The Lag and Lead of Energy Investing

By Paul Sullivan,
Georgetown University

Investing in energy systems takes a lot of time and a lot of money. Planning is required to do this right for a country, for a company and for a community. If one waits until the lights go out, the petrol is not in the stations, the houses are cold, and the factories have stopped, it is clearly too late.
The importance of forward investments are vital especially for a quickly growing economy, such as Mongolia and China. As an economy grows, energy demands increase, and increase sometimes at a breathtaking speed. As people gets wealthier, they want more appliances in the houses, such as clothes washers, dryers, modern heating, modern stoves for cooking, cars, more and better lighting, radios, TVs, computers, and all of the things that go along with being a richer country. All of these things will require that the country produces more electricity, more gas and oil, more petrol and diesel, and more of just about every kind of energy people use.
As industry grows, it needs more energy. As more hotels and office buildings are completed, more energy is needed. Even as the government grows, more energy is needed for its requirements. Think of a growing army and all of the fuel, electricity, gas and more it will need. Now think of a growing army in a country that gets very cold in the winter.
This last part adds in even more complexity. Not only is energy needed to grow, energy planning needs to take into consideration seasonal energy changes and even daily energy changes. Seasonal energy changes are pretty clear for Mongolia. When it is a wonderful warmish sunny day in June a lot less energy is needed than when it is cold and windy in the middle of January. Energy demands also change during the days, not just by the seasons. When people are asleep, and everyone has to sleep, energy demands normally go down. As they are waking up, turn on the light, turn up the heater a bit, start making tea and breakfast and so on, energy demands increase. Then many go to work, school, and other daily occupations. Energy demands will likely go down in the houses and apartments, and then rise in the office buildings and factories, for examples. During the day, the heating and cooling demands will change as the cycles of the sun go through their inevitable movements. There are also times at mid-day when demands increase as people go to lunch. Cooking takes energy. Then as people head home, energy demands in households increase for dinner time, TV watching, clothes washing and drying and so forth. As people head to sleep, energy demands go down. The lights go out. Often heaters are turned down as people cozy up in the warmth of blankets and so forth. Then as the night goes on, energy demands head toward the beginning of another day. Then the cycle begins again. Colder days need more heating. Warmer days need more cooling.
All of these cycles need energy supplies that can adjust to the needs of the people, the factories, and offices. As populations grow, as income and wealth grows, as investment in industry and other economic activities grow, then energy demands normally grow. More electricity generation plants will need to be built. The electricity infrastructure needs to keep up with both the production and demand increases in electricity. More refinery capacity needs to be built. More coal needs to be dug up and transported to the factories and electricity plants. More gas lines need to be put down. More refined product pipelines need to be put in place and activated.
These are just a few of the investment needs that will be required. Many of these can take years to accomplish at a big scale and months even at a small scale. It is not just that it takes time to construct the plants, pipelines and refinery capacity. A lot of these investments need permitting. They also can go through some very lengthy legal issues. There may also be push back from politicians, NGOs and others. All of these potential time delays need to be calculated with some reasonable sense of the realities the investors and other face.
Yes, energy investments need to be done before the problems start. Good forecasting of all sorts of economic, demographic, and other future trends needs to be done. It is not as simple as a politician saying “let’s solve the electricity problem” or “let’s make sure there is enough coal and petrol around in the future”. A huge amount of investment, planning and common sense thinking is required – and often well in advance to make sure energy shortages and other problems do not happen.

Short URL: http://ubpost.mongolnews.mn/?p=8474

Posted by on Mar 26 2014. Filed under Opinion. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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