Policy Tools for a Secure and Sustainable Electricity Sector

Abstract

Abstract Electricity is a major contributor to any nation’s economic development and is the fuel that drives most aspects of everyday life in society. Digital technologies, communications infrastructure, and industrial operations all depend on a reliable and efficient supply of electricity, which is paramount for development. The future of the entire energy sector will, to a greater extent, be shaped by the evolution of the electricity sector, which is at the centre of most energy discussions. The electricity sector is at a turning point in the transition to low-carbon sources for generating power. This transition will require massive investments in new generation assets, transmission and distribution networks, as well as improving system operations while managing the transformation associated with new information technology and distributed technologies. This thesis investigates three interconnected aspects that govern the development of the sector, which are not explored in the literature. Part 1 of the thesis aims to find the qualities that are essential for the sustainable development of an electricity sector; this is investigated by evaluating number of electricity sectors around the world that have varying characteristics. The study evaluates countries that are in power crises (South Africa, Sri Lanka), in a transitional stage (Australia, Germany, UK), experiencing regular load shedding (India, Bangladesh, South Africa), resource poor (Singapore, Japan), have a higher population (China, India, USA), are geographically interconnected where electricity transmission is possible (Germany, UK, India, USA), and are island nations (Japan, Sri Lanka). This enables us to determine the most important indicators for electricity security that are common to any electricity sector although each has different characteristics. The objective of the second part of this thesis is to construct a composite index to measure electricity security globally. The five indicators utilised include: reliability, accessibility, prices, profitability of the generation, and the quality of governance. The validity of the index is proven by evaluating the index performance using 14 countries over 25 years. The results identified reasons for weak performances of electricity sectors and the policies to overcome those issues for a sustainable electricity industry. Part 3 of the thesis investigates the role of energy storage with renewable energy integration focusing particularly on retail electricity prices and electricity import dependency. This study uses data from 17 European Union countries from 1990 to 2015 and examines how higher penetration rates of renewables lead to higher electricity prices and greater import dependency. Then to understand the role of energy storage, we test the significance of these effects considering different levels of energy storage shares. The results from this analysis show that with greater rates of the deployment of storage, electricity prices and import dependence are both reduced. The final part (4) of the thesis investigates the electricity sector of Sri Lanka as a case study of a nation at a critical stage in its electricity security. Using data over a period of 25 years (1990-2015), the study analyses the electricity security of the country. The results show that the country has serious issues with cost-effective power plant adequacy, unreliable supply and poor governance that affect the entire sector negatively. The study also finds that since Sri Lanka’s hydro capacity is exhausted and depending on hydro for the majority of its electricity generation is risky, it must seek urgent solutions, otherwise a period of insufficient capacity during the dry season is predicted. The results presented in this thesis have four significant policy implications. Firstly, the study identifies the most important qualities that affect the development of an electricity sector. These are not restricted to a group of countries that have similar characteristics, but, rather are relevant for any electricity sector around the world. These factors are likely to benefit policy makers to develop appropriate policies in the future. Second, the findings of the composite index will assist in the formulation of effective policies to integrate renewables while not compromising electricity security. It will further assist in understanding the criticality of quality of governance for the electricity sector and improving the under-performing aspects of the sector while not affecting the stronger aspects of the electricity sector. Third, the results of the investigation on the role of energy storage will offer new insights and policy options for establishing a power system that is capable of meeting volatilities in the future market.