World Energy Outlook 2006

Investment along the Electricity Chain
In the Alternative Policy Scenario, the avoided investment throughout the
electricity chain – from the producer to the consumer – is $1.1 trillion (Table 8.1).
Total additional investment on the demand side of electricity amounts to about
$950 billion, while savings on the supply side total $2.1 trillion. On average, an
additional $1 invested on demand-side electricity in the Alternative Policy Scenario
avoids more than $2 in investment on the supply side (including generation,
transmission and distribution). This ratio varies by geographic region. In OECD
countries, the ratio is $1 invested to $1.6 avoided, while in developing countries,
the ratio is larger, at $1 in investment to more than $3 in supply costs avoided.
Demand-side investment in the Alternative Policy Scenario across all regions amounts
to about $950 billion more than in the Reference Scenario over the next twenty five
years, as consumers purchase more efficient equipment. Their purchases include:
� Industry and agriculture: motors, pumps, compressor systems, irrigation
pumping systems.
� Residential sector: heating, ventilation, air-conditioning, lighting, appliances
(e. g. refrigerators, washing machines, televisions), hot water systems.
� Services sector: heating, ventilation, air-conditioning, lighting, office
appliances (e. g. PC, mainframes).
More efficient and cleaner technologies, energy-efficient equipment and
appliances generally cost more in OECD countries than in non-OECD
countries. In the OECD, equipment efficiency at the outset is already higher.
More than two-thirds of overall additional spending on the demand side will be
by consumers in those countries. On a per-capita basis, the incremental cost in
OECD countries is eight times higher than in non-OECD countries. Globally,
demand-side investments result in slower growth in electricity demand, reducing
global electricity generation needs by 3 900 TWh in 2030. As a result, there is less
need to build transmission and distribution lines: cumulative network
investment is $1 630 billion lower than in the Reference Scenario.
Not all policies in the Alternative Policy Scenario drive supply-side investments
down. Policies to promote renewable energy and nuclear power result in an
additional total investment in these types of generating plant of $600 billion.
However, the net supply-side investment in this scenario is still lower than
in the Reference Scenario, because the higher spending on renewables-based
and nuclear plants is more than offset by the reduction in total capacity.
Total new fossil-power plant investment in the Alternative Policy Scenario is
$1 030 billion lower than in the Reference Scenario.
Most of the avoided net investment along the entire electricity chain occurs in
developing countries, where savings amount to some $680 billion. Avoided
investment in OECD countries is smaller, largely because the additional capital
spending on end-use equipment is bigger.
196 World Energy Outlook 2006 - THE ALTERNATIVE POLICY SCENARIO
© OECD/IEA, 2007