Energy efficiency in transition: do market-oriented economic reforms matter?

Global climate change and security of supply concerns pose significant challenges for sustainable development in transition and developing economies. Meanwhile, it also largely underscores the need to improve energy efficiency in these countries. Economic theory suggests that market-based economic policies and reforms are crucial for accelerating energy efficiency in developing and transition countries. Hence, this paper analyses the impacts of several market-oriented economic reforms on energy efficiency across the popularly termed ‘transition countries’. The transition economies experienced a rapid marketization process which transformed their economies from central planning towards more market-oriented since the early 1990s. The econometric results from the bias corrected fixed-effect analysis (LSDVC) suggest that both large and small scale privatisation process has been the sole driver of energy efficiency during the two decades of reforms. However, the lack of suitable institutions to support overall-market reforms implies that other market based economic reforms remain ineffective in improving energy efficiency among transition countries.

Keywords: market reforms, energy efficiency, transition countries, institutions

JEL Classification: P28; Q54; C33

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http://ideas.repec.org/p/pra/mprapa/33349.html

Going Green

I conclude that Nepal has significant potentials to economically harness renewable energy using small-hydro, photovoltaic (PV) and wind reducing our dependence on traditional energy sources. However, several domestic and international factors are responsible to address the associated demand and supply-side constraints and contribute towards the spread of green technologies in the country. At the domestic level, it is necessary to design cautious subsidies and tax incentives scheme capable enough to create a balance between ‘economic efficiency’ and ‘social equity’. Equally important factors are the need to improve the access to credit, creating proper institutional settings, encouraging the private sector and extending adequate entrepreneurial support for all players involved. The need to support socially-oriented organization such as cooperatives can be pivotal in the Nepalese context in utilizing the available green energy sources. Similarly, increased investment in renewable energy sources from international sources in the form of well monitored long- term loans and grants coupled with timely technology transfer are essential to extend electricity services among rural and urban-based communities in less-developed economies like Nepal.

To read the rest of the article published in MyRepublica, please follow the following link http://www.myrepublica.com/portal/index.php?action=news_details&news_id=33891

Renewable Energy in Less-Developed Economies:Roles and Potentials

Increasing the renewable energy share in national energy mix remains one of the major energy policy goals across many economies. This paper assesses the roles and potentials of renewable energy sources in less-developed economies while citing Nepal as an example. Renewable energy has a significant role to play in the electrification of rural areas in developing economies and contribute towards sustainable development. Realizing full potentials of renewable, however, requires addressing both the associated demand-side and supply–side constraints. Innovative subsidies and tax incentives, adequate entrepreneurial support, strengthening institutional arrangement and promoting local community-based organizations such as the cooperatives are the necessary factors in promoting the green technologies in countries like Nepal. International factors such as large scale investment and adequate technology transfer are equally crucial to create a rapid spread and increase affordability of decentralised renewable energy technologies in less-developed economies.

Keywords: renewable, electrification, research and development

JEL – Codes: Q42; Q01; O33

Please follow the link below to read this full length research article:
http://mpra.ub.uni-muenchen.de/31878/

Globalising Electrification

Jimmy Carter once said that ‘globalisation is a policy and not an act of god’. Assuming his witticism holds true; the benefit of globalisation should largely accrue to those with the ability to implement timely and problems-focussed policy making in the economy. The electricity sector remains no exception to it either. Increasing cross–border flow of electricity and the creation of regional energy trading blocs has been one of the hallmarks of modern globalizing economy. Those who joined the bangwagon have largely gained in terms of competitive power prices, increased security of supply and overall socio-economic development as evidenced from several European, Latin American and Asian countries like Bhutan. If so, are we letting yet another opportunity pass by?
The inability of Nepal to develop its own hydro resources as anticipated and the subsequent problems facing the power sector is well-known among the masses. Most notably, around 88% of the national energy demand is met through traditional sources explaining limited opportunities for rural development coupled with environmental degradation. Per capita electricity consumption remains one of the lowest at 89 KWh due to supply limitations under rising electricity demand. The need to expand access to reliable electricity in affordable manner remains the prime challenge.
To read the rest of the article published in 'The Kathmandu Post'; please follow the link below:
http://www.ekantipur.com/2011/06/28/oped/electric-trade/336419.html

Reforms in Small Power Systems

How can we effectively reform a small electricity system like Nepal experiencing twin problems of political volatility and increasing power demand under capacity shortage? Our recently published policy paper titled ‘’Reforming Small Electricity Systems under Political Instability: The Case of Nepal’’ at the Electricity Policy Research Group(EPRG), University of Cambridge analyses the issues and options surrounding the Nepalese electricity sector and provides appropriate policy recommendations.
We suggest a piece-meal approach of reform considering the resource constraints and recommend a two-staged reform process based on the lessons learnt fr0m other electricity systems in the world. In the short and medium term, focus should be towards tariff and subsidies restructuring and creating an effective independent regulatory body. Economic theory also suggests that cost-reflective prices is desirable as it leads to net social welfare gains although assessing the distributional impacts of tariff adjustment is a complicated task. A two part tariff design where a fixed payment is added to the system marginal income (such as capacity payments) can ensure the sustainability of the system as widely practised in most Latin American countries.
To follow the rest of the article, please follow the link below:
http://www.ekantipur.com/the-kathmandu-post/2011/04/14/oped/marketing-electricity/220603.html

Energy Emergency in Nepal

The declaration of ‘a state of energy emergency’ by the energy Ministry was utterly unsurprising to read about. Yes, energy emergency is an alternative expression to indicate a deepening energy crisis and the ministry rightly expressed so. Energy emergency is also an urge for meaningful policy urgency. As history repeats agahttp://www.blogger.com/img/blank.gifin, the newly formed government also did not delay on the opportunities to sketch the future course of the Nepalese energy sector. While some of the earlier policies are now declared to be discontinued and stalled, more new policies are designed in a bid to mitigate the crisis under political uncertainty. I believe that the new policies formulated are logical and indeed reflects the plight of the sector and the subsequent hope of the nation it carries upon.
To read the rest of the article published in The Kathmandu Post, please click on the link below
http://www.ekantipur.com/the-kathmandu-post/2011/04/02/oped/divide-and-grow/220155.html

Lessons Learnt

We have devoted a vast amount of scarce economic resources to reform our electricity sector over the years. Yet, the reform process can be dubbed ineffective while the empirical evidence of reforms has departed from the anticipated underlying motives. So, have we ever wondered upon what it takes to successfully reform the power sector in a developing country? In a recent paper titled “Reforming the Power Sector in Transition: Do Institutions Matter” published as University of Cambridge Working Papers in Economics, we have emperically formulated relevant policy recommendations for an effective electricty sector reform. Although the study focusses on ‘transition economies’ (TECs hereafter); the lessons learnt can certainly be tranferred to other developing countries like Nepal as economic transition is an ongoing process.
The rest of the article published in 'The Kathmnadu Post' can be followed via the link here: http://www.ekantipur.com/the-kathmandu-post/2011/03/09/oped/power-links/219264.html

Hope Looms

It is certainly a relief to know that Kasturi Trade Link and Hydro Air are planning to initiate a project to generate electricity from valley’s garbage within two years amidst the on-going energy crisis. Although the generation capacity is limited to 3 MW in the early phases of production; the consequences are far reaching than just the scale of production in my view. According to my first view, the switch towards alternative energy sources is indeed essential given our excess reliance in hydro coupled with a poor track record in developing hydropower projects as anticipated. My second line of thought states that people will now no longer perceive garbage as just a ‘waste’ but instead a resource with immense value attached.
Generating energy from waste can be an alternative source of renewable energy in the country with some potential to mitigate the ongoing power crisis. The success will depend upon the importance attached to such technology in the national and municipal policy framework. We have to ensure that we are eventually burning waste to produce energy and not burning money instead.
To read the rest of the article published in 'The Kathmandu Post', please follow the link here: http://www.ekantipur.com/the-kathmandu-post/2011/02/19/editorial/waste-not-want-not/218613.html

Policies Without Directions

The establishment of the Ministry of Energy as a separate ministerial entity also installed high hopes across the nation. The country believed that the energy sector deadlocks would eventually get a proper impasse with a distinct energy ministry in place. While the customers hopes have gained greater heights in recent times; the sectoral deadlocks is deepening with no immediate signs of easing up. Given the importance of the energy sector for a country experiencing a systemic change; the logic of such segregation is vindicated on the grounds that the acute energy concerns can receive the much-needed priorities. Unfortunately, the practice is no longer in harmony with the theory prompting me to raise two major questions here. Firstly, is the current sectoral performance an improvement from the previous performances under an integrated energy ministry? Secondly, are the taxpayers funding the energy ministry largely benefitting from the service that is being currently rendered to them? The answers are certainly not pleasing as I have been arguing in my previous articles which justify an analysis into this issue.
To read the rest of the article published in The Kathmandu Post, please follow the link:http://www.ekantipur.com/the-kathmandu-post/2011/02/02/oped/out-of-energy/217981.html

On Power Theft

Power theft is critically proving to be one of the unsuccessfully addressed acute concerns of the Nepalese electricity sector. Though the actual estimate on Nepalese non-technical losses is unknown; an overall system losses of 26.58% in 2010 indicates that electricity theft is being gravely practiced in the country after accounting for inefficiencies in system use, technical transmission and distribution losses from grids inefficiency and gratis. At one end, not all people are willing to pay for energy usage and connection charges despite their ability to pay. On the other end, electricity theft has also become institutionalized in the political and economic governance settings providing the theft-culture more robustness and longevity.Power theft has resulted in significant lost earnings for NEA creating a fund-crunch for investment in the power system while also necessitating capacity expansion in generation to cope with power losses. Electricity theft is identified as one of the fundamental drivers behind Nepal Electricity Authority’s (NEA) whooping financial loss of Rs. 5350.92 million incurred in 2010. Yet, the practice towards electricity theft control remains largely apathetic in the country.......Theft practice thereby creates negative externalities for other responsible electricity users who actually pay for their power usage and connections.
Please follow the link below to read the editor's version of the article published in The Kathmandu Post:http://www.ekantipur.com/the-kathmandu-post/2011/01/18/oped/a-noble-opportunity/217398.html

Silver Jubilee of Nepal Electricty Authority (NEA)

Nepal’s power sector is currently battling out the toughest challenge ever-encountered in the last two and a half decades of its electricity sector reforms experience. The sector is faced with an upheaval task of electrifying the nation under twin scenarios of escalating electricity demand and growing political instability. Unlike others, I preferred to label them as ‘scenarios’ than ‘problems’ because the actual problem in my view has been the immature engineering of the sector that is proving unable to cope the long-foreseen pressures of soaring demand and vagabond politics over the years.After the establishment of the vertically-integrated Nepal Electricity Authority (NEA) in 1984; several policies and acts followed suit to provide appropriate institutional framework for implementing electricity reforms. The Hydropower Development Policy of 1992 was supported by the Water Resources Act of 1992, the Foreign Investment and Technology Transfer Act 1992, the Electricity Act 1992 and the Industrial Enterprises Act. The Hydropower Policy of 1992 was subsequently amended in 2001 and led to the formulation of the Community Electricity Distribution Bye Laws in 2003. All the above mentioned acts and policies in paper addresses the acute concerns revolving the Nepalese power sector such as capacity expansion, imports reduction, private participation, losses reduction, rural electrification, environmental protection, etc. Yet, the practice has unusually departed from theory while the empirical evidence from two decades of electricity reforms has starkly defied the logic of reforms in Nepal.
To read the rest of the article published in 'The Kathmandu Post', please follow the link:http://www.ekantipur.com/the-kathmandu-post/2011/01/04/oped/a-silver-jubilee-to-mourn/216860/