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close this bookSustainable Energy Strategies - Materials for Decision-makers (SEED - UNDP, 2000, 208 p.)
close this folderChapter 6. Promoting Institutional Change for Sustainable Energy
View the document(introduction...)
View the document6.1. Introduction
View the document6.2. Liberalising the energy sector
View the document6.3. Making it happen
View the document6.4. Conclusions

6.4. Conclusions

As it may have become clear from all the preceding considerations, there is no unique or best way, applicable to every country and situation, to proceed in regulating the energy sector. Each country or group of countries in a region needs to find what instruments are more likely to have success in their particular conditions.

A few general conclusions can, however, be attempted.

Market instruments and stimulation of private initiative are too effective to be ignored in any circumstance. The important role of the government is to use these instruments so as to reach its goals of economic and social development, with special emphasis on providing modern energy services to the rural areas and to the poorer strata of the population, as well as to protect the environment.

One of the first steps towards the use of market-based instruments is to reduce or eliminate the subsidies which are given to various forms of energy (except in a transitional phase to compensate for market failures and accelerate the introduction of environmentally-friendly technologies), to let the market determine the prices through competition when this is feasible, and to introduce taxation that reflects at least a part of the externalities.

Liberalisation of the power sector (and, when applicable of the natural gas sector) needs to aim at allowing a number of independent producers to enter the market and compete. In particular, it should favour distributed generation, renewable sources of energy, high efficiency, combined heat, and power production. Privatisation may be under certain circumstances, an instrument for increasing managerial efficiency and competitiveness, but it ought not to be considered a goal in itself. High-level regulating authorities, essentially those independent from government and political powers, have proven to be a good solution, but the main guidelines of their ruling and the priorities of their objectives have to be set by governments.

Market rules in the energy sector should, in any case, put on an equal footing supply and demand of energy, and aim at increasing the efficiency of energy use through integrated resource planning and demand-side management.

Identifying barriers in legislation, norms of implementation, and diffusion of more sustainable energy systems is by no means simple, and needs to be done at various levels of governments. Private business, NGOs, and various types of associations can help in this analysis.

Special measures are advisable to facilitate the initial diffusion on the market of renewable energy technologies and advanced methods for energy efficiency; however, such measures have to be transparent, limited in time and possibly decreasing in a programmed way, and in no case should promote technologies that have no prospects of eventually competing in a free market.

Aggregating demand for financing is essential for the promotion of small interventions, which are prevalent for renewable energies and for efficiency improvement. The same aggregation is going to have positive results on technical issues, like installation, operation, maintenance, availability of spare parts, etc.

Several different options are available for facilitating sustainable energy initiatives at the local level and in rural environments. The ones which are most adapted to the particular conditions of a country need to be identified and selected. The involvement of local communities, as well as encouragement to small business, cooperatives and the like, is an essential condition for success. Collecting and providing correct and adequate information is of the greatest importance, while training and capacity building is required in both technical and non-technical domains.

Research and development should be encouraged, with emphasis on testing and adaptation of technologies, determination of standards, and contribution to training.

Regional cooperation is a positive asset, and, in some cases, it becomes an absolute necessity. It concerns free energy trading, exchange of experience, pooling of R&D, setting up of common standards and norms, etc.

In conclusion, institutional conditions, as derive from the actions of governments at all levels, are of great importance in determining the evolution of energy systems. An active, targeted initiative is necessary in order to direct this evolution in a more sustainable way.

It is important to devote more attention to projects aimed at creating an environment favourable to the diffusion of sustainable energy solutions by market forces and private initiative. Such projects may concern the identification and removal of institutional barriers, creation of local structures to supply energy services or market improved equipment both in urban and in rural areas, capacity building at all levels, etc.

Experimentation of innovative organisational, institutional, financial, or normative solutions is at least just as important as the testing of new technologies, and possibly more useful. More projects in this direction need to be encouraged.