Electricity demand in Asia and the effects on energy supply and the investment environment

Demand for energy (including electricity) has been increasing more rapidly in developing Asian economies than anywhere else in the world and is expected to continue growing. To meet rising demand, these countries must address such issues as how to meet the resulting enormous capital requirements and how to prevent environmental deterioration. To calculate what those capital requirements may be, and to estimate potential environmental damage, the authors built econometric energy demand models for seven economies: China, Indonesia, Malaysia, the Philippines, Republic of Korea, Taiwan (China), and Thailand. They estimate that electricity demand will increase an average 8.1 percent a year between 1993 and 2010. To finance power development projects, many governments are encouraging"build, operate, and own"or"build, operate, transfer"schemes, but there is a limit to the use of these schemes, which require foreign capital and thus reimbursements in hard currency. Because the seven governments must mobilize substantial domestic resources to finance capital requirements, it is essential that these countries develop or strengthen development of domestic bond and stock markets. To control emissions of pollutants will cost an estimated US$165 billion in 1994-2010.