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Electricity

Long-term growth in electricity consumption is expected to be strongest in the developing economies of Asia, followed by Central and South America (Figure 64). In the reference case for the International Energy Outlook 1999 (IEO99), the projected growth rates for electricity consumption in the developing Asian nations average nearly 5 percent per year from 1996 to 2020 (Table 17). Electricity consumption growth in Central and South America is projected to exceed 4 percent between 1996 and 2020. The projected increases in electricity use are based on expectations of rapid population and economic growth, greater industrialization, and more widespread household electrification. Developing nations are expected to account for 43 percent of the world's total electricity consumption in 2020, compared with only 28 percent in 1996. With much of the world population today still having only limited access to electricity, a significant portion of the future growth in electricity use will result from the connection of more of the population to the electricity grid.

Figure 64. World Electricity Consumption by
Region, 1996 and 2020

energy, has been affected by recent global economic and financial problems, an economic turnaround is expected in a year or two, accompanied by a resumption of earlier trends in demand growth.

Collapsing financial markets and falling currencies can affect energy demand in several ways. For countries that are net importers of energy, a debased currency means that more of the currency must be expended on energy imports, as well as on other goods and services. If a country's financial markets fail, economic growth and energy demand growth may be slowed as investments in development projects (including energy projects) become more risky and capital formation becomes more difficult. Corrective measures, such as raising domestic interest rates in order to restore stability to currency values and financial markets, may at the same time reduce economic growth, slow the growth of long-term investment, and depress aggregate energy demand.

The countries most immediately affected by the economic crisis that originated in Asia in mid-1997Thailand, Malaysia, South Korea, Indonesia, and the Philippines have undertaken various economic policies to restore economic growth, and there have been some positive signs that their economies are beginning to turn around. China and India have also been affected by the crisis, although not nearly as much. The IEO99 projections of electricity demand growth for these regions are substantially lower than last year's projections out to the year 2000, but less so out to 2005 and hardly at all for 2020.

Annual growth in electricity consumption for the industrialized economies is expected to average 1.6 percent between 1996 and 2020, with continuing penetration of electric equipment in the end-use sectors counterbalanced by slowing population growth and higher energy efficiencies. Economic growth in the industrial economies has also been affected by the Asian crisis, largely through a slowdown in exports to Asian markets. In 1998, as a result of growing concerns that Asian economic problems had begun to affect the industrial world, several central banks reduced interest rates and eased monetary policies.

Japan, the largest economy in Asia and second largest in the world, continues to be a significant source of

uncertainty. Its real GDP fell by 2.9 percent in 1998. according to WEFA Energy [1]. The Japanese government has, however, undertaken a $500 billion spending initiative aimed at reviving the economy. The Japanese central government's expansionary fiscal policies in the past have generally proven inadequate to the task of restoring economic growth, and little improvement is expected for Japan's economy in the near term.

In Russia, economic developments have grown more discouraging. Although difficulties in the Russian economy were heightened by events in Asia, the Russian government's persistent inability to undertake meaningful and much needed-domestic economic reform continues to be the main roadblock to economic recovery. A moratorium on servicing government debt and the Russian government's recent plan to make good on payments on past-due salaries and pensions through printing money suggest that the Russian economy is likely to worsen further before getting better.

Downward pressure on financial markets and currencies in Central and South America was another fallout of the Asian economic crisis; however, not all of the region's current economic problems can be attributed to events in Asia. Brazil, for instance, has found itself in need of a $42 billion credit from the International Monetary Fund, largely because of its huge government budget deficit [2]. The credit was needed both to keep the Brazilian financial system solvent and to stem a run on the Brazilian currency.

For the developing nations of Africa and the Middle East, both economic growth and electricity consumption growth are expected to fall midway between those

projected for the industrialized economies and the developing economies of Asia and Central and South America. Rising electricity demand in the Middle East will be linked more strongly with rapid population growth than with increases in per capita electricity usage. The outlook for Africa is similar, but the growth in electricity demand is expected to be slightly higher s access to electricity grids becomes more widespread Both the Middle East and Africa depend strongly on extractive industries for economic growth. In both regions, economic growth and electricity consumption growth will be shaped by developments in the supplies of and demand for raw materials and petroleum.

Highlights of recent electricity developments around the world are as follows:

•The world's recent economic difficulties-which started in Asia but then moved to South America, Russia, and finally the western industrial economies-continue to restrain the near-term prospects for global economic growth. Again, in the near term. the electricity consumption growth forecast has been revised downward, particularly for Southeast Asian nations. Over the past year, several Southeast Asian nations have canceled or postponed a number of electricity projects. The effects of the crisis have been most immediately felt in Thailand, Indonesia. Malaysia, the Philippines, and South Korea, where project cancellations or delays have been most evident.

⚫Electricity pools have emerged in all corners of the globe: from Australia to Alberta; from South Amer ica to South Africa; from the United States to the