Efficient energy utilization and environmental issues applied to power planning

Energy Policy 39 (2011) 3630–3637

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Efficient energy utilization and environmental issues applied to power planning He´ctor Campbell a,n, Gisela Montero a, Carlos Pe´rez a, Alejandro Lambert b a

´rez y calle de la Normal, Col Insurgentes Este, CP 21280, Mexicali, B.C., Me´xico, ´noma de Baja California, Blvd Benito Jua Instituto de Ingenierı´a, Universidad Auto P.O. Box 3439, Calexico, CA 92232, USA b ´rez y calle de la Normal, Col Insurgentes Este, CP 21280, Mexicali, B.C., Mexico ´noma de Baja California, Blvd Benito Jua Facultad de Ingenierı´a, Universidad Auto

a r t i c l e i n f o

a b s t r a c t

Article history: Received 24 June 2010 Accepted 28 March 2011 Available online 19 April 2011

This document shows the importance of policies for electric energy savings and efficient energy utilization in power planning. The contributions of economic, social, and environmental items were evaluated according to their financial effects in the delay of investments, reduction of production costs and decrement of environmental emissions. The case study is Baja California, Me´xico; this system has a unique primary source: geothermal energy. Whether analyzing the planning as usual or planning from the supply side, the forecast for 2005–2025 indicates that 4500 MW additional installed capacity will be required (3-times current capacity), representing an investment that will emit 12.7 Mton per year of CO2 to the atmosphere and will cost US$2.8 billion. Systemic planning that incorporates polices of energy savings and efficiency allows the reduction of investments and pollutant emissions. For example, a reduction of 20% in the growth trend of the electricity consumption in the industrial customers would save US$10.4 billion over the next 20 years, with a potential reduction of 1.6 Mton/year of CO2. The increase in geothermal power generation is also attractive, and it can be combined with the reduction of use and energy losses of utilities, which would save US$13.5 billion and prevent the discharge of 8.5 Mton/year of CO2. & 2011 Elsevier Ltd. All rights reserved.

Keywords: Energy systems planning Environmental factors Economy of energy systems

1. Introduction This document emphasizes the complexity of the variables in terms of the technical, economic, environmental, and social policies and politics involved in finding the best option for supplying electricity for the development and transition of economies based in agriculture toward modern societies focused on industry and services. Methodologies that are briefly described in this document include an ‘‘Energy Forecast’’ utilized by the Secretarı´a de Energı´a de Mexico (Energy Secretariat of Mexico, SENER), integral resource planning (IRP), demand-side management (DSM) and, in more detail, the systemic planning for Baja California, Mexico. The latter integrates the effects of the saving and efficient use of electric energy and of reducing pollutant emissions into the environment. The case study refers to: (a) The diagnosis of production and consumption of electricity in Baja California, Mexico 1994–2005.

n

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(b) The projection 2005–2025, without a change in historical trends. (c) The possible scenarios when these trends are modified through policies for the saving and efficient use of energy. Baja California is located in the northwest region of Mexico, in the Baja California Peninsula, limited to the west by the Pacific Ocean, to the east by the Sea of Corte´s, and to the north by the State of California, USA. Its area is 71,576 km2 (3.6% from the Mexican territory), and it has a population of 3.2 million (3.0% from total). In 2006, Baja California consumed 10.0 TWh, 4.6% of Mexico’s national consumption. The GDP of US$26.0 billion in 2000 was 4% of the GDP of Mexico. Its electric grid system is isolated from the national grid but connected to that of the US. It uses geothermal energy as a native source and complements its energy requirements with natural gas imported from the US. This system supplies electricity to the Mexicalis Valley zone, which is characterized by a desert climate, and also to the Coast zone, which is strongly influenced by the Pacific winds, and California marine stream, which has a mild climate for most of the year. The present document compares methodologies of electric energy planning oriented towards the supply side, applied in several developing countries, with the proposal of a systemic plan, considering the latter as a very convenient approach for

H. Campbell et al. / Energy Policy 39 (2011) 3630–3637

systems immersed in a multifactor and dynamic context under uncertain conditions. The main contribution of this paper is the use of strategic planning methodologies with a systemic focus to define the participation of public policies, knowledge management, infrastructure, and environmental services. It allows for the development of dynamics involving plans to ensure availability, reliability, and the quality of a power supply. The participation of actions for energy savings and efficient use are analyzed in the assessment scenarios of economic, social, and environmental benefits. The financing of these benefits is achieved through the delay of investments, which decreases production costs and reduces environmental emissions. This manuscript also analyzes the international context, which can be characterized by a rising trend in the price of conventional fuels and more restrictive policies imposed by environmental regulations, which subsequently lead to increased production costs in conventional electric systems. In the case of Baja California, the evolution of the electrical system, changes in the energy portfolio and effect of these changes on the emission of pollutants are reviewed, and the forecasts of the classical methodologies are compared with the scenarios of systemic planning. 1.1. Energy planning methodologies In Mexico, as in many developing countries, the electricity prospective is based on the programming of resources on the supply side to meet the forecasted demand. However, in countries with utilities, vertically integrated with captive customers, energy market volatility increases the risks of relying solely on strategies based only on the supply side. This situation is more critical due to the limited information availability and systematization that takes place in these countries. SENER prepares annually a ten-year forecast for electricity and oil sectors, as well as for markets of natural gas and LPG (Secretarı´a de Energı´a, 2004a, 2004b). In addition, supply-side planning, as previously described, is based on economic assumptions computed with econometric models and regional estimations, where the trends for each productive sector are calculated according to historical data. On the one hand, Alnatheer (2005) describes integrated resource planning (IRP) as an approach that systematically evaluates the electricity supply and potential demand of resources to develop a plan that provides energy services to customers at the lowest social cost.

On the other hand, D’Sa (2005) has reviewed several definitions of IRP and has summarized an approach that takes into account both the options on the supply and demand to meet the need of a resource, looking to minimize costs corresponding to the business and society. This alternative approach, as applied to the electricity sector, can be described as an approach whereby the estimated requirements of electric utilities during the planning period are coupled with the lowest cost combination of supply and efficient end-use of energy; it also incorporates issues, such as equity, environmental protection, reliability, and other specific objectives of the countries or regions being analyzed. The ‘‘Instituto de Ingenierı´a of the Universidad Auto´noma de Baja California’’ (UABC) has adapted different approaches of strategic planning and energy planning to develop a systemic methodology that include the impacts of electric energy saving and efficient energy utilization, environmental emissions, and other energy sources (Campbell, 1996, 2009; Campbell and Pe´rez, 2003). This approach is closer to the concept in D’Sa (2005). Fig. 1 shows a schematic of the proposed systemic methodology. It establishes baseline scenarios that reflect the inertia of historical behavior, updating variables trends, such as population growth, number of customers, and consumption per customer. Electricity sales or consumption were estimated using regression models over the historical evolution of each sector in each geographic region for the projection of the next 10, 15, or 20 years. These results were compared with per-capita consumption, and their growth was shown to modulate, especially in the residential and industrial sectors, which most affect the system. The annual electric energy required is evaluated by adding electricity used in generation and losses of the electrical system to electricity sales. This value is utilized to calculate the annual average demand, and the historical behavior of the system gives the ratio between the average demand and peak demand. The required generating capacity is calculated by adding a capacity reserve, for maintenance and units failures, to the peak demand. A comparison of this generation capacity with the installed capacity is evaluated, and the need to install new plants and/or exchange energy with other systems is determined. Pollutant gas emissions due to electricity generation are evaluated using emission factors, adapting in this case, the data reported in the working paper of the Commission for Environmental Cooperation of North America. These data are based on data from EPA-AP-42, National Institute of Ecology, from

Sectors consumptions

Unit costs Net import or net export

Transmission selfconsumption Transmission losses Distribution selfconsumption Distribution losses

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Minimum net generation

Minimum gross generation

Generation selfconsumption

Generation costs

Average Demand

Gross generation

Maximum Demand

Operation programm

Backup Capacity

Production costs

Capacity to install

Retired Capacity Fig. 1. Systemic methodology proposed for energy planning.

Pollutants Emissions Fuels consumptions Fuels costs Investments

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Comision Federal de Electricidad (CFE) and Petro´leos Mexicanos (PEMEX) (Miller et al., 2002). These emission factors and the estimated fuel consumptions for electricity generation were used to estimate the emission of sulfur oxides (SO2), nitrogen oxides (NO2), and nitrogen dioxide (CO2), which are considered to be major pollutants, for electricity planning. The cost of electricity generation is associated with the cost of fuel, the efficiency of energy conversion into electricity, and the share of costs not associated with these fuels. The average generation cost of any system depends on how involved is each fuel and each generation technology in total electricity production. Average prices in each tariff and in the system are calculated by the ratio of the annual income ($/year) to the corresponding sales (kWh/year). Average prices and costs are compared to analyze both the relation of price/cost and the existence of subsidies. The methodology used in several developing countries analyzes the evolution of the system, performs comparisons, and elaborates forecasts based on trends adjusted by models that correlate critical variables for each sector (e.g., residential, commercial, public, industrial, and agriculture). This methodology, which considers only supply-side options, has been described by various authors as ‘‘Traditional Electric Planning’’ (TEP), and they compare it with the use of IRP, not only from a social perspective but also as baseline of emissions to assess projects of the clean development mechanism (DSM) (Shrestha and Shrestha, 2004). Forecasts for Baja California through the year 2025, if current trends of the past 10 years are maintained, were performed using regression models of historical data. Previous studies in 1996 and 2002 used this procedure and have not differed significantly from the results published by SENER in national perspectives (Campbell, 1996; Campbell and Pe´rez, 2003. The systemic methodology, used in this article to develop energy planning, considers the following guidelines: (a) Demand side planning should be used to direct electric energy planning, and the results of supply-side planning are the baseline for demand growth trends, if current conditions are maintained. According to this framework, goals, strategies, and mechanisms are proposed to modulate the growth of demand and fuels consumption based on feasible and practical ways. (b) Moderate demand growth and electricity consumption. This strategy is commonly used to modulate demand and consumption by means of price policies. Therefore, as prices rise, consumers are forced to apply energy efficiency measures. A major problem with these polices is that it is not possible to discriminate between efficient or non-efficient customers or how electricity use may economically impact different consumers, leading to lost competitiveness, which may hold back social and economic development in areas of production. (c) Selectively influence key users to manage demand. Select key sectors by the magnitude of their effects on electricity system operation and regional economic development for the implementation of savings and energy efficient use strategies, as well as their participation in the electricity sector’s services, such as cogeneration and self-supply. In this scheme, expanding sources of funding, such as carbon bonds and technological innovation, is called for, and the electrical planning and its execution is systematic and participatory. (d) Proposal and assessment of scenarios. Evaluating technical, economic, and environmental effects is called for when introduced actions for electric energy savings and efficient energy usage from both the supply and demand sides when

sources and energy technologies are diversified. Opening the electricity market internationally should also be considered. (e) Assessment of investments and costs associated with proposed measures. The technical, economical and legal feasibility of the scenarios, are evaluated as well as the effects of technological innovation. The proposed fund sources for these measures are energy savings, the decrease in and/or effect of investment delay, the reduction of emissions, and additional funds generated by a deregulated power market.

2. Electric energy planning of Baja California, Me´xico 2.1. Diagnosis 1994–2005 A summary and analysis of the diagnosis for electricity production and consumption diagnosis of Baja California, Me´xico, from 1994 to 2005 were based on CFE data (CFE, 2005). According to 2004 estimates, from the 2652 MW of generation installed in Baja California, only 75% was effective capacity (2000 MW); this amount should satisfy the peak demand in this system isolated from the national grid. However, it was necessary to import energy from the US in 10 of the 15 years studied because the electricity peak of demand grew between 6% and 7% annually. More installed capacity was required by a growing demand, which, combined with the geothermal resource constraints, significantly changed the energy portfolio, so that in 1998, the installed capacity of geothermal power accounted for 57%, and by 2004, 73% of system was based on natural gas. As a result, the energy dependence of Baja California increased, and the net generation in 1996 showed a 2-to-1 geothermal to fuel oil ratio, which by 2004, was nearly a 1-to-1 geothermal to natural gas ratio. However, the use of natural gas increased the overall efficiency of conversion, which rose from 20% in 1996 to 26% in 2004. Table 1 shows the average efficiency of conversion from fossil fuels worldwide and in Mexico (Taylor et al., 2008). US, Japan, Mexico, China, and Italy are the countries that used the most oil to generate electricity (36% of total generation with these fuels). In Baja California, the conversion efficiencies in systems with natural gas are about 42% for simple cycle and 50% for combined cycle. Regardless of these conversion efficiencies, an improvement in generational efficiency, transmission, and distribution was observed, as well as technical and commercial losses. In 1994, 1.77 MWh of gross generation was required for each MWh of sales, and by 2004, the value of this indicator was 1.27 MWh. Taking out fuel oil from the energy portfolio of Baja California helped to decrease SO2 emissions from 4.16 to 0.19 kg/MWh. The increase in natural gas use by combined cycles reduced NO2 and CO2 emissions by 30%. However, the release of CO2 (2.6 Mton/year) did not change substantially, and it will continue growing due to the increase in electricity consumption, regardless of whether it is generated by natural gas or geothermal energy. A geothermal field with 40 Mton/year of geothermal vapor for electricity generation avoids combustion of 20 million barrels equivalent of oil (3.18 million m3). Table 1 Average conversion efficiencies of electricity from fossil fuels.

Global Carbon Natural gas Oil products

World (2000–2005) (%)

Mexico (2008) (%)

36 34 40 37

38 36 44 34

H. Campbell et al. / Energy Policy 39 (2011) 3630–3637

Taylor et al. (2008) indicated that electric energy production represents 32% of the total fuel consumption worldwide and 41% of the CO2 emissions. The improvement of electricity generation efficiency, as well as the use of renewable energies, is among the main strategies to reduce dependence on conventional fuels, to mitigate climate change and to ensure energy reliability. Improving efficiency is expensive, and emission reduction penalizes efficiency also in addition to increasing costs. By increasing fuel prices, increased electricity usage affects the fragile international equilibrium between supply and demand. Additionally, there are different charges not associated with fuel, i.e., to generate energy with turbines fired by fuel oil or natural gas (simple cycle) costs twice as much as natural gas in a combined cycle; however, using geothermal energy is three times less expensive. By decreasing the participation of geothermal plants in the generation process, electric system production expenditures in Baja California increased with an annual rate of 3.7% in 2005 and reached 122.80 USD/MWh. In parallel, the electricity average price grew with an annual rate of 8.3%, and in 2004, it was 86 USD/MWh. The latter value was controlled by the tariffs of residential and industrial customers. The price of electricity for commercial and public utilities in Baja California is relatively expensive compared to the overall average price, while, for large-scale industry (high voltage) and agriculture, it is relatively cheap. The ratio of the average electricity price to the average cost of production is less than unity (as in the whole country); however, it is a fictitious effect due to tax relation amid government and CFE, called ‘‘Aprovechamiento’’ (Secretaria de Gobernacio´n, 1986, 1992) and crosssubsidization among customers, resulting in agricultural tariffs being the only real subsidy. Capacity, demand, consumption, pollutant emissions, costs, and prices were increased in an uncontrollable growth of demand that had to be satisfied by supply. All of this was promoted by population growth, combined with consumer demand for a better standard of living. The annual consumption of electricity of residential customers in Baja California increased from 917 kWh/person in 1996 to 1057 kWh/person in 2003. The federal government reduced subsidies in 2004, and household consumption dropped to 953 kWh/hsehld, a logical response to the price elasticity. However, the ratio of total annual consumption of electricity to the population increased from 2682 kWh/person in 1996 to 3199 kWh/person in 2004. Industrial consumption increased at a rate 2-times higher than residential consumption, whereas other sectors grew at much slower rates, which can be attributed to the development of companies with more intensive energy use, associated with higher prices of electricity for residential, commercial, and public utilities. The supply side planning cannot predict and evaluate social and economic consequences of such policies. The electricity sector in Mexico is characterized as a vertically integrated system, with a captive market that is fully regulated. Energy policies are and have always been constrained by this structure. Changes in the Electric Energy Act Public Service have tried to improve this scheme by diversifying options (small generators, self-supply, cogeneration, and export); however, except for the import option for industry in Baja California (highly regulated and restricted), there is still a strict prohibition against selling electricity by private businesses in the national electricity market. Some attempts to move toward DSM systems have not yielded the expected results because the electricity service companies are included in the same pattern of vertical integration (e.g., the Comprehensive Program of Systematic Savings and Energy Savings Program in the Electricity Sector (ASI, PAESE by its Spanish

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acronym)). Some changes in structure as the creation of the Fiduciary for Saving Electricity (FIDE) or the National Commission for Energy Conservation (CONAE, currently CONUE) are, in practice, controlled by CFE. Giving greater autonomy to SENER regarding PEMEX and CFE and the creation of the Energy Regulatory Commission (CRE) has been somewhat of a breakthrough. Recently, in the area of energy reform, the Law on the Use of Renewable Energy and Funding for Energy Transition and the Law for the Sustainable Use of Energy (Secretaria de Gobernacio´n, 2008) were introduced. Their implementation will remain limited if the system remains vertically integrated and regulated, as it currently stands. Chamberlin and Herman (1996) indicate that DSM originally meant ‘‘The planning and implementation of the activities of utilities designed to influence the use of electricity by the user in such a way that will produce desired changes in the shape of the load.’’ The above-cited authors also mention that the corporate restructuring resulting from these regulatory changes will allow significant changes in the role of energy efficiency services. The role of traditional DSM is not clear in the terms in which it was originally conceptualized. Even though vertically integrated companies can adjust their capacity expansion plans in the long run, when the demand forecast is reduced by the activities of DSM, the ‘‘remaining resource planners’’ (such as distributors, unregulated dealers, or brokers) would not be able to buy from utilities, in the available market, sufficient energy at the right time, and it would not be possible to defer investments in plants due to resulting rates and environmental impacts. CFE raised a similar scheme of separate business units (i.e., generation, transmission, and distribution) without being disintegrated. D’Sa (2005) states that the power sector reforms initiated in developing countries during the 90s were driven by the shortage of generating capacity, together with insufficient funds for new investments. Attention to social and environmental welfare was much less important. In addition, problems have occurred even in some developed markets that have suggested that regulation is necessary for the effective functioning of the electricity system. The expected reduction of subsidies has also contributed, and one reason for privatization was the need to reduce government subsidies to public utilities. Ideological changes are also required for private property as part of a broader restructuring. It is evident, from this diagnosis of energy policies in Mexico, that a systematic planning, or IRP, will not be possible if there is no change in the structure of its electric sector, moving toward the disintegration of at least generation and distribution processes and the maintenance of regulation of the process of transmission and control. This is not an easy decision with insufficient capacity and limited funds; however, it would be possible to privatize the energy efficiency services. In other words, the development of Energy Service Companies (ESCOs), different of Energy Service Provider Companies (ESPCs) currently integrated to public sector in Mexico. 2.2. Forecast 2005–2025 The forecast for 2005–2025 assumes historic trends from 1996–2004, which were selected as a baseline for this forecast: 4% of own use in a generation, 10.15% and 2.8% of sector sales as losses and own uses, respectively, in the transmission and distribution processes, and a consumption growth rate of 5% for the industrial sector. As constraints on implementation of the forecast, it is considered that the installed geothermic capacity cannot be increased and that electrical capacity growth is achieved through combined cycle plants operating with natural gas. Moreover, the

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H. Campbell et al. / Energy Policy 39 (2011) 3630–3637

10

US$/MBTU

8 6

Table 2 CO2 emission per capita for selected countries in 2006 (combustion only).

8.79 6.76

6.95

5.85

4 2 0 2004

2005

2006

2007

Fig. 2. United States natural gas prices, US$/MBTU (BP, 2008).

price of natural gas remains constant at 27 US$/Gcal (7 US$/thousand cubic feet, 7.2 US$/million BTU). Fig. 2 shows prices reported in the US for natural gas in dollars per million BTU (US$/MBTU). Prices of long-term contracts signed between CFE and California, US, were above these values. With the reference values and the proposed constraints, the technical and economic parameters were selected to analyze and compare scenarios for 2005–2025. Forecast indicates that electricity demand in Baja California will grow at an annual rate of 6%. This is consistent with the value reported by Secretarı´a de Energı´a (2004a, 2004b) for the Electricity Sector Forecast 2004–2013. In other words, it will be necessary to install 4500 MW in 2005–2025 period to reach 7200 MW, almost three times the installed the capacity in 2004. Geothermic plants will decrease their participation in installed capacity to 10%, and some of the thermoelectric plants that operate with fuel oil will close or will be modified to burn natural gas. The energy portfolio will depend more on natural gas to increase its input from 60% to 86%, the efficiency of conversion will rise from 27% to 38%, and the damping effect of geothermic energy in the total cost of production will be eliminated. The demand for energy will double with annual growth rates of 2–3% and will triple the natural gas consumption. System losses and own uses will be 15% of the gross generation in 2025, which means that for each MWh that could be sold, it will be necessary to generate 1.18 MWh, improving this indicator by 7%, with respect to 2004. The net export necessary for the system balance represents an average of 7% of the net generation. The net export decreases when the installed capacity is close to equilibrium, with an internal peak of demand and sales. Increased net exports associated with marketing represents additional revenue for the system; moreover, a decrease in peak demand means less pressure on the electricity system to avoid operating higher-cost plants or needing to import electricity. The net export of 41,461 GWh in the full period from 2005 to 2025 produces an income of US$ 2073 million. The pollutant emissions projection indicates that SO2 emissions will be maintained at 2200 ton/year and be emitted mainly by the geothermal system. The NO2 emissions will increase by 4, going from almost 6000 ton/year in 2005 to 24,000 ton/year in 2025. Moreover, CO2 will increase from 3.4 Mton/year in 2005 to 12.7 Mton/year in 2025, and 70% of the latter two pollutants will be generated in the coastal area. CO2 emissions, considering the full period 2005–2025 were 162 Mton. IEA has reported that global CO2 emissions in 2006 for combustion only, as well as for general use, were 4.3 ton CO2/inhab (ton per inhabitant). Table 2 shows this indicator for selected countries (IEA, 2008). The forecast for Baja California obtained a value of 1.12 ton/ capita in 2006 for electricity generation only, so it is estimated

Country

CO2 (ton/capita)

Australia USA Canada Russia Germany South Korea Japan England Italy Spain France Sweden China Mexico Argentina Chile Cuba Brazil Costa Rica Colombia India

19.02 19.00 16.52 11.14 10.00 9.86 9.49 8.86 7.61 7.44 5.97 5.32 4.27 3.97 3.80 3.64 2.36 1.76 1.35 1.30 1.13

Table 3 Cost per kW installed of power plants in Mexico. Power plant type

USD/kW installed

Geothermal flash process Combined cycle (natural gas) Simple cycle (natural gas)

$1100 $400 $150

Table 4 Share of investments for electric systems in Mexico. Power plant installation (%) Transmission (%) Distribution (%) Maintenance work (%) Other investments (%)

44.5 19.7 20.0 13.9 1.8

that the indicator for all combustion processes is about 2 ton of CO2 per capita. The annual cost of generation will increase 3.5 times from $648 million dollars in 2005 to $2,273 million in 2025. The cost of natural gas consumption will be multiplied by 4, from $387 million dollars in 2005 to $1,584 million in 2025, increasing its participation to the cost of generation from 60% to 70%. The natural gas consumption for the full period from 2005 to 2025 was 681 Pcal, and expenses were $US19800 million. Cost distributions for electricity processes were estimated as follows: generation 60%; transmission, transformation and control 14%; distribution and marketing 26%. With this scheme, the total annual cost will increase from $1,080 million dollars in 2005 to $3,789 million dollars in 2025. The natural gas contribution to the cost will increase from 36% to 42% and the average production cost will rise from $88 USD/MWh in 2005 to $111 USD/MWh in 2025. The forecast 2005–2025 indicates that an investment of $2,865 million dollars will be required by the electric system of Baja California over the next 20 years. Tables 3 and 4 show the reference values of investment for Mexico (CFE, 2004). Considering the full period from 2005 to 2025, Table 5 summarizes the reference values from forecast to be compared with

H. Campbell et al. / Energy Policy 39 (2011) 3630–3637

the possible scenarios of a systematic planning in the next section. The Baja California population will grow at rate of 2.40% annually, from 2.8 million in 2005 to 4.5 million inhabitants in 2025, which is consistent with the projections reported by the CONAPO (2005) (National Population Council). The growth trend for the number of customers in the residential sector is less than the growth rate of housing, causing a decrease in the number of people per home and per customer. In 2006, CFE (2009) reported for Mexico total sales of to be 145.7 TWh, which corresponds to 38 TWh for the residential sector; however, the company, ‘‘Luz y Fuerza del Centro,’’ worked in tandem with CFE in such a way that SENER forecasts, for the period 2008–2017, estimated a domestic national consumption of 197 TWh, internal sales of 175 TWh and residential sales of 44 TWh (Secretarı´a de Energı´a, 2008). With these values and a population of 104.75 million inhabitants the national consumption is figured as 1885 kWh/capita-year; however, the residential indicator was 424 kWh/capita-year. In the same year, the indicator of total consumption for Baja California was 3191 kWh/person/year, which is 1.7-times the national level. With regard to residential consumption per capita, the value was 971 kWh/person/year, 2.3-times the national level. Notably, this indicator is 5-times higher in the Valley Zone than in the Coastal Zone. Fig. 3 shows the average annual total consumption per capita for the year 2006 for selected countries according to the IEA (2008). In earlier UABC studies (Campbell and Pe´rez, 2003), energy consumptions for residential sector housing were recommended as 180 minimum and 360 kWh/month medium, for winter. For the Valley Zone, during the summer season, the minimum and medium consumptions recommended are 1250 and 2250 kWh/ month. The Valley area is expected to achieve these estimated values, but it is evident that in the coastal area, the electricity consumption will be under the recommended minimum, producing a regressive effect on social and economic development. The involvement of industry in electricity consumption in Baja California will become more significant, increasing from 57.3% to Table 5 Reference values from forecast for systemic planning (2005–2025). New installed capacity (MW) Net export (GWh) Natural gas consumption (Pcal) CO2 emissions (Mton) Investment ($US million) Income net export ($US million) Expenses natural gas ($US million)

700% 600% 500% 400% 300% 200% 100%

1% 63

4500 41,461 681 162 2865 2073 19,800

3% 57

1% 50

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60.5% from 2005 to 2025, respectively. The residential sector will increase slightly from 31% to 32.5%, respectively, but other sectors will decrease their participation. 2.3. Systemic planning 2005–2025 For systematic planning, possible scenarios are developed to modify historical trends through savings and efficient use of electricity. Goals were established to quantify the contrast between scenarios developed with planning oriented to supply (forecast) and those scenarios resulting from systemic planning methodologies. These goals are used as a means of quantifying the expected impact of achieving each goal alone or in sets (plans), in addition to finding out the advantages of applying a systemic planning methodology based on saving and the efficient use of energy versus ‘‘traditional electric planning’’ (TEP). The main goals were to reduce (1) 50% of own use in gross generation (from 4% to 2%), (2) 30% of own use and losses in transmission and distribution processes to reach 7% in losses and 2% in own use, both related to total sales, (3) 20% of the consumption rate of industry, to 4% per year, (4) participation in natural gas by installing instead 500 MW of geothermal power, (5) impacts of natural gas price decreases by 15%, and (6) 15% of the public sector energy consumption for 2008 and up to 30% by 2010 through scheduled programs for efficient use and energy saving in public water utilities, education, and street lighting. To achieve these goals, strategies and mechanisms are proposed, whose main purpose is the management of domestic and international financial resources, supported by issues, such as avoiding newly installed capacity, savings in natural gas consumption, increased export earnings and lower emissions based on the clean development mechanism (CDM) and certified emission reduction (CERs)of greenhouse gases. The values of reference from the TEP scenarios or ‘‘business as usual’’ (see Table 5), considering the full period from 2005 to 2025, were for an investment of US$2865 millions, income by net exportation US$2073 million, for natural gas expenses of US$19800 million, and nothing for carbon bond income. The CO2 emissions were estimated as 162 Mton. Table 6 shows the economic potential of each goal to support these efforts based on the resources released and the lowering of emissions, and Table 7 presents the funds released and the emissions reduced by combining goals into plans. From Table 6, Goal 5 cuts down expenses of natural gas, which is the most attractive of the resources freed but does not abate the environmental impact; therefore, achieving this goal depends more on the international market than the regulation of regional

5% 42 9% 3% 5% 0% 30 30 28 27 4% 33% 30% 7% 7% 2 2 23 21 21 1% 1% 0% % 12 12 % % 10 99 77 75 68% 6% % % 4 35 19

0% . . d a a il y a bia n a a a ia o le e ly in l d na n ia di hi an s si B. C Ita orn az x ic Ric an pa ub ad d e .S.A tral apa ore a nc or ti In C gl C l om u m if W en S Br Me ta K Fr J an we r l y s n U R o e a g h C S E l le Au C C os G ut Ar C Va ja So li Ba ci a ex M

Fig. 3. Relative average annual consumption per capita 2006 (World: 2659 kWh/capita, 100%).

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H. Campbell et al. / Energy Policy 39 (2011) 3630–3637

Table 6 Goals: Financial resources released and emission reduction. Goal

1 2 3 4 5 6

Millions of dollars

Thousands of tons

Investment saving

Net exportation income

Carbon bonds income

Natural gas saving

Total

CO2 emission reduction

86 111 171  713 0 43

288 486 661 1948 0 90

9 12 19 14 0 5

203 263 401 798 2776 104

586 872 1252 2048 2776 242

1548 2012 3096 2336 0 774

Table 7 Plans: financial resources released and emission reduction. Goals

1 þ2 1 þ2 þ3 1 þ2 þ3 þ4 1 þ2 þ3 þ5

Millions of dollars

Thousands of tons

Plan

Investment saving

Net exportation income

Carbon bonds income

Natural gas saving

Total

CO2 emission reduction

3 5 9 7

171 227  717 227

828 1445 3433 1445

19 37 51 37

401 798 1592 3459

1420 2506 4359 5167

3096 6192 8528 6192

planning. From an environmental point of view, Goal 3, managing the consumption trend of the industrial sector is more attractive and has the best balance with the release of resources and reinforces the advantages of savings and efficient energy use. Goal 4 increases the participation of geothermic energy, which is also attractive in financial resources released and emission reduction. In Table 7, combining these goals into plans, Plan 9 is the plan that provides a better balance between economic resources freed and emissions reduced. The isolated efforts of the power sector or the supply side, which is represented by Plan 3, have a lower economic and environmental impact than Plan 5; the latter plan is based on saving and the efficient use of energy when combining both the supply and demand issues. These goals and plans are not limiting or exclusive, and they can demonstrate how systemic planning supports decision-making regarding where to direct the restricted financial resources to achieve the best economic, environmental, social, and political results.

3. Conclusions and recommendations The goals set in the systemic methodology for the case of Baja California were oriented to (a) reduce own uses in processes of generation, (b) reduce own uses and losses in transmission and distribution processes, (c) reduce consumption growth rate of the industrial sector, (c) mitigate additional installation of natural gas power plants, increasing participation in geothermal energy, (d) reduce impacts of natural gas price, and (e) decrease the electric consumption growth rate of the public sector. Among the results of previous targets and their combinations, in contrast with the TEP or ‘‘business as usual,’’ all scenarios were characterized by an increase in net exports, a reduction in peak demand growth, reduction in natural gas consumption and emissions, an avoidance of additional generation capacity, a reduction of production and fuel costs and increase savings on investment. Decreasing the price of natural gas saves more money but does not mitigate the environmental impact. In this sense, it is more attractive to regulate the consumption growth rate of industry, an

action that exhibits the best economic and environmental balance, reinforcing advantages in both savings and efficient energy use. Combining energy-saving measures and efficiency in the electric and industrial sectors, as well as increasing geothermal generation capacity, offer a better balance between economic resources and emissions reduction. Systematic planning allows a simulation of different conditions and an analysis of the sensitivity of different parameters, which ultimately optimizes electricity planning. It also facilitates the decision-making process to correct deviations from supplyside planning and classical methodologies. By comparing results from systematic planning with those obtained from the supplyside approach, the strategies and mechanisms that link resources with goals and identify potential advantages strengthen the management of domestic and international funds supported in technological innovation and emissions reduction. Continued planning focusing on the supply side will drive the electricity system to an unsustainable level with respect to the requirements of demand, consumption, and quality of service to customers; moreover, supply-side planning will cause a rise in electricity prices and a loss of energy self-sufficiency. Growth rates will be adjusted by a lack of plant capacity and the policy of prices, as opposed to the forecast accuracy of an expected scenario. The future of energy generation in developing countries will be dominated by natural gas, and therefore, the importance of achieving its supply at affordable prices and also establishing plans and intensive programs for energy saving and efficient use of energy. It is recommended to implement a systematic plan with the commitment of various sectors for the positioning of entities, regions, and countries due to energy savings, the efficient use of energy and the mitigation of impacts to the environment. It is vital to develop schemes regulating operational and administrative capacities to ensure that savings and additional income obtained in the energy sector can be transferred to customers. The electricity planning system will not be successful if it is not immersed in an environment of appropriate energy policies. According to the results of this study, it is suggested as a general framework that these policies reflect the actions and strategies required to influence economic development, job creation,

H. Campbell et al. / Energy Policy 39 (2011) 3630–3637

income distribution and share of benefits. These polices should maximize the use of local resources and develop new exports, mainly related to the way that electricity services are provided. Renewable energies and efficient technologies should be encouraged to meet a significant portion of electricity needs by creating energy security, local economic development, and incentives to improve the quality of the environment. Subsidies applied to electricity reduce the competitiveness of renewable and energy efficiency technologies because environmental and social costs are not included in the cost of electricity, they send the wrong signal to the market, avoiding beneficial investments in energy. Energy polices should provide financial resources to implement programs that may not be relevant to the current electricity sector but can spread the costs equitably with the industry. This may be more possible than taxes and subsidies on electricity, because it is more likely to change the behavior and technology in the industry so as to reduce social and environmental impacts of electricity generation.

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