Revisiting energy planning


It is well known that the structural reforms that were promoted from the late 1980s and throughout the ’90s in the majority of countries in Latin America and the Caribbean set out a series of measures aimed at bringing about dramatic changes, mainly in the economic sector.

The objectives of these reforms were directed in the energy sector, in particular to:

1) Stimulating competition and opening investments to the private sector;

2) Developing privatizations and/or capitalizations with transfers of public companies;

3) Achieving vertical disintegration in order to support competitive segments;

4) Promoting  market tariffs and prices, which are more economical and competitive;

5) Creating autonomous and impartial regulatory bodies that defend both the users and the interests of companies;

6) Creating states that are basically normative;

7) Fostering regional integration through private activity, with the harmonization of sub-regional regulatory frameworks promoted by governments.

With this in mind and as a result of the rapidity of these changes, including privatizations and the vertical disintegration of markets in the energy sector, several countries in Latin America and the Caribbean neglected what is known as “energy planning”. However, precisely the opposite should have occurred and the state should never have weakened or abandoned its role in energy planning, because by default it has the final responsibility for the safe, long term provision of energy, using the most abundant, economic, and cleanest energy resources possible.

A reliable and well researched energy planning strategy is the only viable means of making decisions on energy issues. Indeed to be more emphatic about this, energy planning allows us to make the correct decisions in the short, medium and especially long terms – that is to say the correct energy policies. For this reason it is common to hear: “We don’t have a coherent energy policy.” Instead, what we have in several of the countries in the region are short term energy policies based on their immediate needs and demands, which unfortunately cause great harm to the economies and development of these nations.

If energy planning was abandoned or weakened in some the countries, we leave it up to the imagination of readers what happened, and is still happening, at the regional and sub-regional levels of countries in Latin America and the Caribbean that in some way or another have developed an energy interdependence among themselves. From the discussion above it is easy to understand why sub-regional and regional energy policies based on fact or viable, real and – above all – well researched means do not exist.

Let us analyze what energy planning means. In the first place, a country must constantly be aware of and analyzing the structure of its energy matrix and energy balance and it must have a historical database of all events that have taken place. Also, a country should be constantly analyzing the relation between supply and demand in the short, medium and long terms, for example, over 15, 20 or 25 years. This means that prospective studies should be prepared, as objectively as possible, that outline future scenarios of supply and demand and assess future energy balances. The supply, of course, can come from internal or external sources.

With this information to hand, different scenarios and possible paths can be mapped out in order to generate secure, safe and economical supply, that is also as environmentally friendly as possible.

Energy planning is the responsibility of the state, and should always include tactics and strategies, i.e. it should look at both the short and long terms. Tactical energy planning only for the short term, as we have noted as occurring in several countries of the region, can lead to decision making that is not the most beneficial for those countries, due to a lack of foresight.

The reforms that were promoted inscribed indicative planning, where the state would indicate the steps to be taken and where investors could or could not go on these. On the other hand there exists an obligatory form of energy planning, where the outlined scenario must be strictly fulfilled, as is the cases of Mexico and Costa Rica. These are examples where no privatizations have been carried out or the adopted scheme is that of a unique purchaser. Another possibility that is being debated is the mixed model between these two types of planning.

The important thing, though, is that countries have understood that omitting the construction of statistical systems, energy balances and energy planning is not a good idea and many countries in the region are now trying to restructure themselves and update their equipment and institutions in this area.

The most interesting aspect of all of this is that what is occurring at the national level is also occurring at the sub-regional level in Latin America and the Caribbean. The recent Summit of South American presidents in Venezuela established in one of its recommendations: “To work with a view to establishing a systematization and evaluation of the South American energy balance with the objective of developing a regional energy matrix, identifying energy integration options and fostering projects among the South American Community of Nations.”

OLADE has for several months been supporting the fulfillment of this role at a national level within the countries of Latin America and the Caribbean, and believes it can also do so at a sub-regional level, with its database of energy information on the 26 countries in the region, as well as the technical tools to support energy planning at the sub-regional and regional levels.