Abstract:
The present study examines (a) the energy demand, supply and
investment trends in the process of economic development in
sri Lanka, (b) the relationship between economic development
and energy consumption and the major determinants in the
energy consumption of the household sector and (c) the issue
as to whether there could be an imbalance between the future
demand and supply of energy in Sri Lanka and if so, how this
gap could be bridged.
The author has endeavoured to analyze the energy trends with
special reference to the decades of the 1970's and 80's and
to obtain a vivid picture of these trends in the process of
economic development. Energy-GDP relationship has been
viewed from the perspectives of both consumption and
production. The relationship between energy consumption and
GDP has been examined through simple, multiple and
simultaneous regression techniques and GDP-Energy technical
relationship by using the Cobb-Douglas Production Function.
Energy-Economy interactions have been explained in terms of
Energy-GDP elasticities. The energy imbalance issue has
been viewed through the overall energy supply-demand balance
based upon energy supply-demand balances of the sources of
energy under different scenarios making use of macrosimulation
as a tool. The efficient energy pricing and
conservation has assumed increasing importance in meeting
energy demand and supply. The efficient prices for
electricity and petroleum products have been computed in
terms of marginal costs and for fuelwood in terms of
incremental annui tized fuelwood cost. Concerning energy
conservation in the household sector, the largest consumer
of energy, the improved closed wood stoves have been proved
to be the most efficient at both market and shadow prices.
The analysis of energy consumption trends over the period
1970-89 in the country has revealed the existence of a
consumption-oriented pattern of energy use, the decline in
the energy intensity of the economy attributable to the
decline in the sectoral energy intensities rather than to
the structural changes in the economic sectors and the
changes in the growth rates of the GDP in the same
directions as those in the energy consumption. The energy
supply trends have depicted the non-existence of structural
changes between commercial and traditional energy in the
composition of the energy supply over the period, 1970-89.
However, the sources of commercial energy supply have
undergone changes in its composition with the rising share
of electricity accompanied by a declining share of the
petroleum products over the same period. Concerning
investment trends, the history of energy sector development
has been largely a case of hydro-power development with the
result of installed capacity of electricity leading to an
excess over the optimum electricity capacity over the
period, 1983-89.
An empirical verification of the "Energy-GDP" relationship
using regression models has confirmed the existence of close
relationship between energy consumption and GDP and also
brought out income elasticities for energy consumption
greater than these obtained for energy price. Energy-GDP
relationship, viewed from the standpoint of inter-factor
substitution, has confirmed that GDP has been sensitive
mostly to energy among the variables, capital, labour and
energy. As regards the energy consumption of the household
sector, the strong impact of per capita income upon
electricity and kerosene consumption has been evident from
the result of the Single-Equation Regression Models.
Similarly, the strong impact of per capita income upon
electricity consumption and the less impact of electricity
price upon electricity consumption have been discernible
from the results of the Simultaneous-Equation Models.
Overall Energy Supply-demand balance 1990-2000, has resulted
in a progressive decline in the surpluses of indigenous
energy sources with a deficit in both the hydro-electricity
and the fuelwood balances under low scenario projections
occurring around mid-1990's. There would be a deficit in
the overall energy balance from 1999 onwards under the low
scenar io proj ections. The implementation of efficient
energy pricing policies, the conservation of energy
particularly in the household sector through the
dissemination of improved wood stoves and the shift to less
energy intensive modes of transport in the transport sector
have to be given serious consideration in meeting energy
demand. This study emphasizes the need for energy
conservation efforts to be reinforced by the substitution of
coal for oil, the expansion of the Refinery capacity, oil
exploration and decentralized power generation through nonconventional
energy applications in meeting the shortages in
the energy supply.
The results of this study of energy trends indicate the need
to shift to a production-oriented pattern of energy
consumption. The regression results have identified income
as the main path through which policy impulses could be
transmitted in energy management. In the light of the
progressive decline in the future balances of the primary
sources of energy, it is vital to utilize the secondary
sources of energy and new and renewable sources of energy in
addition to the adoption of demand management measures such
as efficient energy pricing and end-use energy conservation.