Assistance to countries facing power crunches

1. 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.
* Corresponding author. Tel +1 XXXX; fax: +1 301 330 0141.
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2. Email address: gheffner@worldbank.org (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
electrification), renewable energy and energy efficiency, and energy generation,
transmission and distribution.
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3. 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 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
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4. 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 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
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5. 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].
3.2 The importance of sensible rationing
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6. 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.
Certain rationing elements can be effectively combined, such as incentive schemes
and consumption quotas. For example, the Brazilian rationing scheme included: (a)
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7. 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 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
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8. 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 good
effect in a number of countries experiencing capacity shortages, including Thailand, China,
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9. 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
shortages. Since the mid 1990s The World Bank has worked with utilities and energy
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10. 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
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
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11. 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 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
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12. 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 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
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13. 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
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].
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14. 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 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
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15. 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
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
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16. 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
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
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17. 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
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
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18. 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 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
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19. 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 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
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20. 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.
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).
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21. 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=permalin
k
[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:
Page 21

22. 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
[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:
Page 22

23. 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.
[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 23

24. Figure 1: Botswana capacity outlook
Page 24

25. Figure 2: Residential energy savings results during the 2001 power crisis in Brazil
Page 25

26. Tubes
11%
Energy
savers
22%
c
Ordianry
bulbs
67%
Figure 3: Uganda household light fixture holdings, 2005
Page 26

27. Table 1: Notable power shortages since 2000 – developed and developing economies
Country/Region/State Vintage Cause(s)
Tanzania, Kenya 2001 Drought
Pacific Coast of USA 2000-01 Drought, heat, failed sector reforms
New Zealand 2001 Drought exacerbated by transmission failure
Brazil 2001-02 Drought, sector reform, insufficient investment
Dominican Republic 2002 - “Financial black-out”: no money to buy fuel
Tokyo 2003 Nuclear power plant safety shut-downs
Norway 2003 Drought and unusually cold weather
Europe 2003 Drought, hot weather, plant shutdowns
China 2004-07 Very rapid demand growth, deteriorating load
factors, insufficient investment
Bangladesh 2005- Demand growth & lack of investment
Tanzania 2006 Drought, depleted reservoirs, demand growth
Uganda 2006- Drought, insufficient investment, demand growth
South Africa 2007 Demand growth & lack of investment +coal
shortages
Vietnam 2007 Very rapid demand growth
Rwanda 2006- Insufficient investment, demand growth
Ghana 2006- Insufficient investment, demand growth
Pakistan 2007 Rapid demand growth & lack of investment
Ethiopia 2008- Delay in commissioning of Tekeze Hydro Plant,
drought and demand growth
Sources: IEA, World Bank
Page 27

28. Table 2: Diagnosing power shortages
Type of Acute Long-lasting
Shortfall
• Scandinavian drought • South Africa’s power crunch (2006-?)
Energy
(2002) • Brazilian Power Crisis (2001-2002)
• East African drought
(2006)
• Tepco’s nuclear plant shut- • California Power Crisis (2000-2001)
Capacity
downs (2003-4) • Rapid peak demand growth in China and
• European heat wave & Vietnam
drought (2004)
Page 28

29. Table 3: Evaluating alternative rationing strategies
Rationing Advantages Disadvantages Examples
Strategies
Block load shedding Bangladesh
Easy to implement Unpredictable, very
California
inefficient, unpopular
Class-wide Brazil
Equitable Inefficient
consumption quotas Japan
Easy to explain & implement Requires “safety nets”
Market-based Brazil
Economically efficient More difficult to
rationing (quota and implement
Sustainable
trade)
Requires strong
leadership
Incentive/reward California
Equitable More expensive in the
schemes short run
Sustainable
Encourages efficiency investment
Rationing using Most OECD
Equitable Bill impacts from
price signals countries
higher rates
Sustainable
Need to maintain a
Reflects marginal costs
social safety net
Encourages investments
May induce load impact
Page 29

30. Table 4: Energy conservation actions taken by households in response to Brazilian
rationing [3]
Page 30

31. Table 5: Some indicative bulk CFL programs in developing countries
Region/ CFL Program Goal Program Design Status Comments
Country
3rd party distribution via free
Uganda 0.8 million/30 MW Completed
swap-outs including
Measurement and
Evaluation
Rwanda 0.4 million 2 free lamps for each pre- Phase 1 complete Includes
paid customer; pass-through Phase 2 ongoing carbon
pricing on balance of bulk financing
purchase
Central 100 thousand Revamp of existing hydro Just approved by
African plants combined with World Bank
Republic distribution of CFLs
1st CDM
Ghana 6 million/240 MW Up to 4 CFLs purchased for Ongoing
cost of incandescent project
Western 5 million Door-to-door free swap-out 2006-2007 Due to shut-
Cape in townships + subsidized down of
(South retail prices through kiosks Koeberg
Africa) & shops Nuclear Power
Plant
South 30 million Replacement program using Underway
Africa/ long-lived bulbs and
ESKOM focused on townships
Mexico 200 million Includes other appliances Since 1995
Hebei .6 million per year Swap out to access CFLs at Ongoing
Province discount price
(China)
Ethiopia 4.8 million/160 Utility distribution via free Launched in 2008
MW swap-outs
Source: World Bank Group
Page 31

32. Table 6: Botswana Power Company capacity shortage mitigation strategies
Strategy Expected peak load impact Timing
CFL program 30 MW 2008
Water heater load shifting 35 MW 2009
Large user demand management 10 MW 2008
Cogeneration retrofits 10 MW 2010
Page 32

33. Table 7; Quota allocation by customer type in the Brazilian rationing scheme
Page 33