DUSHANBE, March 19, 2010, Asia-Plus — The outlook for primary energy supplies, heat, and electricity is questionable for the Eastern Europe and Central Asia region, despite Russia and Central Asia’s current role as a major energy supplier to both Eastern and Western Europe, press release issued by the World Bank said.
In spite of the underlying resource base, the region as a whole will face an energy crunch unless investments of more than $3 trillion are made over the next 20 years, according to the new World Bank report, Lights Out? The Energy Outlook in Eastern Europe and the Central Asia, launched on March 18.
“The demand for primary energy in the Europe and Central Asia region is expected to increase by 50 percent by 2030,” said Peter Thomson, Director for Sustainable Development in the World Bank’s Europe and Central Asia region, “while the demand for electricity is expected to increase by 90 percent.”
Following the break-up of the Soviet Union, the countries of Europe and Central Asia experienced six years of dramatic economic decline, followed by vigorous economic recovery, enabling the region to become one of the most economically dynamic in the world. This economic performance was reflected in the region’s energy sector – the initial economic decline was accompanied by a sharp reduction in the production and consumption of energy. But as the region’s economy recovered, both production and consumption increased. Investment, however, lagged, particularly in energy asset maintenance and upgrading, creating the prospect of an energy crunch.
The region was the hardest hit by the global financial crisis that began in 2008, dampening energy demand significantly. This created some breathing room, but this is only a temporary respite before energy availability again becomes a serious concern. Once growth picks back up, so, too, will energy consumption.
According to the report, if energy production is to be maintained or increased to meet Europe’s energy requirements, significant investment will be required. The projected needs for primary energy development from 2010 to 2030 are estimated to be on the order of almost $1.3 trillion in order to ensure the availability of oil, gas, and coal. In addition, the region’s power sector infrastructure is in desperate need of upgrading. Electricity capacity has hardly increased since the early 1990s and plants are getting old. Investment needed in power sector infrastructure over the next 20 to 25 years is on the order of $1.5 trillion, with a further $500 billion required for district heating.
Investing in energy efficiency achieves three goals, simultaneously and at least cost: lower greenhouse gas emissions, better energy security, and more sustainable economic growth.
Governments have a major role to play in energy efficiency, not only in allowing energy tariffs to reflect costs, but by being proactive in setting and updating energy efficiency standards for homes, equipment, and vehicles, and in enforcing them. The report recommends that to set an example, governments should undertake energy efficiency programs in the public sector, inform the public on energy efficient technology options, and design cities with alternative means of transport.
The report emphasizes that given the enormous need for investment, and the long lead times required to implement projects in the energy sector, countries need to position themselves to secure funding support for such progress as quickly as they can. Failure to introduce an enabling environment to support investment in the sector will translate into a shortfall in investment that, in turn, could constrain economic activity. A 10 percent shortfall in energy availability could lead to a 1 percent reduction in economic growth, and a larger shortfall could have even more detrimental impacts.
