Energy efficiency from the perspective of developing countries

Abstract

Energy efficiency improvements are particularly important for developing countries. In most developing countries, the costs of reducing energy use by one kWh with more efficient technology are invariably much lower than the costs of increasing energy supply by one kWh through investments in new energy supply equipment. In fact, if the unit cost of energy supply increases is taken as the reference for comparison, then the relative costs of energy-efficient technologies can turn out to be negative. Thus, capital can be saved by investing in energy efficiency compared to investing in energy supply. Energy needs in the South are different from those of the North because of differences in climate (e.g., space heating is not required in most of the South) and because satisfaction of basic human needs and infrastructure building must be given paramount attention in the South. Consequently, the innovations necessary are also different. For example, innovations in the processing of basic materials (e.g., steel, cement, glass, etc.) are needed in developing countries because these materials are needed for infrastructure-building. Yet innovations in the basic materials-processing industries will come only slowly from the industrialized countries because the infrastructure-building era is largely over there and the demand for basic materials is largely saturated. Because such industries are energy-intensive, innovations would result in less energy-intensive, less costly and cleaner technologies with beneficial implications for energy futures in developing countries. Such opportunities for technological leapfrogging should be identified and utilized. The technical and economic potential for energy saving is 20–50% in the case of efficiency improvements in existing installations and 50–90% in the case of new installations. The potential for further efficiency improvements through continued research and development is large because fundamental physical constraints on efficiency are remote. The pursuit of energy efficiency improvement should be carried out in parallel with improvements in institutions, entrepreneurship management and human resource development. A key policy is to bring more energy-efficient technologies to the market, and to focus market attention on energy efficiency performance. Several successful approaches have been tried. The incentive structures in the markets are fundamental, as illustrated by integrated resource planning and utility demand side management that took off in the US only after the regulations of the power industry were changed to make it possible for utilities to earn profits on demand side energy efficiency investments. There is a need for an integrated view of the concept and role of energy efficiency revealing its structure and interconnections. Energy efficiency should be an integral characteristic of any product or activity. Emphasis on energy efficiency would liberate resources that can then be used for socio-economic development.