Energy policy modelling: agenda for developing countries

Abstract

Literature is replete with both top–down and bottom–up energy policy models developed for addressing various policy and planning concerns in developed countries. These models provide a good starting point for analyzing certain issues in the modern industries of developing countries, like improvement of operations, impact of technology mix, and effects of certain aspects of privatization. However, their capability for enabling a comprehensive policy analysis for developing countries is limited. This is because they lack in their representation of characteristics that are specific to developing economies. Policy priorities of equity and sustainability, existence of a large traditional sector, transition of population from traditional to modern markets, on-going major changes in the regulatory and competitive structure of energy industries, existence of multiple social and economic barriers to capital flow and technological diffusion, likelihood of huge investments in energy supply over next few decades, long-term uncertainties in domestic policy regime, and importance of decentralized energy planning are examples of characteristics that are specific to most developing economies. Such features need to be explicitly addressed in energy policy models in order to enable a meaningful policy analysis for developing countries. Additionally, results from a variety of models need to be considered by policy makers of developing countries in order to assess robustness of their decisions.