Coping with the Energy Challenge. Sharon Hsu Energy Team Office of Infrastructure & Engineering U.S. Agency for International Development

Transcription

1 Coping with the Energy Challenge Sharon Hsu Energy Team Office of Infrastructure & Engineering U.S. Agency for International Development USAID/EGAT/I&E Infrastructure Workshop December 17, 2009

2 Outline Energy and Development The Energy Challenge Coping with the Energy Challenge A Toolkit for USAID

3 Outline Energy and Development The Energy Challenge Coping with the Energy Challenge A Toolkit for USAID

4 Energy and Development What is the relationship between energy and human development? Steepest Curve Steepest curve Strong positive correlation between energy consumption and human development across all countries. Energy impoverished countries improve human development rapidly with increased energy consumption.

5 Energy and Development What are some of energy s cross-sectoral linkages? Development Links Poverty Reduction & Econ. Growth Agriculture Fiscal Balance ENERGY Education Social Stability Environment & Climate Change Health Energy is linked to a wide range of development objectives

6 Energy and Development How is energy related to economic growth? Energy is critical for manufacturing, tourism, ICT, etc. Country examples: Philippines: The Visayas region is suffering from electricity shortages and high prices. Tourism on Panay Island is suffering. Foreign call centers and IT business are not establishing new offices in Cebu. Pakistan: Power rationing and shortages in Karachi have had serious impacts on industry. 16 major textile units and 15,000 cottage industrial units closed down. Losses caused by load shedding as of mid 2008 were around $400 billion. Downtown Cebu

7 Energy and Development How does energy affect social stability? High energy prices fuel violent public protests and threaten social stability. Recent examples: Guinea: In 2007, energy price increases of 63% resulted in violent protests and 200 people dead. Lebanon: In May 2008, protesters and police clash in riots against rising fuel prices, leaving five people killed and forty injured. Indonesia: Daily protests erupted after Indonesia withdrew energy subsidies in June 2008 and fuel prices jumped 30%. Nepal: The pump price of gasoline and diesel jumped 25% in June 2008, sparking street protests.

8 Energy and Development Guinea Indonesia Lebanon Nepal

9 Energy and Development How does energy affect a country s fiscal balance? High energy subsidies creates significant government budget constraints, shifting resources from social and basic infrastructure programs. Country examples: Malaysia: Fuel subsidies cost the govt. $17 billion in 2008, four times more than what it pays for national defense, education and health care. India: Power subsidies cost the Government of India $3 billion in Theft alone cost Indian states more than $4.4 billion a year.

10 Energy and Development How is energy critical for health & education? Reliable electricity is critical for operation of medical equipment and refrigeration of vaccines, medicine, and blood supplies. Energy is needed for lighting and heating of schools Country examples: Haiti: Hospital Petit Goave goes without electricity due to high fuel prices. The hospital s blood bank and supplies including HIV rapid test kits, reagents, blood, vaccines, etc. are sometimes stored at room temperature. Tajikistan: Energy shortages closed down schools for two months during the 2007/8 winter; school attendance plunged. Most of the nation s 3800 primary schools and 400 kindergartens have almost no, or very limited, heating.

11 Outline Energy and Development The Energy Challenge Coping with the Energy Challenge A Toolkit for USAID

12 The Energy Challenges What are some energy challenges faced by developing countries? Energy Security Price level and variability Energy Povery/Access Environmental impacts Need for financing and investment:

13 Energy Challenge: Energy Security Energy security is a top priority for developing countries. Definition: Ensuring the availability of energy resources that are reliable, affordable, and environmentally sound. Growing energy demand, especially in developing countries. Net importers risk energy supply disruption or price increases. World Primary Energy Demand

14 Energy Challenge: Price Variability Oil prices rose from , dropped in 2008, and are trending upwards Crude Oil Prices Dec 8, 2009: $72.59/ barrel

15 Energy Challenge: Price Variability In the short-term, oil prices can be very volatile. In the long-term, high oil prices and economic effects are expected... Nominal World Oil Prices in Three Cases ($/bbl) High Price Reference Low Price 20 0 History Projections Source: EIA. International Energy Outlook. September 2008 The EIA defines the three cases based in four factors: growth in world liquids demand, high production costs for accessible non-opec conventional liquids resources, OPEC investment and production behavior, and the cost and availability of unconventional liquids supply.

16 Energy Challenge: Price Variability Poorer countries suffer the most under higher oil prices All Very Low Income countries and 70% of Low Income Countries are net oil importers. Poorer countries have higher percentage of Net Oil Import/GDP and therefore are more vulnerable to an oil shock. Poorer countries have weaker economies to cushion the negative impacts. Percentage change in GDP by a US$10/bbl rise in oil prices Poverty Per Capita income ( US$) Net Oil Import/Export as % of GDP % Change in GDP Net Oil Importers Very Low Income <300 [18] Low Income >300 and <900 [22] Middle Income >900 and <9000 [36] High Income >9000 [21] Net Oil Exporters Low Income >300 and <900 [10] Middle Income >900 and <9000 [17] High Income >9000 [7] * Base Oil price of US$23.55 Source: The Impact of Higher Oil Prices on Low Income countries and on the Poor. ESMAP (2005) Reduced GDP

17 Energy Challenge: Lack of Access Energy Poverty: how many people still lack access to electricity? Region (2008) Electricity Un-served (in Developing Countries) Coverage Population (%) (millions) South Asia Sub-Saharan Africa East Asia & China Latin America Middle East North Africa 95 7 TOTAL 75 1, billion people lack access, mostly in Africa and Asia.

18 Energy Challenge: Environmental Impacts Energy use has local and global environmental impacts. Energy accounts for 61.4% of global greenhouse gas emissions.

19 Energy Challenge: Financing Needs Financing/Investment: What are the needs? Can it be realized? International Energy Agency (IEA) estimates $1.1 trillion investment needed every year from now until 2030 (total $26 trillion). IEA estimates that limiting GHG emissions to 450 ppm would require additional $10.5 trillion. Climate change financing (e.g., MDB funds, carbon markets) will play important role. Private sector investment needed.

20 The Energy Challenges Summary of key energy challenges - Developing countries have growing energy demand and limited supplies. The cost of energy is affecting governments, industries, and consumers. Conventional energy sources are causing global climate change. Massive need for investment in energy, especially clean energy. 1.5 billion still lack access to electricity.

21 Outline Energy and Development The Energy Challenge Coping with the Energy Challenge A Toolkit for USAID

22 Interventions to Cope w/ Challenges Key Interventions are structured in four key areas: Energy Enabling Environment; Energy Market (Supply and Demand); and Social Safety Nets. Energy Enabling Environment Over-arching Institutional aspects of the energy sector Interventions in the energy market Energy Supply Energy Demand Social Safety Nets Interventions that protect the most vulnerable

23 Interventions: Enabling Environment Interventions in Energy Enabling Environment aim to improve the legal, policy, regulatory, and institutional framework. Energy Enabling Environment Establishing a long-term sector vision and policy Strengthening the legal and regulatory framework Creating an institutional framework

24 Interventions: Energy Supply Energy Supply interventions look at ways to improve the energy supply conditions (quantity, price and risk) to the country Energy Supply Enhancing Energy Supply Diversifying fuels Transport Industry Residential Electricity Improving efficiency on electricity supply

25 Interventions: Energy Demand Energy Demand interventions explore approaches to reduce the energy intensity from the demand side Energy Demand Adjusting Prices Promoting Energy Efficiency Transport Industry and commerce Residential Public Sector Economic sector shifting

26 Interventions: Social Safety Nets Social Safety Nets Interventions aim to protect the most vulnerable against high energy prices, promoting the access and affordability of energy services Social Safety Nets Promoting access to energy services Designing appropriate tariffs Implementing targeted subsidies

27 Interventions: Key Considerations Successful interventions should consider the following dimensions Efficiency Package of coordinated interventions increase the efficacy compared with single measures Each country needs to adapt the interventions to its own circumstances Sequence Incentive prices that reflect the real costs: A condition for successful energy interventions Need of a favorable and stable institutional framework Timeline Energy sector reform takes time to implement There are interventions that have an impact in the short term (e.g. DSM programs) and other in the long term (e.g. renewable energy projects)

28 Outline Energy and Development The Energy Challenge Coping with the Energy Challenge A Toolkit for USAID

29 Toolkit for USAID USAID Toolkit: Objectives Identify Problems: To provide a quick diagnosis of the key energy challenges faced by developing countries, especially with regards to oil import vulnerability Identify Solutions: To introduce a structured approach for USAID to understand possible types of interventions to be considered to cope with key energy challenges

30 Toolkit for USAID USAID Toolkit: Components Diagnostic Tool: Measures the vulnerability to high oil prices through a series of key indicators. By comparing them with reference levels, the tool will flag the most vulnerable sectors of the country. Menu of Interventions: Linked with the Diagnostic Tool, provides effective interventions at different levels of detail to the critical areas identified in the diagnostic tool Bibliography: Provides references from the literature on the various interventions of the menu.

31 Toolkit for USAID USAID Toolkit: Diagnostic Tool (screenshot)

32 Toolkit for USAID USAID Toolkit: Menu of Interventions (screenshot)

33 Toolkit for USAID USAID Toolkit: Bibliography (screenshot)

34 Conclusion - Energy is critical for development and affects almost all other sectors - Most USAID-assisted countries are oil-importing and affected by energy challenges. - There are interventions that can help to meet the energy challenge - USAID/EGAT developed a toolkit to help diagnose key problem areas and identify potential interventions - The Energy Team is available to assist Missions in assessing the energy challenge and developing programs to address challenges.

35 Contact and Follow up - Toolkit demo (temporary link): Energy Team website (will host toolkit): d_trade/energy/ - Sharon Hsu, shsu@usaid.gov,