Energy Planning

Energy Resources and Utilization

 Energy Planning
Energy planning seeks to guarantee supply through the following:

1. Managing the natural energy sources and energy reserves in a

short, medium and long-term evaluation

2. Defining an energy import (or exporting) policy and its import

dependence or effects of the exportable resources

3. By influencing the demand through pricing (and Taxation)

policy and incentives for rationale use of energy

4. Certain functions like the production (Cobbs-Douglas

production function) and cost functions support these process.
 Energy Planning-overview
Energy planning must take into account all the political aspects
including economic, social and environmental considerations
depending on available energy resources and the acceptance by the
society.

Definition

An energy policy is that part of national (or international)

policy that is concerned with the production and supply of
energy, its conversion, storage, distribution and utilization and with
formulation of measures of meeting energy demand with the
presumed available energy sources
 Basic Energy concepts
Primary energy:- Energy which has not been
subjected to a conversion or transformation
process
Secondary or derived energy:- energy which has
been produced by the conversion or
transformation of primary or another secondary
energy
Final energy:- is energy made available to the
consumer before its final utilization
Useful energy:- is energy made available to the
consumer after its final utilization
 Basic Energy concepts
Energy Economy:- That part of energy applied
to energy problems. Its components include
energy supply, energy demand, and
implementation means for coverage at local &
international levels.
Gross National Product (GNP) is the total
production of goods and services by its
citizens both at home & abroad
 Integrated Energy planning
Integrated energy planning involves estimating
how much energy all the different consumers
(e.g. industry or households) will need in the
future to deliver certain services; and then
identifying a mix of appropriate sources and
forms of energy to meet these energy service
needs in the most efficient and socially beneficial
manner
The inclusion of all energy service needs and
supply side options, including energy savings and
efficiency interventions
 Integrated Energy planning
The inclusion of all costs and benefits (economic,
social and environmental), including long-term
benefits and costs and macro-economic impacts
(e.g. economic competitiveness in 20 years) in
describing possible futures (scenarios) for the
entire energy sector
Setting goals for the future, based on a
description of the most desirable situation at the
end of the planning horizon, that embrace the
whole energy system and its impacts
Integrated Energy planning
 Integrated Energy planning
I.E.P has 3 main phases

Phase 1: Reference Energy System and how it

evolved

Phase 2: Energy forecasting and scenarios

Phase 3: Planning
Phase 1: Reference Energy System and
how it evolved
The foundation for energy planning is a
comprehensive description of the whole energy
system for the country (or city, or region), as it
exists at present. This is known as the reference
energy system (RES)

The core of the RES in an energy balance

Energy balance is a table used for energy

planning or for understanding the energy
economy. Three types exist
 Types of Energy balance
Purely physical balance:- The different energy forms are
added in a supply or demand approach with relevant
equivalence coefficients to give the total quantity in a
particular unit (e.g. tons of coal equivalent)
Economic balance:- The different energy forms are added in
terms of their monetary value not physical value. The
balance considers also currency exchange rates, taxes,
subsidies, & price aspects
Substitution balance:- Balance investigates how one unit of
an energy form (oil, hydro, geothermal, solar etc) can be
replaced by a certain amount of another energy form. The
substitution approach is important for evaluating a future
energy policy.
 Purpose of the energy balance
Show in one table the overall picture of energy
production, conversion and consumption for each fuel
utilized in the country
Provide background information to the countries
energy planning - Give a good picture of the countries
energy situation - Show changes over time.
Basis for emission calculations
Basis for calculations of value figures for energy in the
National Accounts.
Energy research and basis for preparing energy
indicators
Public information to media etc.
 Energy balance-2
Energy balance records in a standard energy unit
(or some other unit) all the:
primary energy supply (e.g. oil, coal, hydro; including
imports and exports)
transformation to secondary energy (electricity
generation, oil refining, coal to gas and liquid fuel etc)
transport and distribution (including a reflection of
system losses) and
final consumption per sector (e.g. iron & steel, mining
and quarrying, rail transport, residential)
 Phase 2: Energy forecasting and
scenarios
Energy forecasting involves using the snapshot and video
taken in phase 1 to map possible evolutions of the energy
system
The first step is to choose a time horizon for the planning
exercise. The energy forecast must then describe the
evolution of the reference energy system from the base
year to the horizon year
In addition to future forecasts, energy forecasting also
considers suppressed demand (needs that are not
expressed through purchasing power)
In addition to future forecasts, energy forecasting also
considers suppressed demand (needs that are not
expressed through purchasing power)
 Phase 2: Energy forecasting and
scenarios
To undertake these forecasting and
suppressed demand a number of methods
and tools like models are used to develop
scenarios
Scenarios then examine the conditions under
which future energy demand can be met in
ways that are most beneficial socially,
economically and environmentally
Energy planning process
Terminologies used in the Energy field
Primary energy sources are those like; Solid
fuels, liquid fuels, gaseous fuels, hydropower,
nuclear energy, solar energy, biomass energy,
wind energy, ocean energy, and geothermal
energy
The main secondary energies are: Electrical
energy, Heat or thermal energy and lastly
mechanical energy
Terminologies used in the Energy field
Resources are the occurrences of energy sources
in recognizable form (WEC). While proven
reserves are generally taken to be those
quantities that geological and engineering
information indicates with reasonable certainty
can be recovered in the future from known
reservoirs under existing economic and operating
conditions" (BP, 1999).
Other terms like probable reserves, indicated
reserves, inferred reserves and undiscovered
resources can also be understood
Energy resource classification
Static or dynamic view of resources
Geologist tend to treat resources as innate
component of the physical world (static view)

Economist view what exists in the Earth's crust

as neutral stuff that becomes a resource only
if there is a market demand for it (dynamic
view)
 Energy Investment Planning
Investment planning in energy economics is not
any different from practices in other sectors of
the economy. Investments can be classified as
follows:
Must investments:- These are investments that must
continue under all circumstances. For instance for
public services utility has an obligation to supply
energy. Such utilities include those of gas, electricity,
petroleum, and district heating
Can investments:- Investments that can be postponed
under particular circumstances due to lack of
profitability
 Energy Investment Planning
Calculations and planning can be done to help
determine whether or not to undertake an
energy investment. An investment calculation
has two steps
Determination of profitability of the investment
through calculations and verifications
A comparison of profitable investment options
based on payments of expenses and return on
capital by incomes
 Energy Investment Planning
A number of procedures are used for
investment calculations. They are essentially
interest calculation methods.

The discount cash flow method (Discounted

present value method)
The Annuity methods
The Internal interest method
the Critical value procedure
 Energy Planning- Variables and
parameters-1
The variables, parameters and other
determinants for energy planning include:
Definition (System external and system
relevant values)
 Energy Planning- Variables and
parameters-2
Definition (Goal or objective oriented values)
 Energy Planning- Variables and
parameters-3
Definition (Economic and oriented variables)
 System Analysis
System analysis becomes important when one
is considering the use of simulation models
System analysis is a procedure for incorporating
the elements (the energy supply and/or demand
system or concept) to be studied in a broader view
of the economy by investigating the major
components if not all.
Two approaches occur in system analysis
 System Analysis
The recognition of the system in its
consistency, its dynamic behavior and its
evolution from the past
Generally after obtaining a detailed
knowledge of the system, one tries to
influence and restructure it in a possible
future evolution
This leads to a differentiation between
cognitive and decision making system analysis
 Cognitive System Analysis
This analysis approach is founded on the assumption
that a system exist in and of itself, regardless of the
person doing the investigation, consequently there is a
problem of identification
Identification is the determination of the interactions
within a system seen from the perspective of the
element to be observed or studied
The cognitive system can function globally-which parts
interacting in a sort of chemical synthesis or it can have
a theological behavior i.e. its end or purpose
guarantees its integrity over time
 Decision making system analysis
In this approach the system will be created by the
person analyzing it and not only through identification.
The analyst decision will be particular based on the
geographical and institutional framework.
As contrasted to cognitive approach, this approach
allows the possibility to grasp system dynamics and
consequently better orientation.
In summary cognitive system analysis tries to consider
the system as it is to identify its different structural and
functional elements. Decision making system analysis
tries to introduce in a given system modifying and
evolution aspect
 Qualitative evaluation for energy
planning methods
The deviation between forecast value and effective or real
value can only be registered many years after model
application.
This deviation is between the effective and forecast curves
is captured by a so called relevance indicators
The relevance indicator is a relative summary tool to give a
qualitative indicator as to the difference of the two
tangents or curves. It is useful and measurable only in
particular cases
Another approach is the use of qualitative and quantitative
analysis
A causal analysis can also be used in the evaluation and
assessment
 References
Francis Xavier Ochieng, NATIONAL ENERGY PLANNING & POLICY
ENERGY PLANNING, POLICIES & MODELS, Institute of Energy and
Environmental Technology (IEET)

Munasinghe, Energy Policy Analysis and Modeling