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Domestic energy in developing countries

Availability/Use of domestic energy over the last 70 years in developing countries

Introduction

Energy Trends

Energy Trends

  • Current Energy demand increase 5% p.a
  • Solid Fuels
  • Demand for more convenient fuel sources.
  • Stable demand (1970 - 1995)
  • Fuel choice (1990 - 2015)
  • Access to electricity (1990 - 2015)

Solid Fuels

  • Wood, animal dung & crop waste
  • 3 billion cook with solid fuels
  • Widely used in rural areas
  • Time consuming to collect
  • Higher quantity of biomass sources in Africa
  • Health implications

Solid Fuels

Demand for more convenient fuel sources

  • Increases with development

(higher disposable incomes / lifestyle changes)

1) Solid fuels

2) Petroleum products

3) Natural gas & electricity

1994

1994

1970 - 1995

  • 1970-1995 Energy demand stable in non-OCED countries
  • Declined in North America

- Increased efficiency

- saturation of electrical appliances

  • Higher consumption /availability of biomass in Africa

Per capita housenhold energy consumption

Per capita housenhold energy consumption

Fuel Choice

Influencers

  • Fuel cost
  • Household expenditure
  • Education
  • Urbanisation
  • Electrification status
  • Water source

Multiple fuel sources for cooking

Cooking fuel use

Cooking fuel use

Access to Electricity

Reduction in people without access

1.54 to 1.07 billion

Fuel switching is unlikely to occur without electrification

Access to Electricity

1990-2015

1990-2015

Energy Demand

Energy demand

Urbanization

For the past 50 years, developing countries has experienced movement of population and consequently, rapid urbanization (Kojima, 1996).

Urbanization

  • Promotes economic activity growth
  • High concentration of energy consumption
  • Pressures the energy supply system

Energy consumption x Urbanization

Energy consumption x Urbanization

  • Increase in energy demand
  • Dependency in foreign energy supply
  • Impact in the economic growth and energy efficiency

Benefits of energy

  • Improve living standards
  • Healthcare
  • Education

Differences in developing : electricity access

Benefits of energy

Depends of economic, social, political and cultural issues

China

  • 45% to 80% over 25 years

Chad

  • 8% of the population in 2014

Infrastructure

Improvements in this sector are commom responses to the rapid urbanization.

Infrastructure

  • Investments in domestic production
  • Importing energy
  • Transition of technology

Investments of $125 billion annually would be needed in developing countries to provide adequate supplies of electricity.

The World Bank

Financial constraints

Financial constraints

Interventions and Issues

Observed Trend

Government Interventions

  • Taxes and Revenue
  • Increase in taxes to reduce spending cuts
  • Decrease in taxes -->Encourage saving and investment from nation's workforce
  • Bank Loans
  • Open to forms of corruption, such as capital flight, opposition bribery, fund warfare
  • Used to purchase oil -->oil crisis
  • Banks could not manage; spiked interest rates

Foreign Debt

  • Oil Shock caused high levels of debt via loans.
  • Some capital lost in capital flight
  • Lower GDP
  • Affects exchange rates
  • IMF & WB stepped intervention
  • Long term Issue

External Debt Post Oil Shock

Foreign Investment

  • Financial Direct Investment (FDI)
  • Also referred to as the direct method
  • Horizontal or vertical.
  • Not without it's drawbacks
  • Regulated by a body (UN, OECD etc)
  • Financial Portfolio Investment (FPI)
  • Less risk for the investor as security measures have been put into place.

Government interventions

Government intervention

-Inefficienct State Intervention

- Private Sector Investment

Problems with State Intervention

Problems with State Intervention

  • Poor Productivity
  • Inadequate management
  • Lose experienced staff due to uncompetitive employment conditions and poor job satisfaction
  • Inefficient operation and maintenance
  • Deteriorating equipment

Private Sector Investment

  • Investment in the Private Sector is crucial to developing the energy sector
  • Government subsidies are not sufficient
  • Challenge to developing countries: Difficult to make outward investment an attractive option
  • Private Participation in Infrastructure (PPI)

Benefits of PPI

Benefits of PPI

  • Transfers: Production technology, skills, innovation and organisation and managerial practices

  • Increases efficiency of the sector

  • Creates competition

  • However - States need to establish the right business regulatory and legal environment to sustain investor interest

Difficulties in encouraging investment

Difficulties in encouraging investment

PPI in Developing Countries

PPI in Developing Countries

The Global Economy

The Global

Economy

  • Challenge: The Global Economy is out of Government control
  • Why Developing countries are more vulnerable
  • How the changing of oil prices affects them

Oil Prices Fluctuation

  • Oil Vulnerability Indicators:

- Level of net oil import

- The oil share in energy mix

- Energy efficiency of production

Oil Prices Fluctuation

Oil Prices over 70 Years

Oil Prices over 70 Years

Future expectations

Many countries signed the Sustainable Development Goals.

From 2015 to 2030

Future expectations

Conclusion

  • Rapid urbanisation
  • Increased demand for energy
  • Factors that influence energy transitions
  • Foreign investment tends to be the most secure and viable
  • Developing countries are unattractive to private investment
  • Oil Price vulnerability
  • Socio-economic and political factors are related and interlinked and they impact on energy availability and use

Conclusion

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