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Assistance to countries facing power crunches
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Minding the gap: World Bank's assistance to power shortage mitigation in the developing
world
G. Heffnera,*, L. Maurer a,, A. Sarkar a,, X. Wang a,
a,The World Bank, 1818 H Street, NW
Washington DC 20433
Abstract
This paper describes the World Bank’s technical assistance and lending efforts in
support of developing countries facing power shortages. The paper reviews the World
Bank’s experience in helping governments to mitigate power shortages in Africa, South
Asia, East Asia, and Latin America regions. The paper stresses the need to evaluate and
appreciate the scope of and solution to each power “crunch” on an individual basis, and
describes the process used in diagnosing a shortage situation and prescribing mitigation
strategies. Several brief case studies are presented, including Botswana, Brazil, Uganda,
and South Africa. The political and customer-centric dimensions of power shortage
mitigation are briefly described, with suggestions for minimizing the socio-economic
impacts of power shortages on the urban and rural poor. The paper concludes that a
supply-demand portfolio approach works best, and within the portfolio a mix of market-
based rationing, emergency mobilization of customer-owned generation, interruptible
rates, load control, and energy efficient lighting should be sought. Although the best
formulation will vary according to market structure, demand composition, and nature of
the crisis, World Bank practitioners have found one program that works almost
everywhere to produce fast results – mass market Compact Fluorescent Lamp (CFL)
replacement programs.
Page 1
* Corresponding author. Tel +1 XXXX; fax: +1 301 330 0141.
Email address: [email protected] (G. Heffner)
1. Introduction: power shortages and the World Bank
Power shortages are a fact of everyday life in many parts of the world. Even
developed countries are subject to power shortages; however, these are usually short-
lived (weeks or months) affairs. In developing countries, especially in regions like Africa,
it can take several years for new generating capacity to be constructed or for the
contributing factors (e.g., drought, civil strife, financing) of the shortage to be resolved
[1].
The past ten years have seen an increased frequency of power shortages in both
the developing and the developed world, as evidenced by Table 1. Power shortages
seldom have a single or the same cause. However, a typical pattern begins with
underinvestment or very rapid demand growth that degrades reserve margins below
acceptable reliability levels, with a crisis then brought on by unusual combinations of
weather, fuel supply, or plant availability, or all three.
Efficient, affordable and clean energy supply is a key ingredient in poverty
reduction and economic growth. The World Bank supports developing countries' efforts
to provide clean and reliable electricity services to households and businesses through
financing instruments, policy advice, partnerships, and knowledge transfer. In response to
demand from developing countries, World Bank financing for energy infrastructure
development reached US$ 7 billion in Fiscal Year (FY) 2008. Lending and technical
assistance is provided for all aspects of energy, including energy access (e.g., rural
Page 2
electrification), renewable energy and energy efficiency, and energy generation,
transmission and distribution.
As part of its ongoing engagement the World Bank provides technical assistance
and advice on sustainable development and infrastructure investment, including the
electric power sector. The power sector in many Bank client countries is under severe
stress due to generation supply deficits, exacerbated by high or volatile fuel prices. The
electricity supply–demand gap in many developing countries is widening, due to growing
electricity demand caused by urbanization, industrialization, and rural electrification
together with generation and transmission capacity deficits caused by insufficient
investment, climate change effects, and budget constraints. The power sector in many
countries is also a substantial contributor to both global (greenhouse gas) and local
emissions. In its dialogue with client countries, the World Bank seeks to transfer best
practice from around the world pertinent to these issues. The World Bank has developed
a bundle of knowledge and best practice applicable to diagnosing and resolving electric
power shortages, some of which is described in this paper.
2. Diagnosing power shortages
Considerable practical experience has been recently gained on how to overcome power
shortages. Meier [2], Maurer [3] and others have studied the causes of power shortages
and suggested solutions. Power shortages can be divided according to whether they are
capacity-related or energy-related and whether the shortage outlook is acute or chronic.
Of the notable electricity shortages listed in Table 1, the most serious have been chronic
shortages of energy or capacity or both. In the case of South Africa, for example, failure
Page 3
to invest in response to rapid demand growth led to a lack of intermediate and peaking
thermal resources – a shortfall of both energy and capacity. In Brazil in 2001, the
convergence of a stalled deregulation effort leading to underinvestment in private
generation, and a lengthy drought caused a chronic energy shortfall which was only
abated with the return of normal seasonal rainfall and the commissioning of new thermal
power generation.
These distinctions, shown in Table 2, are important because each shortage is
likely to require a different mix of remedies. In the case of long-lived energy shortages
such as Brazil and South Africa, successful remedies must address both the supply and
demand side of the problem with multiple and complementary solutions.
3. Portfolio approach to power shortage mitigation
The first step in power shortage management is establishing a detailed
understanding of the problem. A logical starting point are existing power development
plans at the level of the distribution provider or the regional or national utility
complemented with demand disaggregation based on the best customer class and end-use
load research data available. Understanding the dimensions of the energy and capacity
shortfall allows the load-serving entity to identify, evaluate and compare alternative
short- and medium-term remedies such as energy efficiency, power factor correction, loss
reduction, time-of-use (TOU) and interruptible rates, end-use load control, mobilization
of captive and emergency power supplies, and capacity and energy rationing. The
planning process should identify the size and duration of the shortfalls to be closed in the
short-term with emergency measures such as power rationing, and include other remedies
Page 4
which help customers cope with rationing or reduce the overall level of demand by other
means (e.g., loss reduction). Since some remedies are more long-lived than others, the
planning process should consider implementation time and sustainability of stop-gap
measures such as industrial shut-downs. This basic approach is consistent with that
suggested by the International Energy Agency [2].
3.1 Need for complementary, comprehensive solutions
A chronic energy or capacity and energy shortfall is unlikely to be resolved with a
single measure. Furthermore, there are important complementarities between remedies,
especially on the demand side. One complementary solution proven in Brazil, California
and South Africa is the combination of utility- and state-sponsored energy efficiency
programs together with rationing or rebate programs. In this approach customers are
offered incentives (e.g., co-financing, tax breaks, financial intermediation) to encourage
purchase of energy-saving appliances or equipment which in turn help the customers
meet their consumption reduction quotas. Brazil is often cited as a best practice example,
and deservedly so. A concerted effort combined market-based rationing with scaled-up
investment in both energy efficiency and new supply, with the entire package bound
together with an extensive public awareness program [3]. Similarly in California the so-
called “20/20 rebate” program was effective in encouraging customers to reduce their
usage to get a 20 percent reduction in their rate. The California utilities aggressively
scaled-up initiatives such as bulk procurement and distribution of CFLs and rebates on
efficient appliances in order to encourage the investments in energy efficiency that made
the 20 percent reduction targets achievable [4].
Page 5
3.2 The importance of sensible rationing
Rationing in the form of load shedding is the most ubiquitous short-term
“remedy” for power shortages. Although easiest to implement and most frequently used,
load shedding is nonetheless the least desirable form of rationing. This is because load
shedding is indiscriminate and usually implemented without warning, thus causing large
and unpredictable economic losses that also have a debilitating effect on general
customer morale. Prolonged load shedding tends to drive profitable businesses to invest
in back-up generation or auto-production, thus reducing the commercial viability of the
utility. Over the long run this creates a less conducive environment for new generation
and transmission investments in the power sector overall.
In some cases utilities have tried to mitigate the impacts of load shedding by
differentiating between customers or by providing a schedule of outages in advance.
Most of these partial mitigation measures suffer from technical problems. It is difficult to
separate out “essential” from “non-essential” loads on the same circuit, as networks are
inter-meshed, and providing timetables for load shedding can increase crime rates. Based
on experience from around the world, it makes sense to treat load shedding as a rationing
tool of last, rather than first, resort [3].
A viable power shortage management scheme must not only limit the impacts of
rationing but also distribute these impacts based on economic and equity considerations.
Rationing strategies can be evaluated along five dimensions – economic efficiency,
equity considerations, sustainability, political/customer reaction, and implementation
issues. Some rationing strategies are clearly superior to others, as suggested by Table 3.
Page 6
Certain rationing elements can be effectively combined, such as incentive
schemes and consumption quotas. For example, the Brazilian rationing scheme included:
(a) consumption quotas that varied by rate class and assigned to individual customers
based on their normal billing cycle; (b) a bonus for additional reductions; (c) social safety
nets for rural and poor households; (d) significant penalties for non-compliance,
beginning with financial (based on system short run marginal costs) and extending to
service cuts; (e) opportunities for bilateral quota “trading” between large users; (f) a
large-scale promotional and awareness campaign; and (g) co-financing of energy
efficiency and DSM solutions [5].
3.3 Harnessing customer preferences via self-rationing and market-based
rationing
Rationing schemes based on customer-specific usage empower the customer to
choose between which types of electricity consumption have the most value. In the case
of Brazil, discussed below, households engaged in an array of behavioral and technical
changes to achieve an average 20 percent reduction against the previous year’s
consumption (see Table 4). A significant number of households purchased more-efficient
appliances as part of their self-rationing strategy, thus “locking in” reductions for the
lifetime of the appliance.
In the case of larger customers a system of secondary markets and bilateral
trading of quota entitlements can provide customers with the opportunity to choose an
optimal combination of price and quantity. Market-based rationing was included as part
of the Brazilian scheme, via a formal secondary market in quota entitlements for larger
Page 7
customers (over 2.5 MW) and provisions for smaller customers (below 2.5 MW) to
engage in bilateral trading of quota entitlements by registering the transaction with their
utility company. The importance of including opportunities for large customers to
engage in consumption entitlement trading was underscored by a study carried out by the
Ministry of Finance which concluded that creating opportunities for marginal transfers of
energy between customers and sectors with different consumption valuations could
reduce the impact on GDP of rationing by as much as two-thirds, from 2.4 percent down
to 0.8 percent [6].
In the Brazilian case most of the marginal transfers took place bilaterally,
although a formal quota entitlement market was created. A common practice was for
utilities to establish an internet site where customers could post offers and realize
bilateral quota entitlement trades which would then be confirmed and monitored through
the utility billing and accounting system. The inclusion of secondary markets and
provisions for quota exchanges can provide an important corrective mechanism to the
inherent shortfalls of administratively-allocated rationing quotas [5].
3.4 Price rationing through TOU rates
In the case of capacity shortfalls rationing can be also accomplished through price
signals that vary by time of day. Such differentiated price signals allow customers the
opportunity to decide when and how much energy they want to consume according to its
price. A common type of price rationing is TOU pricing, which can be an effective tool in
coping with power capacity shortages. TOU pricing can be combined with inverted block
tariffs, in which customers are charged a lower price if their consumption stays under a
certain threshold for a given interval (week or month). TOU pricing has been used to
Page 8
good effect in a number of countries experiencing capacity shortages, including Thailand,
China, South Korea, and Taiwan. Under the right conditions and with the right rate
design a TOU tariff can shift as much as 10 percent of on-peak demand into other hours
[7].
Care must be taken in the design of the tariff to avoid creating another peak
demand or sending price signals that cause customers to invest in self-generation rather
than redistributing their consumption. The World Bank recently sponsored a marginal
costing and TOU rate design and impact study for the Egyptian Electricity Holding
Company (EEHC). EEHC’s 2008 peak demand was 20,000 MW but is forecast to
increase to 25,000 MW by 2011and more than double within ten years. This peak
demand growth is accompanied by a deteriorating load factor, creating a shortage of
peaking capacity during the very hot summer months. The TOU pricing study concluded
that mandatory TOU pricing for large customers using a 4-4-4 rate design (on-peak
season of four months, four hour on-peak pricing period each work day, and a 4:1 ratio of
on- to off-peak prices) could reduce large customer peak demand without causing undue
customer impacts or drastic changes in utility revenues or customers costs. The study
suggested placing some 3,000 large industrial customers on TOU rates could reduce peak
demand by 2-3% while reducing the rate of peak demand growth. Extending TOU rates
to all customers could potentially double these impacts [8].
4. Bulk procurement and distribution of CFLs: a “capacity in a hurry” silver
bullet?
No other demand-side program has proved as effective as bulk Compact
Fluorescent Lamps (CFL) programs in helping developing economies remedy power
Page 9
shortages. Since the mid 1990s The World Bank has worked with utilities and energy
ministries in over a dozen countries and has provided advice, assistance and grants and
lending to support investment in CFLs as a “stop-gap” power shortage mitigation
strategy.
In country after country, the World Bank experience has been that CFLs are a
unique remedy in either a portfolio or stand-alone context. Large-scale deployment of
CFLs for households and small businesses can be quickly implemented to fill power
capacity and energy gaps. Replacing incandescent bulbs with CFLs yields an additional
benefit in the form of lower customer bills for the very poor, thus providing a form of
social “safety net”. CFLs are also significantly less expensive than an equivalent source
of generation. The cost of using CFLs to avoid electricity production can be as little
1/20th of cost of adding emergency diesel generation capacity. Furthermore, deploying
CFLs in place of incandescent lamps reduces greenhouse gases (GHG) emission, making
these programs eligible for carbon finance. Finally, in many developing economies
household lighting is coincident with utility system peaks. For all these reasons it has
been easy to convince utility and government power planners and managers that CFL
programs are literally a “silver bullet” that can quickly relieve acute capacity shortages
while delivering a host of other benefits as well. Table 5 lists just a few of the dozens of
developing countries now implementing large-scale CFL programs with donor support
[9].
4.1 Mobilizing the household lighting capacity reduction potential
Lighting represents a $200 billion global market and is the most significant
electricity saving opportunity in the household and small service/commercial sectors. The
Page 10
energy savings potential is estimated at up to 60 percent for household lighting, including
CFLs and thin tube fluorescent lamps (TTFLs), and up to 40 percent for commercial
lighting [10]. However, realizing this potential – especially on an accelerated time
schedule needed for capacity reductions – requires coordinated supply sourcing,
distribution network creation, and aggressive marketing efforts. These coordinated efforts
must also be calculated to overcome the particular technical, market and institutional
barriers to lighting efficiency improvements in any given country.
Designing a large-scale CFL program begins with a Residential Consumer
Survey. This survey helps verify anecdotal estimates of market potential for CFLs and
provides the basis for calculating the costs and benefits of a large-scale program. The
upstream considerations of sourcing and procuring large quantities of CFLs are addressed
in designing the CFL procurement scheme.
Considerable technical and administrative capacity must be established within the
implementing agency and its technical partners (e.g., national standards setting
organizations and testing laboratories) and the technical and commercial terms of the
bulk Bidding Package must be set (e.g., schedule of requirements, delivery points, bid
evaluation criteria, technical specifications, penalties and remedies). A key issue with
some earlier CFL programs was CFL quality. Program implementation has been made
simpler and consumer satisfaction has been improved with the advent of standards and
specifications for hardware and vendors. The International Finance Corporation (IFC), a
unit of the World Bank Group, sponsored creation of the Efficient Lighting Initiative
(ELI) Product Quality Certification Institute, which developed specifications which now
Page 11
largely guide the technical terms of bulk procurement and the logistics of quality
assurance [11].
To be successful a bulk CFL program must deliver the CFLs into the hands of
consumers and, in the case of replacement programs, making sure that the incandescent
bulbs in current use are taken out of circulation. New marketing, distribution and delivery
channels need to be created, or existing ones modified to serve a new purpose. Consumer
awareness is crucial, both to create market demand, overcome any technical or consumer
preference barriers, and ensure the overall operation is sustainable. An understanding of
customer preferences gained in the Consumer Survey should enter into the design of the
delivery and distribution channels for the program. A variety of approaches can be taken
according to resources available, public and private sector capacity, pricing strategy,
existing utility programs for households and small businesses, and other factors [9].
Distribution can be through either utility or private channels, including non-profit
or government organizations (NGOs). Inefficient lamps are collected, destroyed and
recycled. Typically a dedicated DSM cell is created within the procuring entity, usually
the electric utility. The DSM cell is responsible for continued consumer awareness,
monitoring and impact evaluation, processing of Carbon Finance opportunities, and
ensuring the terms of the procurement (e.g., providing for testing) are met.
As in all large-scale programs project financing is critical. Programs supported by
the World Bank often include grant or lending support or, more recently, carbon
financing through the Clean Development Mechanism (CDM) or some other means [12].
The financing strategy affects the details of program design and product pricing and may
Page 12
affect the components that must be included in the implementation stage, especially the
need for measurement and verification (M&V).
4.2 Assembling best practice into a “tool kit”
Based on some of the projects listed in Table 5, a list of success factors for bulk
CFL procurement and distribution programs can be offered. The most important factor is
ensuring the quality of the CFL product and a good match between the specifications of
the CFL and the characteristics of the power network. For example, the power factor of a
CFL can be improved towards unity for a small per-unit cost. This may be necessary for
some networks already suffering from poor power factors, but unnecessary for others. In
some distribution schemes the cost of maintaining kiosks for replacement of CFLs after
their design life may be high. If this is the case then longer-lived CFLs (12,000 hours
instead of 6,000 hrs) can be specified at a higher per-unit cost but yielding an overall
lower program cost and improved sustainability. Properly specifying the CFL equipment
in terms of lifetime, voltage tolerance, lumens/watt, power factor, and harmonics is a key
task that requires specialized expertise. Other important factors include ensuring that
awareness and promotion programs are properly targeted to the market audience,
including safeguards that ensure the collection and destruction of old incandescent lamps,
creating a Monitoring and Evaluation component that is balanced and meets the needs of
any carbon financing element, and incorporating sustainability by creating long-term
markets and space for private sector participation.
The World Bank is currently developing a bulk CFL procurement “tool kit”. This
technical assistance product will consolidate best practice in program design and
implementation from several “market transformation in a hurry” projects focused on
Page 13
energy efficient household lighting. The planned CFL Tool Kit should reduce the amount
of specialized program design expertise and the amount of time needed to develop the
upstream and downstream components of a bulk CFL procurement and distribution
program. A particular focus of the tool kit will be choosing among different CFL product
attributes (e.g., lifetime, power factor, cost) in order to specify a product which is optimal
for a given power network and household market [13].
5. Case Studies
Four brief case studies are offered to illustrate the variety of power shortages
affecting different countries around the world.
5.1 Botswana
Botswana is a small southern Africa country, bordered by Namibia, South Africa,
and Zimbabwe. Botswana’s power “crunch” came about as a result of three factors
common to much of Southern Africa over the past decade – rapid growth in electricity
demand due to sustained economic development, rapid expansion of the mining sector
due to high commodity prices, and lagging investment in generation and transmission.
Facing an immediate supply shortage expected to worsen (to over 150% of
available supply) before new generation is available (see Figure 1), the Botswana Power
Company (BPC) has implemented the National Energy Efficiency Campaign (NEEC).
The campaign includes bulk procurement and distribution of CFLs, load control of
electric water heaters, awareness and promotional activities, and a power conservation
program for large users (See Table 6). As BPC’s generation capacity is primarily base-
load hydro and wholesale imports, the power “crunch” manifests as a peak capacity
shortage. Availability of imports for peaking needs have been constrained by the parallel
Page 14
power crunch in South Africa. Therefore, both load management strategies (load shifting,
load control) and energy efficiency strategies (household CFLs and industrial power
conservation) are effective.
BPC has focused NEEC efforts on outreach and awareness to electricity
customers and the general public. BPC utilizes radio and TV for mass markets and
special seminars and workshops for large customers to get across the basic message of
“Take action to use electricity more efficiently… in your homes and your place of
business… in every aspect of your life…save power for your country…save money for
your home and business.” [14].
5.2 Brazil
The well-documented [3] 2001 Brazilian supply crisis was the result of several
intersecting events and a healthy dose of bad planning. A power sector reform effort
undertaken in 1998 successfully privatized the distribution sector, but not generation. The
overall sector reform strategy called for the new investment flowing into the sector from
privatization to stimulate development of gas-fired power plants utilizing new sources of
gas to expand and diversity generation supply. While these plants were being built, the
ongoing power needs would be met by drawing down the stored hydro reserves.
This strategy was undone by delays in new generation construction, inability to
execute long-term contracts for gas, and development of a new grid code. As a result the
forecast short-term power supply became badly deficient. Despite dwindling hydropower
reserves, the Government of Brazil (GoB) did not take any firm action until a lack of
Page 15
rainfall in 2000 and 2001 made it clear that drastic reductions in demand would be
necessary to avoid extended blackouts.
In June 2001 the GoB created the Electric Energy Crisis Management Board,
known as the GCE. The full Board was chaired by then-President Cardoso, and the GCE
was granted special powers that superseded the regulator, including establishing special
tariffs, implementing compulsory rationing and blackouts, and bypassing normal bidding
procedures. The Board considered two distinct approaches – (a) a load shedding
approach, where each region would be disconnected on a rotating basis, according to a
pre-agreed schedule but priority loads (e.g. hospitals, police), spared; .and (b) a “Quota
System”, in which each customer was obligated to reduce their consumption relative to a
“baseline”, with financial penalties and disconnection for non-compliance. The GCE took
a gamble in opting for the Quota System (shown in Table 7), which was anticipated to be
administratively complex with uncertain impacts.
The Brazilian case demonstrated that a rationing scheme can complement other
DSM and energy efficiency market intervention strategies, especially customer awareness
building, promotions, and incentive schemes to influence customer behavior. The
decision to adopt a self-rationing system based on quotas rather than involuntary
rationing via rolling black-outs proved highly successful. The quota system yielded
sufficient reductions in usage to eliminate the need for load shedding or involuntary
black-outs.
The rather extraordinary results are shown in Table 2. The self-rationing scheme
for mass market customers and market-based entitlement trading scheme for large users
resulted in a 20 percent reduction for the 9 month period needed for the crisis to pass. A
Page 16
massive educational campaign resulted in permanent savings in terms of energy
efficiency investments, and the impact on GDP was minimized as businesses were able to
use the secondary quota entitlement market to set their own price-consumption
combination. The demand response to compulsory rationing was so successful that the
Government was obliged to pay out over $200 million in bonuses to residential, industrial
and commercial customers who met and exceeded their reduction quotas [3].
5.3 Uganda
The power shortage began in 2004 when a severe regional drought lowered the
level of Lake Victoria, reducing available hydropower generation and exacerbating an
existing power deficit. The result was massive load shedding for many months, hurting
the economy and disrupting normal activities. The Government took a decision to install
diesel-fueled thermal power plants on an emergency basis and after considerable delay
these units began operating. However, emergency generation comes at a cost. Despite
tariff increases which brought prices up to 18 cents/kWh, the Government still finances
up to pay US$50 million a year in operating costs to make electricity even somewhat
affordable to consumers.
Base-load hydropower capacity remains badly de-rated because of lowered water
levels. During 2008 only 145 of an installed hydropower capacity of 380 MW was
operating, with the balance supplied by expensive thermal power. This situation will
continue until construction a new 250 MW hydropower plant at Bujagali (partly financed
by the World Bank) begins operation in 2012. In the interim the Government has
Page 17
undertaken demand side measures to reduce the shortfall, including loss reduction and a
bulk CFL program.
Bulk CFL program design began with a consumer survey, which showed only 1/3
of households were already using efficient lighting fixtures (See Figure 3). Household
consumers were sensitized through awareness campaigns and provided with CFLs to
realize the 80 percent savings when CFLs replace incandescent bulbs. Some 800,000
CFLs were procured and distributed to domestic consumers of the state utility. The
consumers are given three CFLs free of charge in return for handing over three ordinary
bulbs. Bulk procurement brought the price down to $1.23 per CFL. These bulbs were
procured using the technical specifications developed through IFC’s ELI activity and
approved by the Uganda Bureau of Standards. Actual savings in 2007 was estimated at
30 MW by a third-party independent evaluator. The evaluator calculated the cost of the
CFL program as 1/10 of the equivalent cost of electricity generated with diesel-fueled
thermal power stations [15].
5.4 South Africa
South Africa’s power shortage slowly developed over a decade but emerged as a
national crisis only in early 2008. The parastatal generation and transmission company
Eskom was advised as early as 1998 that, absent a large new investment program, it
would be short of power in 2008. Despite these alerts the Government did not approve
any capacity additions, with the result steady erosion in reserve margins [1]. A power
crisis in January 2008 was brought on by a combination of supply-side problems
including coal availability, maintenance needs, and unplanned outages causing system
Page 18
reserve margins to fall from 10 percent to nil, effectively overnight. The size of the power
shortage is staggering - daily on-peak system loads (defined as 6 am to 10 pm) need to be
reduced by 3500 MW, or about 10 percent of peak demand, for a four year period until
new capacity can be built [16].
Despite a year of consultation, Eskom has still been unable to work out with
Government an economy-wide Power Rationing Scheme, or agree on a rapid scale-up of
demand side measures. Emergency power cuts of up to 20 percent applied to large
industrial customers at the onset of the crisis continues to be the only rationing scheme in
place. Industrial expansion has been slowed and mining and other companies have been
forced to factor self-generation into development of new projects. In the meantime
Eskom has proposed a number of major demand-side initiatives, including a program to
replace 1 million gas water geysers with solar water heaters, replacement of 35 million
incandescent bulbs with CFLs, installation of 5 million advanced, “smart-meters” capable
of partial demand rationing for suburban households, and scaling-up of other energy
efficiency efforts [16].
The global economic downturn has manifested in lower power demands,
lessening the pressure of Eskom’s existing generation resources and providing some
breathing room. Although Eskom now has a reserve generating margin of 8% (compared
with the 5.6% margin the utility had at the beginning of 2008), this remains well short of
the 15% reserve margin target. For this reason Eskom is leaving in place promotional
campaigns encouraging consumers to save 10% on electricity demand and is moving
forward with its demand-side investments, subject to approval by the National Energy
Regulator of South Africa (NERSA). These investments together with a rationing scheme
Page 19
for larger homes and businesses with penalties for excessive consumption, recently
agreed in principle with Government, will restore adequate reserve margins by reducing
peak demand by another 1,200 MW [17].
6. Lessons learned
Power shortages are not accidents in high growth, financially constrained power
systems. With rare exceptions, the scope and timing and causes of a power shortage are
known well in advance. Unfortunately, the necessary action or decision is often not taken
or politically possible until the effects of the shortage are felt. The lag times to
implement investment decisions in either new supplies or demand reductions extends the
duration of the power shortage and its negative impact on the economy and quality of
life. Therefore, an effective power shortage mitigation strategy should be phased so as to
minimize the impacts of the initial power crisis while developing longer-term solutions to
the causes of the shortage itself.
Shortages vary in nature and duration; therefore, no remedy fits all. However
some remedies – notably sensible rationing programs and bulk CFL replacement
programs - have proven adaptable to many types of power shortages. Other proven
remedies include energy conservation promotion and awareness programs and quickly-
implemented targeted solutions such as load control, TOU pricing, and mobilizing
customer-owned generation.
Unfortunately, the worst power shortage solution - load shedding - is the one most
commonly used. These forms of involuntary rationing are the worst way to deal with
electricity shortages and should be considered the last resort, when everything else has
been tried and found insufficient.
Page 20
Some other lessons learned in mitigating the effects of power shortages on the
economy and livelihoods of developing economies include:
1. Have good early warning signals before the situation gets out of control and “last
resorts” such as load shedding and blackouts become unavoidable (South Africa,
Uganda, Botswana).
2. Create enough lag time to develop superior solutions that take a little more time to
implement, such as market-based rationing (Brazil, South Africa).
3. Look for power shortage remedies that increase the inherent efficiency and flexibility
of the power sector, such as improved end-use efficiency (South Africa, Brazil).
4. Power shortages call for a centralized approach to planning and implementation and
the capacity to take tough political decisions. This can be helped by creating
temporary entities with special authority backed by highest-level government support
(Brazil).
5. Social safety nets should be retained as part of the power shortage remedies. The
targeting of poor households for CFL distribution is attractive because it reduces
household consumption and customer bills (Uganda, Botswana).
References
[1] The New York Times. Toiling in the Dark: Africa’s Power Crisis. New York:
New York Times, 2007. See also:
http://www.nytimes.com/2007/07/29/world/africa/29power.html?
ex=1343448000&en=3091a716b2e58631&ei=5124&partner=permalink&exprod=permal
ink
Page 21
[2] International Energy Agency. Saving Electricity in a Hurry: Dealing with
Temporary Shortfalls in Electricity Supplies. Paris: International Energy Agency, 2005.
See also: http://www.iea.org/Textbase/Papers/2008/cd_energy_efficiency_policy/7-
Energy%20utilities/7-savingElec.pdf
[3] The World Bank. Implementing Power Rationing in a Sensible Way: Lessons
Learned and International Best Practices. Washington, DC: World Bank, 2005. See also:
http://www.esmap.org/filez/pubs/372007120957_305-05+Final_to_website.pdf
[4] Lawrence Berkeley National Laboratory. California Customer Load Reductions
during the Electricity Crisis: Did they Help to Keep the Lights On? Berkeley, CA:
Lawrence Berkeley National Laboratory, 2002. See also:
http://eetd.lbl.gov/ea/EMS/reports/49733.pdf
[5] Maurer, L. Confronting Power Crises in a Sensible Way: Putting the Demand
Side into the Equation. From: AFTEG Staff Meeting, Annapolis, MD. Washington, DC:
World Bank, 2008.
[6] Power Systems Research Incorporated. Review of the Brazilian Power Sector. Rio
de Janiero: Power Systems Research Incorporated, 2002. See also:
ftp://zia.stanford.edu/pub/papers/vonderfehrwolak.pdf
[7] The World Bank. Primer on Demand-Side Management with an Emphasis on
Price-Responsive Programs. Washington, DC: World Bank, 2005. See also:
http://siteresources.worldbank.org/INTENERGY/Resources/PrimeronDemand-
SideManagement.pdf
Page 22
[8] Economic Consulting Associates, Ltd. Egypt: Development of a Load
Management Program and Design of Time of Use/Seasonal Pricing. London: Economic
Consulting Associates, Ltd., 2008. 41 Lonsdale Road, LONDON, NW6 6RA, UK.
[9] The World Bank. Large Scale CFL Deployment Programs: Mainstreaming
Carbon Finance and Clean Development Mechanism (CDM). Washington, DC: World
Bank, 2008.
See also: http://www.energyrating.gov.au/pubs/2008-phase-out-session4-sarkar.pdf
[10] Lawrence Berkeley National Laboratory. The $230-billion Global Lighting
Energy Bill. Berkeley, CA: Lawrence Berkeley National Laboratory, 2002. See also:
http://eetd.lbl.gov/EMills/PUBS/Global_Lighting_Energy.html
[11] International Finance Corporation. The ELI Story: Transforming Markets for
Efficient Lighting. Washington, DC: International Finance Corporation, 2005. See also:
http://www.ifc.org/ifcext/sustainability.nsf/AttachmentsByTitle/p_ELI/$FILE/
ELI_FINAL.PDF
[12] The World Bank. Scaling Up Demand–Side Energy Efficiency
Improvements through Programmatic CDM. Washington, DC: World Bank, 2007. See
also: http://www.esmap.org/filez/pubs/11212007125014_ScalingUpDemandSideEE.pdf
[13] The World Bank. Energy Efficiency Needs and Toolkit Assessment Project
Concept Note. Washington, DC: World Bank, 2006. See also:
http://www.esmap.org/filez/activity/228200731110_GlobalEENeedsandToolkit.pdf
[14] Botswana Power Corporation. The National Electricity Efficiency Campaign.
Presented at: GoB Energy Sector Communications workshop, Maharaj Conference
Centre, Gabarone, Botswana: Botswana Power Company, 2008.
Page 23
[15] UgandaPulse.com. Power Crisis Hits Harder in Uganda. Kampala, Uganda:
Ugandapulse.com, 2006. See also: http://www.ugpulse.com/articles/daily/Business.asp?
about=Power%20Crisis%20Hits%20Harder%20in%20Uganda&ID=526
[16] Power Magazine. Whistling in the Dark: Inside South Africa’s power crisis.
Houston: Power Magazine, 2008. See also:
http://www.powermag.com/business/Whistling-in-the-dark-Inside-South-Africas-power-
crisis_1488.html
[17] Miningmx. Eskom: One Year Later. Sandton, South Africa: Miningmx, 2009.
See also: http://www.miningmx.com/commentary/Eskom-one-year-later.htm
Page 24
Page 25
Figure 1: Botswana capacity outlook
Figure 2: Residential energy savings results during the 2001 power crisis in Brazil
Page 26
Ordianry bulbs67%
Energy savers22%
Tubes11%
c
Figure 3: Uganda household light fixture holdings, 2005
Page 27
Table 1: Notable power shortages since 2000 – developed and developing economies
Country/Region/State
Vintage Cause(s)
Tanzania, Kenya 2001 DroughtPacific Coast of USA 2000-01 Drought, heat, failed sector reformsNew Zealand 2001 Drought exacerbated by transmission failureBrazil 2001-02 Drought, sector reform, insufficient investmentDominican Republic 2002 - “Financial black-out”: no money to buy fuelTokyo 2003 Nuclear power plant safety shut-downsNorway 2003 Drought and unusually cold weatherEurope 2003 Drought, hot weather, plant shutdownsChina 2004-07 Very rapid demand growth, deteriorating load
factors, insufficient investmentBangladesh 2005- Demand growth & lack of investmentTanzania 2006 Drought, depleted reservoirs, demand growthUganda 2006- Drought, insufficient investment, demand growthSouth Africa 2007 Demand growth & lack of investment +coal
shortagesVietnam 2007 Very rapid demand growthRwanda 2006- Insufficient investment, demand growthGhana 2006- Insufficient investment, demand growthPakistan 2007 Rapid demand growth & lack of investmentEthiopia 2008- Delay in commissioning of Tekeze Hydro Plant,
drought and demand growthSources: IEA, World Bank
Page 28
Table 2: Diagnosing power shortagesType of Shortfal
l
Acute Long-lasting
Energy Scandinavian drought (2002)
East African drought (2006)
South Africa’s power crunch (2006-?)
Brazilian Power Crisis (2001-2002)
Capacity Tepco’s nuclear plant shut-downs (2003-4)
European heat wave & drought (2004)
California Power Crisis (2000-2001)
Rapid peak demand growth in China and Vietnam
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Table 3: Evaluating alternative rationing strategiesRationing Strategies
Advantages Disadvantages Examples
Block load shedding Easy to implement Unpredictable, very inefficient, unpopular
Bangladesh California
Class-wide consumption quotas
Equitable
Easy to explain & implement
Inefficient
Requires “safety nets”
BrazilJapan
Market-based rationing (quota and trade)
Economically efficient
Sustainable
More difficult to implement
Requires strong leadership
Brazil
Incentive/reward schemes
Equitable
Sustainable
Encourages efficiency investment
More expensive in the short run
California
Rationing using price signals
Equitable
Sustainable
Reflects marginal costs
Encourages investments
Bill impacts from higher rates
Need to maintain a social safety net
May induce load impact
Most OECD countries
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Table 4: Energy conservation actions taken by households in response to Brazilian rationing [3]
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Table 5: Some indicative bulk CFL programs in developing countriesRegion/Country
CFL Program Goal Program Design Status Comments
Uganda 0.8 million/30 MW 3rd party distribution via free swap-outs
Completed including Measurement and Evaluation
Rwanda 0.4 million 2 free lamps for each pre-paid customer; pass-through pricing on balance of bulk purchase
Phase 1 completePhase 2 ongoing
Includes carbon financing
Central African Republic
100 thousand Revamp of existing hydro plants combined with distribution of CFLs
Just approved by World Bank
Ghana 6 million/240 MW Up to 4 CFLs purchased for cost of incandescent
Ongoing 1st CDM project
Western Cape (South Africa)
5 million Door-to-door free swap-out in townships + subsidized retail prices through kiosks & shops
2006-2007 Due to shut-down of Koeberg Nuclear Power Plant
South Africa/ESKOM
30 million Replacement program using long-lived bulbs and focused on townships
Underway
Mexico 200 million Includes other appliances Since 1995Hebei Province (China)
.6 million per year Swap out to access CFLs at discount price
Ongoing
Ethiopia 4.8 million/160 MW
Utility distribution via free swap-outs
Launched in 2008
Source: World Bank Group
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Table 6: Botswana Power Company capacity shortage mitigation strategiesStrategy Expected peak load impact TimingCFL program 30 MW 2008Water heater load shifting 35 MW 2009Large user demand management 10 MW 2008Cogeneration retrofits 10 MW 2010
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Table 7; Quota allocation by customer type in the Brazilian rationing scheme
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