Energy diagnosis: Toward a policy-oriented approach for energy planning in developing countries

LVorld Dmelopmenr. Vol. 18, Ko. 4. pp. 519-538, 1990. 0305-750X 9OS3.00+0.00 Printed in Great Britain. c 1990 Pergamon Press plc

Energy Diagnosis: Toward a Policy-Oriented

Approach for Energy Planning in Developing

Countries

ADILSON de OLIVEIRA Coordena@o dos Programas de Pos-Graduapio em Engenharia, Unicersidade

Federal do Rio de Janeiro

and

JACQUES GIROD* Institut Economique et Politique de I’Energie, Grenoble

Summary. - The oil crisis drastically changed trends in energy consumption and production. In industrial countries, the traditional approach to energy planning was replaced by the end-uses approach. This approach has been introduced in developing countries, but it can hardly deal airh the double energy transition facin, 0 these countries. A policy-oriented approach is proposed that emphasizes the role of energy diagnosis in the energy planning process. and introduces the decision node as a conceptual framework for policymaking.

I. INTRODUCTION tries before and after the oil crisis. The third section deals with energy planning in developing countries,

Energy planning is a relatively new activity pointing out the severe shortcomings of existing which has its origins in the transition from coal to methods in approaching the long-range devel- oil use in industrial countries. Between 1945 and opment of their energy systems. The fourth section 1970, diffusion of the use of oil products was very introduces a policy-oriented approach-for energy strong worldwide, with oil becoming the main planning in developing countries. energy source (Darrnstadter et al., 1971). At that time there were obvious, major economic benefits to the intensive use of oil; the simplicity of methods 2. ENERGY PLANNING IN used for energy planning in this period can largely INDUSTRIAL COUNTRIES be explained by this situation (de Oliveira, 1986).

In the 1970s the oil crisis drastically changed the The Industrial Revolution radically transformed energy market. Many scenarios forecast the rapid society in northern Europe. The development of depletion of world oil reserves (Allen er al., 1981) capitalism introduced the industrial mode of and, consequently, very high oil prices. Apparently it was time for an energy transition, this time from oil to a new energy source. Planning this transition *The ideas we present in this paper are the result of emerged as a major challenge for both industrial some years of exchange of experiences and very fruitful

and developing countries. discussions with our colleagues at the Cooperative Pro-

Developing countries, however, have social and gramtne on Energy and Development (COPED) spon-

economic situations that are distinct from those sored by the Commission of the European Communities.

of industrial countries. Consequently, they need We are very grateful to all of them, particularly to those

methods for long-range energy planning that are of Fundaci6n Bariloche and the Science Policy Research

different from those of industrial countries, as we Unit who have made comments on an earlier version of

shall show in this paper. this paper. We would like to extend our gratitude to the CNPq and CNRS who supported the bilateral coop-

In the next section, we provide an overview of eration between our institutes that made it possible for energy planning methods used in industrial coun- us to produce this joint paper.

529

530 WORLD DEVELOPMENT

organizing social production in other countries as well, but in only a few of them has it diffused throughout society. These countries are con- ventionally known as industrial countries.

During the last 200 years, the industrial countries have structured their economies through a long historical process, producing a relatively homogeneous and articulated social system. Sim- ultaneously, under the pressure of organized social groups, institutional mechanisms of negotiation have been developed in order to solve conflicts among social forces by dialogue.

The Industrial Revolution also produced a radical transformation in the energy system (de Oliveira, 1987). The industrial mode of organizing social production uses machinery, which in turn requires energy sources to function. In the 19th century, social production was structured for steam engines; the rapid diffusion of steam machinery led to the substitution of coal for fuelwood.

In the 20th century, the mode of organizing social production in industrial countries has changed profoundly with the introduction of mass production and the development of road transport. The consumption of oil products started to grow very quickly, resulting in the substitution of oil for coal. This process started in the United States at the beginning of this century, but was postponed in other industrial countries by the two World Wars. However, during reconstruction, the transition to oil gathered momentum, and energy planning was seen as a mechanism to maximize the benefits of this process.

(a) The traditional approach to energy planning

At the beginning of the 1950s the industrial countries already had a highly structured economic system. This system was composed of a complex of articulated cells, and its growth was the result of the expansion of these cells. Structural changes were the result of a smooth process which progressively reduced the weight of nondynamic cells and increased the weight of dynamic cells in the economic system.

Dynamic industries, like motor cars and petro- chemicals, were linked with oil products. Their growth produced increased demand for oil. Tran- sition to oil was both the result of economic growth, induced by dynamic industries, and at the core of economic growth.

Until the 1970s the world economy was in a period of intensive industrialization and economic growth, made possible largely by the supply of low-priced energy and materials from developing countries. The traditional energy planning approach was developed against this background.

It adopts the notion of equilibrium between supply and demand as the basis for energy planning. In this view, long-term movements of the energy system are the result of a series of short-term movements which reflect actions of economic agents to equilibrate supply and demand.

The goal of traditional energy planning is to correctly forecast energy demand and promote the necessary increase in supply that will make it possible to satisfy this demand. Demand is forecast on a global basis, with no disaggregation among energy services,’ and no particular attention to conservation or substitution in each of these services.

This approach is essentially supply oriented. It presupposes an economic system in continuous and equilibrated growth. There is no place for major structural changes that would introduce a breakdown in the energy-society relationships; these relationships are supposed to remain the same over the period forecast. In reality, the expected future energy system is no more than an extrapolation of current trends.

In order to identify actual trends, a representation of the energy sector has been developed: the energy balance.

Energy balances take a “snapshot” of the annual flow of energy through the energy sector. They show, by the internal logic of their calculation, an equilibrated energy system. The objective is to identify the dynamics of equilibrium between supply and demand using successive “snapshots” of the energy flow.

Traditional energy planning is understood to produce a future energy balance at a minimum cost of energy supply. Future energy demand is forecast using econometric models, and optimum supply can be calculated using sectoral models that minimize the discounted cost of supply. Energy prices are supposed to play a key role in supply- demand adjustment.

This traditional approach has a clear theoretical background: the energy sector has to adapt itself to demand induced by the market, which means minimum cost of supply for consumers. When economic and social conditions are those already pointed out, we can expect satisfactory results from this approach, which has been widely used in industrial countries since World War II. However, because of differences in economic, social and institutional situations, specific energy policies have varied widely, even if coal substitution has been the major policy issue.

(b) The end-uses approach to energy planning

By the end of the 1960s and the beginning of the 1970s the world economy was giving indications

of an imminent crisis. Industrial countries began facets of energy (physical, economic, technical, to face problems such as unemployment, inflation, financial, social) and its links with the social and monetary fluctuations, and balance-of-payments economic environment should be studied and inte- disequilibrium (Frank, 1978). Criticism of econ- grated into energy policies. In brief, the energy omic growth appeared (Meadows et al., 1972) system is understood as a subsystem of society that and developing countries reacted against the world has many links with other subsystems: transport, economic order that imposed low prices for their agriculture, industry, services, etc. materials, especially oil. Within the end-uses approach, energy is no

Industrial countries have to find a new basis for longer just another product with its own specific sustained economic growth. Sustained economic markets. Society does not need energy as such; growth would be recovered only if major structural what it really needs is lighting, heating, transport, economic and social transformations occur. steam, etc. In order to supply these needs, it uses

The oil crisis indicated to industrial countries several different kinds of equipment which are con- that their oil supply was no longer guaranteed, as sumers of energy. So the most relevant way to it had been in the recent past. Structural changes estimate future energy demand is to forecast the in the energy system were absolutely necessary in energy services demanded by society and the equip- order to recover the security and flexibility of the ment that will be used to produce these services energy supply. That entailed reorientation of (Chateau and Lapillonne, 1977). This approach energy services toward new energy sources and an stimulates the development of new concepts in increase in their efficiency, especially as far as oil order to analyze demand and supply (energy need, products were concerned. Substitution of oil prod- energy use, energy service, energyfiliere). ucts and energy conservation became two main New tools were also developed, particularly on guidelines of the new energy policy. the demand side, after 1973. Energy balances have

The traditional energy planning approach was been extended, adding to the standard energy bal- not suited to this new environment; a new ance the “useful energy” balance and the resources approach was developed to face the new and reserves balance. A whole generation of end- challenges. Equilibrium between supply and use energy models has been developed since then, demand remains the basic notion in this end-uses and much work has been done on the sociological, approach. It does not seek to reestablish the cur- psychological and cultural behavior of energy rent equilibrium, since there is no possible equi- users (Stern and Aronson, 1984). librium in the short term. The end-uses approach There are radical differences in theory between adopts the hypothesis that the current energy sys- the end-uses approach and the traditional one. tem is not adjusted to the social and economic Planning can now design a future energy system on system; there is a major disequilibrium in the short the basis of the long-term equilibrium. that society term that can only be overcome by a long-term wants to achieve. Energy demand is no longer a policy to modify the actual energy system. Energy sovereign consumer’s decision which the energy planning should identify the future trends that the sector has to meet, using only prices as an adjusting energy system must follow in order to transform mechanism. Planning can and should use many the current disequilibrium into a future equi- other mechanisms to lead supply and demand in librium. directions politically chosen by society.

Final energy demand assessment is no longer outside the scope of energy planning. Leading energy demand toward the consumption of non- oil products, while at the same time developing new 3. ENERGY POLICY AND PLANNING IN energy sources, becomes a major item of planning DEVELOPING COUNTRIES activity. To achieve these goals, it is necessary to go far beyond pricing policy: subsidies for some The Industrial Revolution has also affected energy sources and uses must be introduced; tax- Asia, Africa and Latin America (Amin, 1973). ation both on energy sources and equipment must Imports of industrial products have destroyed be reviewed; technical standards should be defined, local production of handicrafts. The need to pro- etc. duce an exportable agricultural surplus in order to

These new goals and the new hypothesis have import industrial products has disrupted the local had profound consequences from the method- mode of organizing social production. Foreign ological point of view, the most important being investments have been concentrated on services the widening of the scope of energy planning. It is (transport, banks, communication) which are no longer the energy sector that fixes the bound- linked to the international market. Urbanization aries of the energy planning process, but the energy has generated a large, informal service sector. system as a whole. This means that all the multiple In the 1930s the world economic crisis plunged

ENERGY DIAGNOSIS 531


the developing countries into enormous difficulties. Markets for their tradable products were drastically reduced, and they were therefore no longer able to import the required industrial products. Many developing countries, particularly in Latin America, responded to this situation by industrialization through import substitution. Since World War II, import substitution has been the main economic policy of many developing countries.*

The import-substitution strategy (Prebisch, 1950) fosters the development of a local consumer goods industry. Markets for materials and capital goods are expected to increase with industrialization, and when markets become big enough, these goods can be locally produced. By this process, the industrial mode of organizing social production is thought to progressively dis- place the archaic ones and, at the end of the process, an economic and social system similar to that existing in industrial countries should be achieved.

The import-substitution model has presented different results in different countries. There is, however, one main conclusion that can be derived from these experiences: industrialization by import substitution is not sufficient to produce an economy similar to those existing in industrial countries (see “Latin America in the post-import-substitution era,” World Development, 1977). Devel- opment is a much more complex process that involves all aspects of society.

Industrialization also produced substantial modifications in the energy systems of developing countries. Import substitution was carried out mainly with technologies imported from industrial countries; these used oil products as their energy source. This is the reason why industrialization in developing countries produced a direct transition from fuelwood to oil.

(a) The transition to oil

As in industrial countries, the transition to oil had major economic and social effects in developing countries. But local conditions were different from those in industrial countries and hence the effects of this transition were also different.

Developing countries had no structured energy sector when their transition to oil started; coal was marginally used and the electric grid was virtually nonexistent, while fuelwood was mostly supplied by an informal collecting mechanism. There was a strong, unsatisfied demand for modern energy sources (Martin, 1966).

At the beginning of industrialization, the main goal of energy planning was to structure a modern energy sector that would be able to satisfy demand

in urban areas. Later, it would be extended to satisfy demand in rural areas as well.

In the first years of industrialization, supplies of oil products were imported, but as industrialization and urbanization gained momentum, local production of oil products came onto the agenda. At that point, the construction of local refineries and electric grid interconnection became relevant issues.

Energy planning at this time was, however, a simple exercise. Its approach was supply oriented, as in industrial countries. But, even if it used the same theoretical background, its framework was quite different.

Forecasting the demand for modern energy sources in developing countries was unnecessary, since any local supply of these sources would sub- stitute for imports, and import substitution was the main economic policy. Fuelwood substitution was not analyzed since fuelwood had no formal links with modern sectors of the economy. The diffusion of oil products and electricity use was considered to have positive effects on economic and social life, since oil and electricity were intro- ducing the industrial mode of organizing social production and displacing the archaic ones.

The major challenge faced by developing country policy makers was to overcome the difficulties created by their limited financial capacity to meet the large investment demand of their energy sector. The main goal of energy policy makers was to find financial mechanisms that would enable these countries to structure a local energy sector as soon as possible, in order to meet the demand for modern energy sources. By this means, they would be maximizing the social and economic benefits of the oil transition.

Developing countries, however, unlike industrial countries, are nonhomogeneous and nonarticulated economies. They have high-productivity areas where the industrial mode of organizing social production is already in operation, but they also have areas of low productivity where archaic modes of organizing social production still exist (Perroux, l981).’ These areas coexist in mutual dependence; the growth of high- productivity areas does not destroy low-productivity areas, rather, low-productivity areas to a great extent survive economic growth.

In this environment, investments in the high- productivity areas do not necessarily induce sig- nificant changes in low-productivity areas. This has been the case in energy sector investments during the oil transition. Energy investments are highly capital intensive, and they have drained an increasing share of developing countries’ savings. There has been insufficient investment in other sectors of the economy to enable developing countries


to capture most of the downstream developmental effects of their energy investments.

Neither have the developmental effects been cap- tured upstream, as these developing countries have no capital goods industry to satisfy most of the equipment demand of their energy investments. To sum up, energy investments during the transition to oil have reinforced the existing nonhomogeneous and nonarticulated economies of the developing countries.

(b) The oil crisis

When the oil crisis started, developing countries had not yet finished their transition to oil; fuelwood was widely used even if oil products were also consumed in urban areas, particularly by the high-income social groups. Nevertheless, oil substitution and increased energy efficiency became major energy policies, as they were in industrial countries. That meant developing countries would face in the future a double and simultaneous energy transition:

(I) Transition to modern energy sources in low- productivity areas where fuelwood remains the major energy source. In this case, energy transition also requires a shift from the archaic mode of organizing social production to the industrial mode.

(2) Transition to non-oil energy sources in high- productivity areas, where oil products are the main energy source. In this case, energy transition requires a change in the technologies used by consumers, while the mode of organizing social production remains the industrial one.

To face this challenge, energy policy makers in developing countries started to use methods developed in industrial countries. They initially used the traditional approach to energy planning, but poor results turned their attention to the end- uses approach.

An intensive effort has been made since then to adapt the end-uses approach to the specific conditions of developing countries (see Energy and Development, 1984). Accounting methods have been improved to add traditional fuels to the energy balance; relatively intensive effort has been dedicated to data collection on traditional fuels; and a large number of case studies have been carried out in order to understand the conditions of traditional fuel use and substitution.

Nowadays, we can better understand the role of traditional fuels in the energy systems of developing countries. Consequently, it is possible to forecast energy demand more satisfactorily. This may be enough to plan energy sector growth, but

other tools are still needed for the development planning of energy systems.

Energy plants mainly benefit high-productivity areas, polarizing industrial growth and urbanization, while the low-productivity areas, which provide work for the majority of the population, remain in the same underdeveloped situation. AS a result of this process, the growth of the energy sector has merely reproduced the old dichotomy that characterizes developing countries, but on a new basis.

Developing countries need another approach to energy planning. This approach should look at both sides, supply and demand, within the framework of economic development theory. Energy supply and demand growth should promote structural changes and induce technological developments which will substantially increase productivity in low-productivity areas. Development of the energy system should be particularly linked with the use of natural resources which are as yet idle. The energy system cannot by itself solve all the problems of economic development; nevertheless, it has a central role in the economic development process.

Energy projects are highly capital intensive and have a long construction lead time; because of these characteristics, energy investments introduce large disequilibria in developing countries. These disequilibria remain for many years after an energy project is decided, and they can be a source of economic development or the reverse. When these disequilibria produce growth in high-productiviy areas, but low-productivity areas do not change, the dichotomy between these areas is perpetuated and there is no effective economic development. However, energy investment can generate structural changes that will improve productivity in low-productivity areas while producing continuous growth in high-productivity areas. To arrive at this solution, energy projects must provide economic conditions which will induce more extensive use of modern energy sources in low- productivity areas. We must emphasize that there is no conflict between providing incentives to energy use in low-productivity areas and the economic soundness of energy projects. Energy investments, particularly when exploiting natural resources, generate economic rents that should be used for energy system development in developing countries.

4. ENERGY PLANNING FOR POLICYMAKING IN DEVELOPING

COUNTRIES

In both industrial and developing countries, energy planning is a continuous process that aims


to render energy policy makers better informed for decision making. However, the energy systems of developing countries have some specific features which profoundly alter the aim and nature of the energy planning process.

(a) One of the main characteristics of developing countries is their lack of capacity to provide the population with basic needs, including energy. The purpose of economic development is to overcome this primary problem, and so there is no place for a simple supply-e.uisting demand analysis in developing countries. Energy planning must provide mechanisms that will transform the energy requirements of low productivity areas into effec- title energy demand.

(b) Developing countries have very het- erogeneous societies, differing from industrial countries, where there is a strong homogeneity in technologies and way of life. Inequalities in developing countries are quite marked, particularly as far as income is concerned, and it is hard to identify homogeneous groups of consumers with which to link specific patterns of energy consumption.

(c) Energy systems in developing countries are still under construction (in some cases, they are embryonic); they are growing in a developing society. The macroeffects of energy projects in developing countries are large and difficult to assess in a cost-benefit analysis. Very often, an energy project in a developing country should be analyzed much more in the context of its macro- economic rather than its microeconomic effects. This is normally the case of hydropower stations with capacity far beyond local demand, or of a refinery with an output not adjusted to the local market. Such projects affect many components of the local economic and social system, necessitating a very careful analysis.

(d) The state has a very important place in the economy of developing countries, particularly in the energy system. It has assumed, historically, the role of a major force for structural change, creating the infrastructure that makes it possible to move toward the industrial mode of organizing social production.

These specific features of the energy systems in developing countries have some methodological consequences. First, there will be no equilibrium between the modern energy requirements of society and the available supply in the planning period. This means the energy system is unable to offer the same level of satisfaction to all energy actors and simultaneously guarantee that the long-term development objectives of society will be achieved. Therefore, a negotiation stage between energy actors must be introduced in the energy planning process. This is necessary in order to render their demands and supplies adequate to the long-term

development objectives of society, since it is not possible to achieve an equilibrium. In other words, long-term modern energy supplies and requirements to be provided will emerge as a result of negotiation between consumers and suppliers, with the government acting as mediator. Mechanisms other than pricing (taxation, subsidies, distribution networks, quotas, equipment standards, etc.), can be used to match energy supply and demand in the short term. The gap between requirements for modern energy sources and supply will be progressively reduced by successive rounds of negotiation.

Secondly, heterogeneity and inequalities greatly increase the number of conflicts of interest, making them much more difficult and complex to resolve. Methodologically, complexity cannot be overcome merely by an increasing disaggregation of the energy system. Obviously, the energy planning process cannot replace the market in solving all conflicts of interest existing in society. However, when there are major conflicts in the energy system that are constraining economic development, the energy planning process must assess them and produce effective energy policies that will help remove these constraints.

Third, the energy planning process must provide energy actors with a framework of dialogue that will give a rational basis for the solution of their conflicts of interest. Whenever necessary, the state should act as a mediator who, in the general interest,4 will decide on policies that will produce a long-term energy system which is both feasible and desired by society.

(a) Energy diagnosis in developing countries

Energy planning, like any planning process, uses a large set of data to support decision making. Obviously, data collection and processing are important steps in the energy planning process. However, the value of these activities is quite often overestimated by energy planners.

In certain cases, an enormous amount of economic, social and energy data is collected to provide a detailed description of all aspects of the energy system. There is no framework within which the extensive body of data collected will be analyzed, and so most of the data become superfluous. In other cases, data collection is oriented to feed a particular model developed elsewhere, with no ref- erence to the specific economic, social and energy situation of the country under analysis. The model embodies an a priori interpretation of the functioning and development of energy systems, and it decides which data are relevant for the analysis of the local energy system.


Clearly, both situations should be avoided: the first, because it entails major expenditure of the scarce human and financial resources of developing countries in an unnecessary activity; the second, because the information it produces is, in the end, irrelevant for decision making. These kinds of problems can be overcome if the additional stage of energy diagnosis is introduced in the planning process of developing countries. The objective of energy diagnosis is to give policy makers a better understanding of the actual functioning and recent development of their energy systems.

The energy balance offers a good framework for a first overview of the general energy situation. However, in order to produce energy policies it is necessary to go further in the analysis, discovering the relationship between the energy behavior of society and its technical, economic, social and environmental behaviors. An analytical framework is needed in order to identify these relationships and, in the case of developing countries, this framework must shed light on developmental constraints faced by these countries from an energy perspective.

In order to do this, it is necessary first to dis- aggregate the existing energy system, identifying its components and actors (Girod, forthcoming). This disaggregation must ‘be done within the framework of economic development theory, but must extensively use the experience and knowledge of local decision makers to select relevant issues to be addressed. Concepts largely used to analyze the energy sector (like energy use, energy need, energy “module,” energyfiliPre, etc.), should be connected with other concepts that come out of development theory (like duality, dependency, disarticulation, etc.). Patterns of energy demand should be linked with equipment used by consumers and ways of organizing social production, in order to reveal the links between the energy sector and the economic and social problems faced by developing countries, such as income inequality, over-urbanization, and technology gaps.

Particular attention should be paid to the transition to modern energy sources from traditional ones. In this perspective, energy supply will be analyzed all the way along each energyjXre both for modern and traditional energy sources. This will reveal the strategies used by energy industries to develop their markets, as well as the macroeffects of energy investments. Pricing policies will be analyzed and the strategy used by the energy industry to divide costs between energy products identified.

Policy tools used by government in the past (such as taxation, subsidies, technology, and edu- cation) should also be analyzed, but their results

must be evaluated using criteria of economic development. The effectiveness of these policies will then be measured by their ability to stimulate economic development while developing the energy system. The goals which energy policy must help to achieve include elimination of technological gaps, reduction in income inequalities, and reduction in the rate of urbanization. The effectiveness of energy pricing policy should be analyzed within a larger framework, in which its effects on income distribution, urbanization and informal sectors will be taken into account.

Analyzing these elements will give a better understanding of the past functioning and development of the energy system. However, in order to assess future energy policies, it will be necessary to reassemble the pieces of the energy system.

(b) The decision nodes

The objective of this second step is to articulate the many components of the energy system identified in the first step in order to produce a synthesis which will allow one to assess future developments of this system. This aggregation of the energy system is necessary for both practical and theoretical reasons.

From the practical point of view, it is not possible to produce separate policies for each component of the energy system. There are strong interactions among these components; any policy oriented to one component will necessarily affect many others. In fact, the major problem faced by decision makers is exactly the assessment of these lateral effects.

From the theoretical point of view, it is not possible to isolate energy supply from demand and the many economic and social constraints existing in society. In the first step, a disaggregation was made for analytical purposes; now it is imperative to link the many components of the energy system to gain an understanding of the dynamics of the whole. The knowledge of each component accumulated in the first step should be very helpful in this phase.

Even if aggregation is a necessary and important step of energy diagnosis, we must accept that energy systems of developing countries are very complex. This means that it is not technically possible to assemble the many pieces of this real puzzle and reproduce reality. What seems possible is to produce a more general representation of the overall system, using aggregated data, and to complete this overview with a detailed representation of the interactions between components of the energy system at some particular points. For these points, it is possible to search for partial coherence, giving

536 WORLD DEVELOP&LEST

a relatively complete image of interactions between energy actors.

The number of points to be represented in detail is of necessity limited; there are no planning resources to carry out such a task for a large number. The main criterion for choosing these particular points is, from our point of view, their rel- evance for future economic development of the region. This means that only those parts of the energy system which have strong links with the main structural problems faced by the country will have detailed representation, all other parts will be represented in the global framework.s This dual representation makes possible both an overview of the general effects of energy policies, and an assessment of the same policies at focal points in the energy system which are strongly linked with the future economic development of the country.

We call these focal points of the energy system decision nodes. Decisiotz because data related to these points should be assembled in order to inform the decision making process, and node because these are points where actors with different interests establish complex relationships of conflict and coalition among themselves. Decision nodes are central points of the energy system which have stra- tegic roles to play in its development because of their links with the economic development strategy.

Fuels used for cooking in Dakar are, for instance, an important decision node in Senegal. They interact with the deforestation process, which has a major impact on agricultural productivity and desertification. These are important constraints on economic development faced by this country.

Similarly, the development of natural gas is an important decision node in the case of Rio de Janeiro state in Brazil. There, large reserves of natural gas have been discovered offshore; an increase in oil production will also increase natural gas production. This can be an historic oppor- tunity to induce localization of new industries in a region where urbanization has achieved its maximum and there is a huge informal sector in urban areas with very low productivity.

Electricity peak demand is a decision node in Thailand. There is a strong diffusion process of home appliances using electricity for cooking and air conditioning that has a very definite impact on peak load generating capacity. Limited financial resources are increasingly allocated to the electricity sector, while other sectors of the economy are short of financial resources to face their needs.

These are examples of particular points of the energy systems of these countries which are strongly related to the structural development constraints they face, and which necessitate specific energy policies.

As far as structuring the general framework is concerned. it is possible to rely on the existing, traditional tools (like energy balance. input-output matrix. electricity and oil supply models, end-use demand models, etc.). We must, nevertheless. remark that there is no place for universal models in developing countries: each country has its own specific development challenges and the general framework must be structured to address these.

The framework to be used to structure the decision node must, meanwhile, be clarified. Figure I is an attempt to do that. We must. first of all, remark that the decision node framework does not intend to clear the market. It accepts that it is impossible to supply all the modern energy requirements of a developing country. and so conflicts of interest must be solved by involving energy actors (both demand and supply side) in a negotiation process in which the state will act as a mediator.

Energy suppliers will present their long-term supply (S) and pricing (P) objectives nhile consumers will present their long-term energy requirements (D) and ability to pay (n). The state will present to them the constraints to economic development which the country is facing in that particular decision node, and the policy tools it intends to use to overcome these constraints and render future supply adequate to energy requirements. Negotiation between suppliers and consumers can change these policies in order to achieve the best results from an economic development point of view.

It is certainly not easy to structure operational decision nodes in developing countries, particularly because quite often there is not enough social organization on the consumers’ side to tackle demand. Whenever this is the case. energy planners must assume that it is part of the process to build up institutions able to represent consumers in the negotiation process.

Policies adopted in each decision node will be checked against each other. using the general framework as a mechanism to test their effects on the overall energy system. In this way it will be possible to guarantee a minimum of global coherence in the specific policies decided for each one of the decision nodes.

5. CONCLUSIONS

Many developing countries are still using energy planning methods developed to face the challenges of industrial countries. Quite often, models developed for the economic and social conditions existing in industrial countries are used in developing countries to forecast energy demand and analyze its social and economic benefits. Some


SuppCier I

Supplier 2

Supplier n

1 , ,:I Consumer group I

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Consumer group 2

6 r2

/ \

S” /

P,

b

\ OnI r,

Consumer group m

Economic Development

Constraints

I. Unemployment

2. Low productivity areos

3. TechnoCogical gaps

4. Income inequolities

State

Energy Policy Tools

I. Tax

2. Tariffs

3. Royalties

4. Standards

5. Ouotas

Figure I. The decision node frnmework.

extreme examples are the use of “translog” models in countries that have no reliable information even for an energy balance.

We hope this paper makes clear that these methods are not able to solve problems faced by developing countries, not because they are not good, but simply because the aim and the nature of the energy planning process in developing countries are different.

We are not saying that the energy planning experience of industrial countries is not useful for developing countries. Quite the opposite, this experience can be extremely helpful, particularly as far as modern sectors of the economy are concerned. However, it remains true that only a methodology able to tackle both the low- and high-

productivity areas of the economy can correctly assess the energy system of developing countries.

The introduction of energy diagnosis as a step in the energy planning process of developing countries is necessary to produce that methodology. Nevertheless, disaggregation and aggregation of developing countries’ energy systems must be defined to reveal the links between the energy sector and constraints to economic development faced by the country. Additionally, aggregation must produce a double representation of the energy system: a global representation, which can rely on existing methods and produce an overview of the energy system; and a particular one, which should use the decision node as the basic notion to coor- dinate energy actors.

NOTES

I. Obviously, the energy industries made their own 2. More recently, industrialization oriented toward forecasts more acutely on a market-by-market basis. It exports has been adopted by some developing countries, remains true, however, that energy policy makers did not particularly in Asia. analyze these forecasts closely.


3. Perroux denominates zones de capitalisme implante, the high-productivity areas and zones d'economie autho- chone, the low-productivity areas.

4. We know that the state is not a neutral actor; very often, and particularly in developing countries, the state is ruled by specific social groups. However, the state is the only institution in modem societies that can look to the long-term global interests of society.

5. We know that developing countries face many problems simultaneously and it is not an easy task to select those which are most important. Nevertheless, at least a limited, hierarchical list of these problems must be made in each concrete situation. If some problems cannot be addressed in a first energy planning effort, it will be possible to address them in a later one.

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Documents

Energy diagnosis: Toward a policy-oriented approach for energy planning in developing countries