Managing sustainability in developing electricity markets

Citation

(2008), "Managing sustainability in developing electricity markets", International Journal of Energy Sector Management, Vol. 2 No. 1. https://doi.org/10.1108/ijesm.2008.32802aaa.002

Managing sustainability in developing electricity markets

Article Type: Guest editorial From: International Journal of Energy Sector Management, Volume 2, Issue 1.

The electricity sector has more ties with sustainable development than any other one. Reliable and adequate supply of electricity has become a requirement for almost all productive economic activities, access to electricity is key to improve health and education outcomes of the most disadvantaged populations and power generation worldwide is responsible for about 40 percent of all greenhouse gas emissions (followed by the transport sector, with about 20 percent). This accounts to saying that achieving sustainable development where economic, social and environmental dimensions are well integrated and in equilibrium will require electricity markets that are particularly well managed. The challenge is even greater in developing electricity markets, where institutions and access to capital are much more problematic than in developed countries.

This special issue of the International Journal of Energy Sector Management focuses on many of these challenges. Cases from Latin America (Brazil, Columbia and the entire sub-continent), the Caribbean countries and Senegal are used to illustrate new management strategies and tools to help achieving more sustainable electricity markets.

Garrón Bozo covers 30 years of “Energy policies in Latin America and the Caribbean and the evolution of sustainability” through a review and analysis of a set of economic, social and environmental indicators developed by many international agencies. His article sketches some important connections between these indicators and suggests how energy policies can contribute to increase sustainability.

Lizardo R. Hermes de Araújo, de Aragão da Costa, Correia and Melo study the economic sustainability of “Energy contracting in Brazil and electricity prices” after the 2004 Brazilian electricity reform. They look at the results of a series of electricity auctions and analyze their success in terms of bids, prices and signals for new investment. They conclude that adjustments are still required to perfect the market. Moving to the electricity distribution level, Tozzini is interested in “Benchmark regulation in Brazil: potential strategic implications for electricity distribution utilities.” He explores how the definition of the “reference” firm used by the Brazilian regulator can create distortions in distribution utilities' strategies, operations and investment incentives. Operational data from 28 Brazilian distribution utilities are used for this purpose.

“Benchmarking as a management and regulatory instrument for Caribbean electric utilities” is studied by Martina, Hakvoort and Ajodhia, using data from 15 Caribbean utilities. They present, apply and critically discuss the use of data envelope analysis (DEA) in a context of small utilities operating in the challenging environment of small islands, where few economies of scale can be achieved and where context specific features prevent some comparisons to be made. Their paper nevertheless illustrates convincingly how benchmarking through DEA can provide practical management and regulatory advice.

Rural electrification, a key priority to promote rural development and help fighting deforestation, is covered by the last three papers. Zerriffi, in “From acai to access: distributed generation in rural Brazil,” presents findings of a larger international study on sustainable business models for distributed generation in rural areas. Although central systems to promote rural electrification through distributed generation have been working in the past, his study suggests that a significant potential exists for more decentralized models, where private entrepreneurs develop electricity supply services for various activities.

Contreras presents “Planning paths for the electrification of small villages using decentralised generation: experience from Senegal.” A detailed analysis of demand data and willingness to pay for electricity is combined to a technical analysis of various decentralized electricity supply options to find the most promising system. Economic viability is studied for small villages, with an estimation of the required subsidies for each possible option.

Finally, a practical tool to manage the often diverging goals of sustainable development in the context of rural Colombia is presented by Silva Herran and Nakata “Renewable technologies for rural electrification in Colombia a multiple objective approach.” Using typical demand data of “non interconnected zones” of rural Colombia and economic, social and environmental parameters characterizing various generation technologies, they develop a multi-objective decision making method. This method provides an integrated evaluation of generation technologies and helps identifying trade-offs to be made between them.

This special issue starts with the analysis of the evolution of a set of energy policies and their sustainability implications and finishes with micro tools to help manage technological choices meeting social and environmental requirements. It also covers market design issues and management challenges at the firm level. This ambitious program is the type of research I believe is needed for the sustainable management of the electricity sector. I sincerely hope these papers will leads to management and research innovations much needed when so many energy problems disrupt the functioning of economic, social and environmental systems.

Pierre-Olivier PineauGuest Editor