REGIONAL ENERGY PLANNING
I, Dyner, I.M. Giraldo, A. Moreno, D. Valencia and A. Lobo
Universidad Nacional de Colombia
Gobernacién de Antioquia
Programa de las Naciones Unidas para el Desarrollo
A.A. 1027, Medellin, Colombia.
ABSTRACT
The general objective of this paper is to present a method for integral
regional-energy planning within the frame of national policies on energy and
economic development.
A historical database and energy balances of supply and demand allow to
analyze and model the dynamics of the sector, and its interaction with other
economic sectors and social and technological variables.
This paper contributes to understand how to mix econometric and system
dynamics technics. Whenever data is abundant and reliable. statistical analysis
and modelling could be useful to reproduce historical behavior, but in order
to study possible future scenarios it is required to set hypotheses on
parameters evolution. probably based on system dynamics methods.
On.the other hand, in order to model interactions among demand, supply,
prices and other economic variables. system dynamics is particularly suitable.
in this context, technics that seem to be confronted appear to be as each one
complementing the other.
The model was implemented by the Departamento of Antioquia in Colombia.
which possesses a considerable amount of energy resources, particularly
hydroelectricity. Specific methodological! aspects for planning energy resources
were considered to analyze the feasibility to introduce new elements such as
gas.
Recommendations on policy considered integral development of different
regional energy resources in accordance with supply potentials, requirements
and economic efficiency.
333
334 System Dynamics '90
1, INTRODUCTION
The problem related to integral energy planning has troubled the entire world
since the mid seventies, mainly due to the oil crisis.
In Colombia in 1982, the Ministry of Mines and Energy produced the National
Energy Study (Mejia et al 1982) in which the first thorough synopsis of the
national energy situation was presented. This technical report was based on
several factors such as: the supply of different energy resources, the demand
structure and its determinants, balances between supply and demand, and
relationships between the energy sector and many other economic sectors.
One primary aspect in the Study. which has exhibited many great
improvements in the last few years. has been the construction of models to
forecast the future levels of demand in accordance with the type of energy
and the corresponding sector in which it is consumed. Nevertheless, the
models used have led to great excesses in the installed capacity of the
electricity subsector, causing dangerous consequences to the payment capacity
of the external debt and even to the Country macroeconomic balance. This, and
other problems are mainly due to the following facts:
Estimated parameters are held constant during large
historic periods, supported on arguments that the
situation should not vary fundamentally in the future.
In the majority of cases only short time series were
available for economic variables. creating great
unstabilities in the estimated parameters, from a
statistical standpoint.
Although models are complex and take into account
large number of variables, they are not integrated in
a systemic form as to be able to represent a dynamic
economy.
Finally, models do not consider some important
interactions between the supply and demand of
different energy resources.
2. REGIONAL ENERGY STUDIES IN COLOMBIA
In spite of the fact that the Colombian energy sector has been predominantly
developed through government monopoly and that the decision making Is
heavily centralized. there is a regional concern for regaining a relative control
in energy management.
One example of the question mentioned above {s presented in the Antioquia
Energy Study (Valencia et al 1989). in which, following the scheme presented
in the National Energy Study, the former approaches such themes as the
System Dynamics ‘90 335
balance between regional supply and demand. and relationships between costs
and prices from a regional standpoint.
The importance of the Departamento of Antioquia is recognized throughout the.
Country, given that its installed electricity capacity amounts to 30% of the
national level and that it produces 8% of Colombian oil. Also, Antioquia
possesses abundant coal fields. with potentials not yet completely established,
but which have been exploited for many decades. These resources. and their
comparative cost advantages, stimulated investments and creation of new
factories, which led to industrial development and economic growth in the
region.
Information limitations and the need to evaluate regional policies on prices and
energy supply, led to revise the models presented in the Antioquia Energy
Study. System Dynamics was then used to complement the econometric technics
previously used, offering a global view point on energy supply and demand
within a regional scope. Additionally, it was used as a simulation tool allowing
a clear observation of feedback and delay effects on the system, which
permitted to analyze possible policy changes on prices and energy supply, as
well as variations on parameters and exogenous variables.
In order to accomplish the desired effects, besides the econometric technics
used to estimate historical price elasticity coefficients of demand, models were
implemented in Professional DYNAMO with appropriate feedback loops of supply
and demand as in Managing the Energy Transition (Naill 1979). The elasticity
functions maybe easily incorporated to the model.
As an example of this technic to explore different demand scenarios, with
changing policies on prices and supply, this paper presents the case of a
possible replacement program of electricity by gas within the Metropolitan
Area of Medellin (departamental capital of Antioquia and second largest city of
Colombia, in terms of population and economic activity).
3. REPLACEMENT OF ELECTRICITY BY NATURAL GAS
In the future, the increment on electricity prices may contribute to the
competitiveness of other energy resources because of the possibility to use
energy substitutes at lower costs or because of planning strategies on energy
supply.
The exploited natural gas, as well as those fields expected. to be discovered in
association with oil exploration programs, constitute in principle a relative
economic resource and one more appropriate for house cooking. The benefits
gained by switching to natural gas, at least in the residential sector, can
materialize in an energy bill reduction to costumers, as well as in a slower
expansion of the electricity system, contributing to alleviate the financial
burden of the companies in charge of electricity generation and distribution.
The feasibility of constructing a major gas pipe depends on a better
knowledge of real natural gas reserves. The utility of the project is also
based on reasonable transportation and distribution costs that each user
would need to assume, and the opportunity costs for not using natural gas in
336 System Dynamics '90
other profit making alternatives, such as its transformation into products in
the petrochemical industries.
As a final aim in studying an alternative program to replace electricity by
natural gas in residential use, this paper presents results of simulation
exercises performed in order to quantify possible economic effects in terms of:
energy cost savings; gas volume required to meet demands, assuming policies
on the amount of gas made available to different social strata; and the amount
of energy which would be substituted.
This model includes desaggregated variables related to the residential
consumption in each of the six social levels in which the population is
classified, as well as the potential natural gas substitution in each strata, and
the differential increments in electricity price per level. The assumed gas
prices were increased considerably with respect to the ones actually applied
in Bogota, Colombia.
The basic scheme of the simulation model is represented in Figure 1. By using
information on electricity installations, as well as global residential
consumption and its distribution by social levels, it is possible to estimate the
average monthly consumption per costumer, as follows:
£C/(POP"EI) =a ° (GRP/EAP)> * Pe,
Where,
EC: Electricity Household Consumption
POP: Persons per installation
EI: Number of electricity Installations
GRP: Gross Regional Product
EAP: Economically Active Population
B: Electricity Price
a, b, and c: Parameters
The next step is to determine the monthly cost of electricity per costumer.
The substitution alternative is now considered using information of potential
electricity that may be substituted.
Using appropriate conversion factors, the equivalent of natural gas needed for
substitution is calculated and its corresponding price determined. To evaluate
the monthly bill for natural gas, that value is added to the installation
charges, which are distributed during a period of fifteen years. The cost of
electricity not substituted is now valued depending on the amount consumed.
The total average energy bill per user level is then obtained by adding the
previous partial costs.
The comparison between the electricity consumption cost alone and that
constituted by combining electricity and gas, permits to evaluate the incentive
magnitude for a costumer to participate in a substitution program.
System Dynamics '90
Lett
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FIGURE 1. CAUSE-EFFECT DIAGRAM OF ELECTRICITY REPLACEMENT BY GAS
338 System Dynamics '90
Finally, under the assumption of policies for the gas program, it is possible to
obtain the magnitude of energy resources required to satisfy the residential
sector demand.
Figure 2 shows the results obtained in terms of percentages of energy costs
savings per sector of the residential community. These are only observed
starting some vears ahead, wherein it is assumed that the substitution
program will begin.
‘These results indicate that, under the set conditions, the main beneficiaries of
such substitution would be those in the lower social levels.
Figure 3 shows important dynamic changes in electricity and gas consumption
during the simulation period. under the hypothesis of gas availability to
customers. First, making it available to the poorer sectors of the community,
and later, satisfying progressively other sectors.
Table 1, in turn, presents the results in terms of the amount of electricity
substituted, which could represent up to 48% of the consumption forecasted in
the case of a non-existent substitution program. The magnitude gas demand,
which by the end of the simulation is expected to reach 13.9 millions of cubic
feet daily (5070.7 millions of cubic feet per year), is relatively modest.
YEAR 1991 1995 2000 2005
ELECTRICITY CONSUMPTION(GWH/YEAR) 1820.4 1332.0 1352.4 1634.4
ELECTRICITY SAVINGS (GWH/YEAR) 255.1 955.3 1267.2 1380.0
GAS CONSUMPTION (MMCF/YEAR) 937.5 3510.8 4659.2 5070.7
SUBSTITUTION PERCENTAGE 12.3 41.8 48.4 45.8
TABLE 1. SIMULATION RESULTS. MMCF: Millions of Cubic Feet.
4. CONCLUSIONS
The simulation results seem to indicate, in principle, the convenience of the
substitution program, mainly for the lower income sectors. This program would
not only provide great benefits to consumers, but also a considerable
reduction in demand for electricity.
Given the fact that other Colombian cities have gas available for household
consumption, as well as for industrial use, the Medellin case becomes
especially important because its energy competitive advantage could disappear.
In the following issues, the System Dynamics model might become a
fundamental tool in the decision making process of a replacement program of
electricity by gas:
System Dynamics '90 339
30%
20%
'0% Level 1
Level 2
Level 3
te}
Level 4
Level 5
710% —-—— -— -— Level 6
1.988 2.008
FIGURE 2. PERCENTAGE ENERGY SAVINGS
200 e3
150 e3 man
_
_ -—
Le
a Pe
ra
100 ¢3
7
7
7
Zz
50 63 7
7
7 «Electricity
° Z ——— Gos
° 10 hd
FIGURE 3. ELECTRICITY AND GAS CONSUMPTION SCENARIO. Year 0 corresponds
to 1988, and year 17 to 2005,
340 System Dynamics '90
Aiding to design adequate policies on energy prices,
making natural gas competitive with respect to
electricity, in order to achieve savings to customers.
And, furthermore, helping to establish goals on gas
availability in order not to affect drastically the
electricity companies financial situation (due to the
loss of a market portion).
5. ACKNOWLEDGEMENTS
This research was possible thanks to the support of the Departamento
Administrativo de Planeacién at the Gobernacién de Antioquia, as well as the
financial and technical support of the United Nations Development Programme
and the Universidad Nacional de Colombia. The authors wish to thank Sandy
Malca de Dyner for her help in prepairing this paper.
6. REFERENCES
Mejia J., J. Millan & G. Perry (1982). National Energy Study. Departamento de
Planeacién Nacional. Bogota, Colombia. (In Spanish).
Naill R.F. (1977). Managing The Energy Transition. Ballinger Publishing Co.,
Valencia D., {. Dyner, R. Smith & A. Lobo (1989). Antioquia Energy Study. DAP,
Gobernacién de Antioquia, Medellin, Colombia. (In Spanish).
