Mini Review for Formulating Energy Policies for Feasible Energy Planning

Energy is a hot debated issue for the researcher as it is an essential production factor like capital and labor. Energy plays a pivotal role as an input to virtually all other consumptions and production processes. Energy consumption is essential for human being survival and it is one of the basic indicators of economic development and growth. It is generally believed by the researchers’ that energy plays an indispensable role in the process of economic and social development and enhanced quality of life both in developed and in developing economies. Today world in general and developing and underdeveloped world in particular is engulfing by energy challenges and all the concern researchers want to see the developing and under developed world being acknowledged as a major energy reformer in the world. The researchers wish to see the complete harmony in demand and supply side energy policies. These are not unjustifiable target, as we know that every achievement begins with a clear vision of the future. Energy consumption has significant and long run relationship to economic growth for ASEAN countries. In ASEAN developing and under developing countries, energy consumption has progressively increased over the past few decades due to the population growth and industrial expansion [1,2].

The International Energy Agency’s (IEA) (2013) report on South East Asia has shown that the Southeast Asia region is particularly a diverse set of countries with considerable differences in the scale and patterns of energy use and energy resource endowments. The energy demand in the region increased in the last three decades and thus, energy demand would increase by over 80 percent between today and 2035. During 2012 in Southeast Asia the fossil-fuel subsidies are estimated to be US$ 51 billion. Though, some reform efforts were made particularly in Indonesia, Malaysia and Thailand, subsidies remain the most important factor distorting energy markets. It consequences includes wasteful energy consumption, burden on government budgets, and discouraged investment in energy infrastructure and efficient technologies. In South Asia above 130 million populations have no access to electricity. Apparently, there are very high levels of access to electricity in Brunei Darussalam, Malaysia, Thailand and Singapore, while, the levels are below 75 percent in the case of Indonesia and the Philippines. The majority of the region’s population still uses traditional biomass for cooking, which contributes to pollution. The report of IEA [3] also reveals that for the region, it is necessary to devise sound policies in order to enhance investment, which is significant for improving energy security, affordability and sustainability. For this purpose, almost US$ 1.7 trillion of cumulative investment in energy-supply infrastructure to 2035 is needed in Southeast Asia, with almost 60 percent of the total in the power sector. Energy demand increases due to incoming FDI, an increase in the real GDP growth, more opened economies and gradual population moves from rural areas to urban areas.

Indonesia is the largest energy consumer in Southeast Asia at 36 percent of the region’s total primary consumption in 2011. Though, Indonesia is a net importer of oil, but it is the world’s top exporter of steam coal along with key supplier of LNG. Indonesia’s population is expected to increase from 242 million to 302 million, where it’s per capita consumption to rise by 46 percent from 0.8 tons in 2011 to 1.2 tons in 2035. Thailand has the 2nd largest primary energy demand in ASEAN, at 118 million tons in 2011. Thailand is highly dependent on energy imports because of its scarce indigenous resources. Its per capita energy consumption continues to rise, approaching 3 tons in 2035. Similarly, the 3rd largest energy consumer in the ASEAN region is Malaysia, largely the net exporter of oil and natural gas. It is estimated that Malaysia’s population will grow at an average yearly pace of 1.2 percent between 2011 and 2035, reaching 39 million. As GDP of Malaysia increases at 4 percent per year, which is the important factor helping to drive an increase in Malaysian primary energy demand by 71 percent in 2011-2035. Currently Malaysia’s per capita energy use is quite high for the region. Malaysian electricity demand is expected to double by 2030 and then increase further to just over 300 TWh in 2035. This calls for an expansion of installed power generation capacity from 29 GW in 2011 to 67 GW in 2035. In the Philippines, electricity demand is estimated to grow at 4.6 percent per year on average, to over 200 TWh in 2035 (Table 1).

Table 1: Energy consumption and production: a comparison. Source: Central Intelligence Agency (CIA) (2014), the World Bank Factbook. a. 2008 estimated b. 2009 estimated c.2010 estimated d. 2011 estimated e. 2012 estimated f. 2013 estimated.

As far as European country the Greece is concerned, it has developed a high income economy, however the fiscal crisis of Greece in 2009 turned quickly into an outstanding debt crisis, which eventually changed into a complete recession. It has observed that as results, the social cost of the Greek crisis has been recorded unreasonably high. Where, Greece’s national income has decreased by roughly a quarter. The gap in living standards relative to the rest of Western Europe has been increased. The Greece country report (2013), the National Energy Efficiency Action Plans (NEEAPs) and experts’ survey reveals that Greece has neither striving nor an innovative energy efficiency policy. It is also recorded that energy has been saved due to the economic recession, which hit Greece severely during the reporting year (i.e., 2010). The study of Katsivelis notes that four European Union (EU) (i.e., Germany = 19.1%, France = 15.3%, Italy = 10%, UK = 12.1%) out of 27 EU countries use around 56.5% of the EU energy consumption. Where, Greece consumes a very small amount of energy which is almost 1.6% of the total EU consumed energy of 56.5%. Greece energy import dependency is nearby 65.3% due to which Greece raking 8^th out of 27 EU countries. Similarly, Greece consumes almost 19 million tons of oil. This corresponds to nearly Euro 9 billion turnovers, equivalent to 5% of the GDP and evidently employs 50000 employees, which is 1% of the total labor force. Moreover, the data, statistics demonstrates that energy consumption fall down from 21.9 million tons in 2007 to 15.1 million tons in 2012. The total gross energy demand is covered largely by oil and petroleum products, solid fuels, natural gas and renewable energy of 53.2%, 27.8%, 11.4%, and 7.6% in 2010 respectively. Likewise, the electric power account for 27% of the country’s final energy demand, where, fossil fuel (i.e., oil and gas) 69%. A brief comparative analysis of energy consumption and production of Greece economy with China, EU and World consumption and production is reported in Table 2 [4,5].

Table 2: Comparative analysis of energy consumption and production. Source: Central Intelligence Agency (CIA) (2014), the World Bank Factbook. a. 2010 estimated b. 2011 estimated c. 2012 estimated d. 2013 estimated.

A vast body of existing literature explained the various factors explaining energy consumption function. They used different econometric techniques with different set of data for different countries. For example, Kraft and Kraft [6] examined for causality between energy consumption and GNP in USA over the period 1947-1974 by utilizing Sims methodology. The findings revealed uni directional causality running from GNP to energy consumption. In a study Hwang and Gum found bi-directional causality between GNP and energy consumption in Taiwan. Yu and Choi observed that there exists a causal linkage between GNP and energy consumption in South Korea and Philippines. Similarly, the study of Masih and Masih used six Asian countries- India, Indonesia, Philippines, Pakistan, Malaysia and Singapore to examine the causality between energy consumption and income. The study revealed that energy consumption and income to be co-integrated for India, Pakistan and Indonesia, where, energy consumption is causing income in India, income is causing energy consumption in Indonesia and bi-directional causality exist in Pakistan. However, finding portrayed no causality for Philippines, Malaysia and Singapore. In another study, Masih and Masih discovered bi-directional causality in Korea and Taiwan supports Hwang and Gum findings for Taiwan.

The study of Grant [7] has shown that electricity prices will continue to upsurge during the year due to higher liquefied natural gas (LNG) prices in Thailand. Similarly, average electricity prices have increased about 5 percent in the mid of current year in Vietnam. In Indonesia, electricity prices increased by almost 15 percent last year and the report further extended that they are probably to be augmented “dramatically”- by up to 65 percent. Kottari [8] focusses on the significance renewable energy source which plays an ever more key role in Greece’s energy production profile. The study reveals that the existent investment framework needs a prominent expansion in production from wind, solar, geothermal, and biomass/biofuels, which are likely to help progressively as a transport fuel. Greece’s also expected in the coming future to generate electrical energy from renewable energy source at a 40% part of the total electrical power by 2020, due to the development of solar power plant in Greece, within the context of the debt crisis, solar power plant development and particularly the HELIOS project needs to enhance more foreign investments, helps to create job opportunities and it will largely stimulate economic growth of Greece. Table 3 briefly presents most relevant previous studies:

Table 3: Compact prior empirical studies on energy consumption and economic growth nexus. Source: Authors compilation -Comprehensive detail information on the causal relationship between energy consumption and growth are given in the studies of Ozturk [14], Kalyoncu et al. [21] and Ajmi et al. [22].

In order to meet the energy demand, ASEAN countries should have to devise some plans for sustainable development in their region. These plans may consist of the following: (a) There is a need to focus on some other energy sources in the region, as there is an abundance of oil, gas, coal, hydro, geothermal and biomass in Indonesia, while there are oil, gas and coal reserves in Malaysia and Thailand. (b) ASEAN countries need an explicit and countrywide adapted climate policy, where technology, energy, population and economic policy have different weights and contents. As the consequence, rising energy efficiency would provide foremost energy security, economic and environmental benefits

Each ASEAN country should prioritize energy management at the national level to meet future demand. Each country should have an energy development program to shift from fossil oil to other non renewable energy resources based on efficiency and technology. A comprehensive investment framework for renewable energy should also be developed to encourage the participation of independent players/investors, besides maintaining adequate national energy inventory. In order to have an effective energy policy, each government should develop their institutions and capacity related to energy management policymaking and monitors their implementation and progress. The electrification program should also be enhanced to meet the expanding needs of the urban and rural societies in each country. At the regional level, the ASEAN member countries should strengthen their cooperation in sharing best practices and experiences in the utilization of energy resources and energy management and development.

Renewable technologies are significantly contributing to global energy needs. Developing countries have set a modest renewable energy target in short and medium terms. Preference to rightly suited technologies is essential to meet these targets. Determination of suitable utility scale technologies is central for developing countries. Preference to these technologies at the national level shall quicken and economize their deployment. It may save time and national resources necessary for development of renewable energies. These utilities scale technologies are necessary to meet national renewable targets; overcome prevailing energy shortages and meet future energy needs.

Policy makers in Greece need to create an investment-friendly environment in order to enhance more FDI inflows into the country. Moreover, gradual population transfers from rural areas to urban area (urbanization) and infrastructure development is also of paramount importance as all these factors expand energy demand. More importantly, in order to fulfill the energy demand in the country, the policy option is that energy policy should to be adjusted in favor of enlarging the supply of energy to give a boost to economic growth and development.

The efficient utilization of a nation’s available energy resources is undeniably of great significance to the improvement of the welfare of human-being and the entire growth of the economy. On the other hand, environmental degradation is caused by the some factors like industrialization, population, poverty, transportation, soil erosion, traffic and exploitation of open access resource because of weak defined property rights. Pollution free environment is essential for sustainable economic growth and development. Energy consumption [23] and trade openness are found seemingly having an undesirable impact on the environment, but these two factors are usually considered the key factors plays an important role in the process of economic development and poverty alleviation. Each country should systemize energy consumption and formulate environment friendly trade policy at the national level to meet future demand and mitigate environment degradation in order to achieve the ultimate goal of sustainable economic growth and development.