadequate inter-fuel price structure can also distort energy-consumption patterns and lead individual users to less economical fuels, or to fuels that are harmful to the environment. An internal energy-pricing policy and inter-fuel price structure address the double purpose of paying for the resources and capital used in the energy supply and giving the energy consumer a clear message about its economic value and national socio-economic policy considerations. It is recommended that this dual purpose of internal energy prices be duly considered and, if necessary, pricing policies in developing countries revised accordingly.
Taxes and duties on energy conservation equipment are a disincentive to energy-efficiency gains, and it is recommended that they be reduced or removed. Rapid changes in taxation and tax levels for different sources of energy cause problems for both customers and equipment suppliers in that it changes the rules of the market, sometimes too quickly. Taxation is also increasingly being used to achieve environmental ends. A guiding principle in pollution prevention is the polluter pays principle. The traditional way of inflicting pollution costs in the energy supply system is to set emission standards and requirements, forcing a certain level of investment to meet the requirements. These costs must, then, be transferred through the system to the price paid by the end consumer, giving him the right signals. The true price combined with a systems approach to new investments will then help in getting cost-effective priorities right at all levels. People are the key factor in the equation of a successful energy conservation programme. Adequately skilled and motivated personnel are essential for promotion, acceptance and implementation of energy-conservation projects and practices. It is recommended that intensive training programmes and promotional campaigns targeted at different groups and levels of society be pursued in developing countries. Their objectives should be: (a) to encourage policy makers and managers to become more aware of the potential and benefits of energy conservation, and capable of establishing pragmatic conservation policies; (b) to increase the availability of technical staff skilled in energy auditing and in the application of energy-saving technologies; and (c) to keep energy users informed and motivated to include energy-conservation practices in their activities.
Training and promotional needs should be addressed through special courses and seminars at national, regional and international levels, and through promotional campaigns in the mass media. It is recommended that every effort be made to create satisfactory conditions, including adequate remuneration, and, through apportioning responsibilities, to retain trained personnel and encourage them to utilize the skills they possess.
Adequate information is essential for the formulation and execution of energy-conservation programmer. Information on energy supply and demand at the sectoral level is needed in order to identify those sectors and subsectors where energy-conservation efforts should be addressed first and will have the greatest impact. Energy balances and energy-flow diagrams are needed at the plant and industrial-process levels and can contribute to sectoral energy information systems. Microcomputers combined with user-friendly software for marshalling systems information are recommended as important tools to support these information needs. It is recommended that existing national energy information systems be adapted to address the information needs of energy-conservation programmer, including their environmental implications.
Although the benefits of energy conservation from the technical, economic and environmental points of view are known to many developing countries, implementation and investment in energy-conservation projects have only recently begun to gain momentum. Energy-efficiency measures identified by energy audits are being implemented only when small investments or housekeeping measures are called for. As a result, energy-conservation practices have not expanded beyond initial applications.
Inadequate institutional frameworks for guiding, educating and sustaining energy-conservation efforts are a primary reason for the failure of energy conservation policies in developing countries. It is recommended that the establishment of truly effective institutions responsible for energy conservation promotion, education, training and provision of technical services be given a high priority by countries that have not yet done so. These energy resource and efficiency centres have a role to play in the following areas: (a) Dissemination of information on technology options and financing; (b) Promotion and implementation of demonstration projects for demand-side management measures and renewable energy applications; (c) Training, information and advisory services on energy loss reduction programmes; (d) Development of private sector energy service companies; (e) Implementation of energy audits; (f) Assisting government in drafting of codes and standards for energy end-use appliances and buildings; (g) Directing national and international technical assistance programmer directed at energy efficiency.
An important element of the regulatory framework needed to promote energy efficiency is minimum standards for appliances and vehicles and appropriate building codes. Where regulation is necessary, economic incentives should be employed to achieve energy efficiency rather than attempt to legislate behaviour. Public institutions should have the power to enforce such codes and standards, but much support can be received from consumers and the general public if informational campaigns are successfully utilized. The establishment of standards requires the agreement of producers, consumers and government; institutional mechanisms must be established for the effective enforcement of those standards, and laboratories are required to verify standards. Lack of agreement and weak enforcement mechanisms have hampered the effectiveness of standards and codes in energy-efficiency programmes.