First Principles
Technology as an Enabler for Productive Power Markets
This working paper by Peter Hughes, Scott Hare, and Maite Pina (Ricardo Strategic Consulting)was commissioned for the 2012 Pacific Energy Summit on “Innovation Generation: Powering a Prosperous Asia.”
The paper looks at the advantages that decentralized energy (DE) systems offer to the Asia-Pacific as compared to the traditional power generation model and provides insights to governments, utilities, and developers looking to electrify poor and/or remote areas of the region. The Executive Summary is also available in Vietnamese.
EXECUTIVE SUMMARY
MAIN ARGUMENT
Power generation in the developed world has been built around the concept of large, centralized plants connected through long distances of transmission and distribution infrastructure. While this conventional wisdom is embedded in most utilities, a new mindset may be helpful for developing regions in the Asia-Pacific. Smaller decentralized energy systems may offer the best way forward to electrify poor or remote communities without incurring significant delays or infrastructure costs. Within the right regulatory frameworks and employing the correct business models, DE systems can provide long-term socioeconomic and environmental benefits to local communities at relatively low cost. In this paper, we consider how developments in technologies such as solar, wind, and biomass have increased their feasibility for DE systems while ongoing convergence between the energy and information technology sectors is removing previous operational barriers.
POLICY IMPLICATIONS
- Constantly changing social, economic, and technology landscapes should encourage leaders to periodically revisit their energy strategies, and look at the question of whether DE systems can be utilized in order to realize their potential benefits, and if so, where and how?
- The development of DE systems is often constrained by limited access to capital. Many technologies have relatively high upfront capital costs per kilowatt (kW), but subsequently benefit from modest operating costs. Governments should create an environment where public, private, or combined funds can be used to overcome any initial financing hurdles
- Market liberalization is often required to promote DE system development. Smaller, regional players are inherently more efficient at creating small-scale plants than are the large incumbents; however, market regulation frameworks must be designed to remove any major barriers that smaller generators would face.
