2016

BAHIR DAR UNIVERSITY

Institute of Technology
School of Computing and Electrical Engineering
Department of Electrical Power

Impacts of Power Industry Restructuring, Urbanization, etc, on Power System Planning,

Operation and Economics
Assignment on Power System Planning and Reliability

Name: ADEY ADANE

ID No.: BDU 0800785 PGE
Pone No.: 0960334849
Email: adeyadane@yahoo.com
Submitted to Dr. Belachew B.

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ABSTRACT
The electric power industry is the last major regulated monopolistic institution to undergo a
process of restructuring in the midst of its most turbulence period in the history of mankind. A
number of driving forces including the environment, technological advancement, legislation
and regulatory initiatives and market forces, have brought about major changes to the industry.
Electricity generation, transmission and distribution have become “unbundled” commodities
and various institution and technical infrastructural strategies must be put in place to
accommodate relatively fair trade.
Generation is the process used to create electricity, usually at a central power plant. Transmission
is the process of transporting electricity at high voltages, often long distances from where it is
generated, to groups of electricity consumers. Distribution is the process of transforming
electricity to lower voltages and transporting it shorter distances to individual consumers.
Traditionally all three components of the electricity industry were considered natural
monopolies. In the long run, it is envisaged that customers will gain access to cheaper, more
reliable and uninterrupted power supply. With the advent and subsequently the implementation
of the idea of “unbundling” of the main components of the
electric power system, many restructured power system are now faced with new operational and
planning challenges.
This paper focuses on the impact of restructuring the electric power industry as well as
urbanizations in the power system accessibility and operation in Ethiopia.
The main objectives of this paper is to present a clear understanding of the roles, challenges,
opportunities, implementation, and the impacts of deregulation and urbanization in power utility,
system security, Available Transfer Capability (ATC) of a power system for improved network
adequacy.

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Executive Summary
In the first part (part one), this paper tries to address some justification in the field that how the
restructuring of power industry treats power system planning, operation, and economics in
developing Ethiopia.
The electricity industry has three components: generation, high-voltage transmission, and low-
voltage distribution. (In current times, as a result of restructuring, supply or retailing—power
procurement, billing, and customer service—has increasingly been considered a fourth
component). A wide variety of technologies and primary energy sources are used to generate
electricity. Nonrenewable sources include coal, petroleum, natural gas, and uranium; renewable
sources include biomass and hydro, wind, solar, and geothermal power.
Historically, the electricity industry has had a monolithic structure, with a single entity owning
generation and transmission capacity and performing all system operations. This entity transmits
power to one or more distribution companies that hold exclusive rights to serve households and
businesses in specific regions.
Electricity has unique physical and economic characteristics that limit the extent to which
decentralized market mechanisms can replace vertical and horizontal integration.
Complementarities between generation and transmission result in significant economies of scale
and scope, which are the main reason the industry evolved with a vertically integrated structure
The forces driving structural changes in the electricity is the industry poor operating and
financial performance of state-owned electricity systems (with low labor productivity, poor
service quality, and high system losses), lack of public funds for badly needed investments,
unavailability of service for large portions of the population, and government desires to raise
revenue through privatization .

In second part(part two), there is an investigation on the effects of urbanization to the power
system planning, operation, and economics of Ethiopia.
Current drivers for urban planning and energy (in particular, electricity) planning as well as their
future trends are investigated in this section.
As many cities are subject to expansion barriers due to space constraints, urban densification
(e.g. smart growth) is expected to sharply increase, increasing consumption density for energy
and other needs in these areas

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Tables of Contents

ABSTRACT...................................................................................................................................................... ii
Executive Summary...................................................................................................................................... iii
Tables of Contents ....................................................................................................................................... iv
1.0 Impacts of power industry restructuring ............................................................................................ 1
1.1 Background ......................................................................................................................................... 2
1.2 Role of Government ............................................................................................................................ 3
1.3 Energy Regulator ................................................................................................................................. 3
1.4 Power System Restructuring .............................................................................................................. 4
1.5 Unbundled Ancillary Services.............................................................................................................. 5
1.6 Objective Of Restructuring ................................................................................................................. 6
1.7 Restructuring the Industry .................................................................................................................. 6
1.7.1 Open Access Tariff Requirement ................................................................................................. 6
1.7.2 Functional Unbundling ..................................................................................................................... 6
1.7.3 Information Access. ..................................................................................................................... 7
1.7.4 A Climate Resilience and Green Economy (CRGE) ....................................................................... 7
1.7.5 The Electricity Feed-in-Tariff Law (2012) ..................................................................................... 7
1.7.6.Alternative Energy Development and Promotion program......................................................... 7
1.7.7 Competition. ............................................................................................................................ 7
1.7.8 Development of Supply and Demand for Competition ............................................................... 8
1.8.2 Socio-economic Consequences ................................................................................................... 9
1.8.3 Employment ............................................................................................................................... 10
1.8.4.Other Challenges Of Deregulation ............................................................................................. 10
1.9 Conclusion and Recommendation .................................................................................................... 11
1.9.1 Conclusion ................................................................................................................................. 11
2.0 Impact of Urbanization in power system planning, operation, and economics ............................... 11
2.1 Drivers of urban planning and energy planning and their impact ................................................... 12
2.1.1 Space Constraints due to Urbanization..................................................................................... 12
2.1.2 Ageing Infrastructure ................................................................................................................. 13

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2.1.3 Climate Change and GHG Reduction ........................................................................................ 13

2.1.4 Technology ................................................................................................................................. 14
2.1.5 Public Choice & Participation ..................................................................................................... 14
2.2 Key considerations in integrating urban planning and energy planning .......................................... 14
2.2.1 Key Considerations in Urban Planning & Energy Planning ........................................................ 14
2.2.2 Community energy planning ...................................................................................................... 16
2.2.3 District energy and combined heat and power: ........................................................................ 16
2.2.4 Environmental Externalities ....................................................................................................... 17
2.3 Transformation of urban electrical distribution utilities.................................................................. 18
2.4 Solar in an Urban Environment ........................................................................................................ 19
2.5 Conclusion and Recommendation .................................................................................................... 20
2.5.1 Conclusion .................................................................................................................................. 20
REFERENCES ................................................................................................................................................ 21

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1.0 Impacts of power industry restructuring

In pre-restructuring, electric utilities were natural monopolies governed by a regulatory
impact and legislature. The structure then was a strong vertically integrated utility with
the generation, transmission and distribution fused together. Recent developments have
brought about full competition in electricity sector. The role of generation, transmission
and distribution in the development of competitive markets in wholesale electric power is
of crucial importance.
Ethiopia has, for the first time in its history, opened up its electricity generation and distribution
sector to private investors. Privately owned power companies can now invest in the electric
power industry and compete with the state owned utility.
The pressure for the implementation of competitive markets in electricity industry requires the
establishment of well functioning players – buyers, sellers, brokers and marketers that require
nondiscriminatory transmission, generation and distribution services to get the products to the
markets.
In unbundled competitive wholesale electricity markets, transmission service takes a common
carrier role. The electricity markets require nondiscriminatory transmission services for all
players.

The changing nature of electricity to a structure with customer choice, vertical unbundling
and horizontal consideration, increasing volume in interregional energy transfer, a growing
proliferation in the number of transactions, instantaneous changing of suppliers and buyers,
independent grid operators with or without generation resources and decentralize decision
making has major repercussion in the organization and operation of generation, transmission and
distribution.
The accommodation of market forces with the engineering of power systems makes the
task more complex, in most cases the maintenance of system security and reliability
remains very important under the new structure as it was in the old system.
The paper outlines the challenges and opportunities associated with the separation of
services and costs in the unbundled transmission, generation and distribution utility.

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1.1 Background
The Ethiopian Electric Power Corporation(EEPCo) was named in 1997- after serving previously
in the name of the Ethiopian Electric Light and Power Agency(EELPA), which was established
in 1956.
EEPCo is a government owned utility responsible for the generation, transmission, distribution
and sales service of electric energy and maintenance of national grid throughout Ethiopia. The
corporation has two electric power supply systems: the Interconnected System (ICS) and the Self
Contained System (SCS).
The main energy source of ICS is hydropower plants, and for the SCS mini-hydro and diesel
power generators allocated in various areas of the country.
The ICS consists of 11 hydro, one geothermal, and 15 diesel power plants with a total capacity of
2022.2 MW, of which 91% is generated from hydro power plants. The SCS consists of three
small hydro and many isolated diesel plants, located throughout the country with a capacity of
6.15MW and 30.06MW respectively. As part of the government’s growth and transformation
plan, EEPCo has launched hydropower, and other renewable, projects to meet the 10,000MW
target in the coming five years. Regional interconnections with neighboring countries including
Djibouti, Sudan and Kenya are under the construction and procurement phases.
The company has been undergoing various continued transformations, such as via Customers’
Management System (CMS), decentralization of Accounting and Billing system from once
highly centralized down to the regional distribution offices, districts, and customer service
centres (CSCs), and Prepayment (Metering) System, in an effort to realize its long term strategic
vision of “becoming a centre of excellence in providing quality electric service to everyone’s
doorstep and being competitive in energy export.”
Institutionally, Ethiopia has moved from a vertically integrated monopoly towards an
autonomous entity that ensures transport and distribution and allows for private generation.
EEPCo is mandated to encourage private investment in the energy sector and relevant laws were
enacted in 2005 and 2007. Private sector power purchase agreements are negotiated with EEPCo.
Independent Power Producers (IPP) are promoted to supply power through the Electricity
Operations Regulations (49/1999), the letter of power sector policy (2003) and the Investment
proclamation (280/2004).

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1.2 Role of Government

Ministry of Water and Energy (MWE)
The MWE is the federal institution responsible for development, planning, and management of
energy resources as well as for creation of policies, strategies, and programs. The MWE
develops and implements laws and regulations for the energy sector, provides technical support
to regional energy bureaus and offices, and signs international agreements. Following the
government’s restructuring of agreements in 2010, all duties and responsibilities of the former
Ethiopian Rural Energy Development and Promotion Centre (EREDPC) were transferred to new
departments under the MWE, including the Alternative Energy Development and Promotion
Directorate (AEDPD). Within the MWE, a Rural Electrification Fund has been established with
the goal of debt financing small-scale rural energy initiatives.
Responsibility for the development and deployment of small scale renewable energy
technologies lies within the responsibility of the Ministry of Water and Energy which has led the
development of the off grid rural electrification master plan. MWE has also introduced feed-in
tariff legislation that will establish the rates and conditions for independent power producers to
sell electricity to the national grid. However, the bill has gone through several revisions and it is
not clear when it will become law.
1.3 Energy Regulator
The Ethiopian Electric Agency, established in June 1997, regulates operations in the electricity
supply sector, including licensing and ensuring safety and quality standards.
A newly established entity, the Ethiopian Energy Agency (EEA) will replace the Ethiopian
Electricity Agency (EEA) to encompass the energy sector in a broad spectrum. The regulatory
body will control private energy investments in the country and will also set prices for the private
and state power distributors. According to the new law that was ratified by the House of People’s
Representatives in November of 2013, the EEA will be headed by a board of directors and the
board will review tariff proposals for the national grid and submit them to the Council of
Minister’s for approval. Moreover, the board will approve off-national-grid tariffs directly
without any approval from higher bodies.
The Energy Regulator has the following roles.
- To supervise and ensure that the generation, transmission, distribution and sale of electricity are
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carried out in accordance with the Electricity Proclamation No. 86/1997, the regulations and
relevant directives.
- To determine the quality and standard of electricity services and ensure implementation.
- To issue certificates of professional competence to electrical contractors.
- Issuing, and revoking licenses for the generation, transmission, distribution and sale of
electricity.
- To recommend a tariff and supervise the implementation of the tariff.
- To cooperate with training institutions in the field of technical development of electricity.

1.4 Power System Restructuring

The process of privatization in power industry is called power system restructuring. This process
has challenged many technical and economic concepts in generation, transmission, and
distribution of electric power.
In the past the government owned the power systems and generation, transmission, and
distribution. In fact it was governments’ duty to construct the electricity generation and
transmission infrastructures and to operate and maintain them in order to deliver reliable electric
power to the consumers. The electric energy was also generally subsidized because electricity
was perceived as a public service. In the liberalized electricity markets, generation units are
owned by private companies and government only has the transmission grid and supervises over
the economic and reliable operation of the power system.
The purpose of the restructuring is to "unbundle" or separate generation from transmission and
distribution and to require utilities to give sellers and purchasers of generated power access to the
transmission and distribution grids. The transmission and distribution of power on a standalone
basis is known as "wheeling."
The worldwide restructuring of the power industry to meet the challenges of the new economic
environment is characterized by intense competition and globalization of markets. With the
unbundling, separating this competitive segment (generation and supply) from monopoly
segment (transmission and distribution) as well as marketing from the operation functions. At the
same time it is being privatized, passing by multinational companies.
Transmission service is the most critical element in making competitive electricity markets work.
It provides and coordinates the various equipment / facilities / generating resources directly

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connected to the transmission network and possibly some distribution network using complex
data gathering, communication and control equipment and processes which are part of the energy
management system.
Transmission system was developed primarily to meet the customers’ demands by
connecting remote generating resources to load centers and later by interconnecting
utilities for reliability and constructing ties to support inter-utility transactions. All support
services such as Voltage regulation, Frequency, Control, Var output, generation and Var
reserve were all bundled into a single design for that very purpose.

1.5 Unbundled Ancillary Services

Ancillary services are system support services that are essential for physical delivery of
energy from source point to a load point. These services are fundamental and their absence
would result to instantaneous system collapse.
The following are list of ancillary services:
 scheduling, system control and dispatch
 reactive power and Voltage control from generating sources
 regulation and frequency response
 energy imbalance
 operating reserve – spinning and supplemental backup supply and system control
 real power transmission losses
 network stability services from generation sources
 system black start capacity.
These services are provided mostly by generation sources. Pricing allows for package deals in
addition to rates for services purchased separately and transmission.
The scheduling, system control and dispatch services encompass the activities required
to maintain a generation / demand balance, including the implementation of interchange
transactions, and to ensure operational security.
The establishment of independent grids lead to the need for the acquisition of ancillary services
and advent of competitive market place makes possible the provision of such services.

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1.6 Objective Of Restructuring

The objectives for reform / deregulation in the power industry are as follows,
 To improve economic efficiency by introducing competition in power industry.
 Attracting private investors for creating new generation capacities, transmission and
distribution in response to an ever-increasing electric demand to secure
long term supply at reasonable costs.
 Increase quality of service and availability
 Maximize economic use of energy resources and transmission infrastructure.
 Competitive tariffs that reflect efficient economic costs.
 Promote regional power trading and open power trading with other countres.
 Moving from the existing monopolistic and centralized structure for the planning and
operation of the power system towards a more decentralized structure in which
markets for power utility services would be contested.
 Improving transparency in power utility regulation including the setting and
adjustment of tariffs and maintaining the financial wealth of the power utility.
 Increasing management accountability in the existing public utilities.
 Environmental concerns and the need for more efficient technologies.
 The success in liberalization in other industries such as transportation industry.
 The improvement in information technology which made the transfer of huge data
possible.

1.7 Restructuring the Industry

1.7.1 Open Access Tariff Requirement.
To offer non-discriminatory open access transmission and ancillary services to wholesale sellers
and purchasers of electric energy in interstate commerce. And Non-Discriminatory Open Access
Tariff Provisions to file open access non discriminatory transmission tariffs that contain
minimum terms and conditions of non discriminatory service.
1.7.2 Functional Unbundling.
To separate (unbundle) its use of its own transmission system for the purpose of engaging in
wholesale sales and purchases of electric energy from other activities and transmission services
(including ancillary services) and to take transmission services for its wholesale sales and

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purchases under the filed transmission tariff of general applicability. This requirement is to
ensure comparability.

1.7.3 Information Access.

To develop and maintain a same-time information system that will give existing and potential
transmission users the same access to transmission information that the public utility enjoys.
1.7.4 A Climate Resilience and Green Economy (CRGE)
the strategy has been set up which has the policy objective of expanding electricity generation
from renewable sources of energy for domestic and regional markets.
1.7.5 The Electricity Feed-in-Tariff Law (2012).
To encourage the diversification of the power mix in the national grid and thus making power
supply more reliable and less prone to be affected by weather and market conditions.
1.7.6.Alternative Energy Development and Promotion program .
To develop the country’s abundant renewable energy resources and technologies through
adoption or innovation of new technologies. The current energy sector policy of the country
aimed a five-fold increase in renewable energy production and also targets to export power to
neighbouring countries since power demand in Ethiopia is constrained by limited consumption
due to underdevelopment. According to EEPCo the longer-term plan is to hit a target of zero
carbon emissions by 2025 with hopes that the private sector will play a pivotal role to help meet
these goals (Asress, 2013).

1.7.7 Competition.

Ethiopia has, for the first time in its history, opened up its electricity generation and distribution
sector to private investors. The decision follows the ratification of a new proclamation by
Ethiopia’s House of People’s Representatives on 2013. Prior to the new law, EEPCO was the
sole organization in charge of power generation, transmission, distribution and sale of electricity
in the country. However, now private power companies looking to invest in the industry can
compete with EEPCO.
A newly established entity, the Ethiopian Electric Agency (EEA), will monitor private
investments in the energy sector and is also expected to set prices for the private and state power

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distributors. In the restructured electric industry, utilities will have to compete with each other
and with non-utility generators to sell power.

1.7.8 Development of Supply and Demand for Competition

[1] Price Stability
(a) substantial increases in scale economies which encouraged large, vertically integrated utility
companies,
(b) technological improvements, and
(c) only moderate increases in input prices.
[2] Development of Demand for Competitive Supply Alternatives
economic and technological changes, as well as changes in the transmission sector of the
industry, gave rise to a demand for competitive power supplies, made possible the development
of alternative supplies, and created a demand for transmission access to bring supply and demand
together.
[a] Economic Changes
The economic changes included rapid inflation, higher nominal interest rates, conservation, and
economic downturns which left many utilities with excessive generating capacity. Nuclear and
other capital-intensive base-load facilities under construction based upon projected increases in
demand were over budget and behind schedule, due in part to increased environmental
regulation, at a time when the demand for the generating capacity to be supplied by such
facilities did not materialize.
Some industrial customers constructed their own generating facilities to reduce power costs.
Their "bypass" of the electric utilities resulted in rate increases for remaining customers.
These economic changes created pressure on regulators to investigate the prudency of utility
decisions to build generating plants.
[b] Technological Changes in Generation
Smaller size units became cost effective. Combined cycle units (generally using natural gas)
offered the advantages of lower capital costs, increased reliability, and relatively minimal
environmental impacts. Conventional steam units using circulating fluidized bed boilers and
fueled by coal or other conventional fuels were also found to be more efficient and less polluting
generating resources.

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[c] Technological Changes in Transmission

Technological advances made it economic to transmit electric power over long distances at
higher voltages. This made it feasible for utilities with lower cost generation sources to reach
previously isolated systems where customers were captive to higher cost generation.
Additionally, there were increased coordinated operations, and utilities reduced their reserve
margins. This results that substantial amounts of electricity moved between regions and between
utilities in the same region.

1.8 Negative Challenges of Restructuring

1.8.1.Stranded Costs
Stranded costs are unrecovered costs incurred by regulated utilities in reliance upon the pre-open
access regulatory scheme. Under that scheme, utilities had an obligation to serve the public in
exchange for which they were allowed to recover their prudently incurred costs and given an
opportunity to earn a reasonable rate of return on certain investments.
In the restructured electric industry, utilities will have to compete with each other and with non-
utility generators to sell power. In order to be able to compete effectively, utilities may no longer
be able to recover their full costs for power purchases from qualifying facilities.
The treatment of stranded costs affects the ability of consumers to take advantage of direct
access and may affect the playing field between coal and gas-fired generation. It also raises
concerns for the environmental community which fears that allowing full stranded cost recovery
will enable utilities to continue to operate older, dirtier plants which would shut down absent
such recovery

1.8.2 Socio-economic Consequences

In a deregulated power industry, consumers stand to loss because prices are raised to exploitative
level. Invariably, the poor urban consumers suffer most if services provided by the utility
becomes less accessible in terms of affordability. Prices for services increase dramatically
notably if cross subsidization practices common to State owned utilities are abandoned or
government subsidies are withdrawn in the interest of efficiency.
On the long run, the introduction of competition or cost reducing mechanisms should benefit
consumers but transitional problem may be acute particularly in extreme poverty environment.
In attempts to move low electricity price towards economically efficient tariffs through gradual
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introduction of the principle of long run marginal cost may lead to astronomic increase in
electricity tariffs.
It should be noticed that tariff hike will not only affect residential users but will influence
investment decisions in manufacturing, mining and processing.

1.8.3 Employment
Deregulation has negative effect on employment and the associated efficiency
improvements will cause major job losses as new owners of privatized firm, shed excess
labour (downsizing) to improve efficiency as diversifying governments at the work force to
prepare for privatization in the event of redundancy or redeployment, end of service
benefits payments take a long time to be honored. The long waiting periods cause
untold hardship on displaced workers and families with the attendant social economic
implications.

1.8.4.Other Challenges Of Deregulation

 There is need to appropriate incentives for the owners of transmission and distribution
systems to take the risk in capital investments.
 A return on investment for operating software needs to be considered by regulators.
 There is need to provide an incentive for operators to consider software solutions along
with hardware solutions not conditioned by ease of recovery of investment within
regulatory rules.
 Restructuring results in downsizing and loss of some institutional memory and technical
expertise.
 Normal communication channels for conducting business will not exist or be
disrupted.
 Management challenges will be required to establish effective business processes, to
clearly define new responsibilities and to facilitate communication.
 There is need for real time information on generation, available markets and transmission
capacity between utilities and between regions.
 There is also need for application of cost effective technologies such as FACTS devices
that result in increase utilization of existing transmission assets.

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 There is need for technologies to remove constraints based on this assumption that public
opposition will restrict the expansion of transmission facilities.
 To effect a technological change in an organization, some in the organization need to be
familiar with the alternative technologies and be the ”champion” for the change.

1.9 Conclusion and Recommendation

1.9.1 Conclusion
The term deregulation means that competition has been augmented into power marketing,
allowing generation companies and transmission companies to compete in a free market for
business.
The deregulation of electric power industry has become a global issue and new technologies in
generation transmission and distribution of energy and the investment in automation has
improved network security, reliability and cost reduction of processing.
Prices have become lower, and power supply reliability is better as application of new
technologies are accelerated and new measures are advanced for reduction of power losses,
energy theft and improvement of revenue generation by employing the most effective method of
energy metering as measured parameters for the assessment of energy generated for profitability
and accountability. This has improved the power delivery and encouraged investment in the
power industry.
Under a deregulated economy a large volume of energy is injected into the National grid
by the independent power producers, thus increasing the amount of energy wheeled into
the grid. This in effect reduces the cost of energy, frequency of power outages, improves
power factor, line loading time of use metering, availability transfer capability and system
reliability etc.
2.0 Impact of Urbanization in power system planning, operation, and
economics.
Urbanization is a global phenomenon resulting in an ever-increasing concentration of
individuals, economic activity, and resource requirements changing towns into cities and cities
into mega-cities. As many cities are subject to expansion barriers due to space constraints, urban
densification (e.g. smart growth) is expected to sharply increase, increasing consumption density
for energy and other needs in these areas. The pace at which consumption density is increasing

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can exceed the time required to plan, obtain approval, design and construct the infrastructure
needed to meet the new requirement (or future demand). This has the potential to overburden the
existing infrastructure in cities in the short-term leading to their premature failure. In the longer
term, delays in getting the required infrastructure for services in place, could result in the
slowing down of economic development (i.e., industries moving away), and citizen
dissatisfaction. It is worth noting however, that getting approval to build additional infrastructure
for services or even upgrading the existing ones in cities where severe space constraints already
exist would be a formidable task.
With the advent of smart in-home devices including computers as well as increased automation
of commercial and industrial processes, customers are redefining the reliability and power
quality of electricity supply. There is a definite shift in customer expectation towards zero
tolerance for electricity supply interruptions in urban areas. Consistent with increasing urban
population density with the construction of ever taller high-rises, electrical utilities see higher
load densities often exceeding the capacity of the existing electrical supply infrastructure in the
area. As mentioned, urban space constraint being a key factor, new ways must be found to meet
the service needs including the electrical needs of these dense areas. Thus urban planning
concerns itself with developing and managing the physical infrastructure, social, economic,
environmental and energy needs of a city. While planning for energy is integral to the overall
urban planning process, because of the need for detailed specific expertise, procurement and
delivery of such big-ticket items as electricity and gas are handled by separate agencies.

2.1 Drivers of urban planning and energy planning and their impact
Current drivers for urban planning and energy (in particular, electricity) planning as well as their
future trends will bring about changes and innovation in the outcome of urban planning and
energy planning. However, the pace of change and innovation will not be the same for all drivers
as it will depend on each driver’s relative impact and profile. Given below are the drivers for
urban planning and energy planning.

2.1.1 Space Constraints due to Urbanization

All cities in Ethiopia are growing rapidly which in turn more infrastructures (condominium units,
modern roads, railways utilities, and other constructions ) have been added .These basic

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infrastructures need more space which they are growing horizontally. In particular, as
development is occurring predominantly through intensification of built-up areas as a means to
curb urban sprawl and prevent the need for extending infrastructure such as roads, public
transportation and utilities ever farther.
This urban intensification, occurring in all major cities, is mandated by the Places to grow that
aims at preserving pristine yet vulnerable habitats like apartment or real states in which all these
above growth requires electricity.

2.1.2 Ageing Infrastructure

A direct reflection of the high rate of urbanization is higher load density for new construction
and therefore putting strain on water, sewer and energy (electricity, gas) infrastructure, which, in
many instances, is already to its capacity due to past growth. It would be worth noting that the
existing water, sewer and energy infrastructure (if not new) would require increased maintenance
cost to simply function or if a decision is made to replace, outright replacement at a much higher
capital cost.
All power outages occurred due to aging equipments that the cities has the highest outages-
interruptions per customer anywhere in the world, continual refurbishment of its infrastructure
not only increases the electrical system’s resilience but overall customer satisfaction.

2.1.3 Climate Change and GHG Reduction

Perhaps one of the most critical issues facing the world today is climate change and its impact on
both the natural and built environment, like a city’s infrastructure. Extreme weather related
events of the past decade or so attest to the seriousness of the issue and its repercussions on
sewer systems, grids and transportation etc. Jurisdictions have established initiatives that are
wide ranging in scope: eco-friendly designs for buildings/residential units, building resilient
cities, elimination of coal or its decarbonisation prior to its use in any carbon-led industry, use of
renewables such as wind and solar in the electricity industry, shift towards electric mobility of
goods and people, etc.
One of the key drivers of building resiliency has been the insurance industry that has seen many
fold jump in insurance claims in the last decade. Projections indicate this trend to continue unless
concrete steps are taken to reduce emissions and to improve infrastructure resiliency.

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2.1.4 Technology
Technological developments continue at an astounding pace. In fact, the pace is so fast that the
affected industries are having a difficult time coping with it. Furthermore, in our context, the
growth in technology is on all fronts affecting all players: customers, electricity generators,
transmitters and distributors. While concerns exist with respect to reliability of new technologies
because of a lack of enough performance history, the benefits of new technologies cannot be
overlooked. For example, through the use of new technologies, electricity distributors can,
among other things, improve reliability, asset utilization levels, and efficiency as well as
maximize integration of renewables in the grid whereas electricity consumers can better manage
their electrical bills through load control and can be a partner in effecting solutions to grid
problems. The emerging technology of energy storage, which can be utilized by electricity
distributors and consumers alike for a multitude of benefits, seen as a game-changer in the
electrical utility industry. Utilities are engaging in pilot projects to test out some of the new
technologies on the market.

2.1.5 Public Choice & Participation

A key shift in the areas of urban development planning and urban energy planning has been from
an expert-driven activity to one that allows far greater public engagement and participation.
Public engagement and partnerships, therefore, are seen as a cornerstone in novel planning and
operation of the electrical grid approaches which can empower communities and result in more
options to choose from, greater public acceptance of the option chosen as well as better overall
design of urban projects. Participatory planning as it is termed, however, is not without caveats.
It has to be properly planned and executed so that it is meaningful and socially inclusive of all
groups representing the community.

2.2 Key considerations in integrating urban planning and energy planning

2.2.1 Key Considerations in Urban Planning & Energy Planning

Urban and energy planning has moved beyond simply providing for the basic necessities and
societal needs – like roads and bridges, water and sewer systems, or electricity and gas utilities –
to a stage where the central focus has become sustainability, making it much more complex and
interdependent.
Urban and energy planning in all its facets, therefore, must focus on respecting, preserving and
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creating natural environment while improving human environment. Injecting sustainability into
the planning process, as adopted by most if not all mega cities, also requires demonstrating
efficiency in the use of land and other resources such as water, energy and materials required to
run the cities, which ultimately also results in a lower ecological footprint.

Major trends amongst mega cities integrating urban planning and energy planning with an
emphasis on sustainability include the following:
1. Producing, integrating, and using renewable energy
2. Aiming for a net zero carbon footprint, i.e., “carbon-neutral” city
3. Reducing ecological footprint (waste reduction, energy efficiency, demand management, etc.)
4. Transitioning to distributed electrical power system (shift from large centralized power
plants) – also refer to the next section for this
5. Promoting and developing sustainable transportation

Renewable Energy & Ecological Footprint: In pursuing the trends, there is emphasis on cities
taking a sustainable route for energy from its production to consumption, all within city
boundaries. Cities will not be simply consumers of energy; rather they will demonstrate
leadership in developing energy, all within city boundaries, through innovative and sustainable
means that also helps spur economic viability of the area.
Carbon neutrality goes hand in hand with reducing the ecological footprint of a region where a
demonstrable and measurable outcome is continually achieved through sustained effort, such as
reducing dependence on fossil fuels, improving efficiency in energy, lowering waste, and
undertaking initiatives that offset carbon emission (like planting trees). Different sectors such as
households, businesses and academic institutions are all encouraged and incented to participate.

Distributed Electrical Power: Driven by innovations in technology and concerns for

environment, there is a shift from a centralized generation model to supply electricity to urban
areas, where large conventional generators are located far away, to a distributed generation
model where energy producing resources, often renewable in nature, are scattered within the
city’s electrical distribution system. The benefits of this include, among other things, improved
electrical efficiency, greater grid resilience, and lower carbon footprint. Furthermore, incentives
for solar energy on roof-tops of buildings and homes and community energy co-ops are
providing additional impetus towards strengthening the distributed generation model.
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Grid Resiliency Opens New Planning Avenue – The Community Energy Plans: The synergy
created by the need for electrical grid resiliency in light of extreme weather, incentives for
developing more and more renewables, and an influx of new cost-effective technologies for
integration and control are pushing the envelope especially in urban and urbanizing areas. The
result has been the development of “community energy plans - CEPs” by communities, towns
and cities.

2.2.2 Community energy planning

Community energy planning originated from the recognition of the importance of infrastructure
related energy consumption and the effect that changes in land-use patterns play in determining
energy consumption levels for an urban area. This can also be attributed to a raising awareness of
the environmental impacts related with energy use in cities (e.g. smog and climate change).
Community energy planning is increasingly being feasible in small-scale communities due to
improving cost-effectiveness of technologies for small-scale, decentralized cogeneration of heat
and electricity as well as the availability of greener energy technologies in urban settings
Considerations for community energy planning are as follows:
1. How growth impacts energy consumption? This is quantified in terms of population growth,
changing land use pattern.
2. Who is going to provide the energy required?
3. Where in the city can energy be produced, to create decentralized and new sources of energy?
Community Energy Plans (CEPs) are guided by an integrated energy approach, which takes
municipal, utility, transportation and other public and private infrastructure investments in a
community and finds opportunities to create a more holistic energy system emphasizing
reduction in energy consumption and increasing energy reliability.

2.2.3 District energy and combined heat and power:

District energy systems a central plant produces hot steam or cold water, which is then transport
through underground pipes to buildings for heating, hot water and air conditioning needs. This is
a collective utilization of resources, which eliminates the need for each building to own their
own separate heating units, boilers, furnaces etc.
Some other benefits include:
 Increase in energy efficiency

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 Decrease in capital costs

 Better management of operation
 Increased environmental protection
 Flexibility in fuel choices
 Reliability
 Increased resiliency

2.2.4 Environmental Externalities

Understanding and quantifying the full cost of impacts to society and environment must be
incorporated while estimating costs of energy production and distribution. An externality is any
cost or benefit that is not currently reflected in the price paid for energy. These external costs are
created by some impacts of the energy production and transmission process.
Some important externalities to be considered for energy production and consumption are as
follows:
 Air pollution
 Carbon emissions
 Water pollution
 Land use change and its impacts
 Effects on human health
 Radioactive risk
 Effects to the environment e.g. fish population and hydro
Quantifying externalities is difficult, yet possible.
Including externalities in the energy production and distribution process would also lead to push
for green energy, as the economic competitiveness of renewable energy compared to carbon
intensive fuel sources will increase. However, including externalities could lead to possible
increase in price of energy, directly affecting markets and profits. A framework needs to be
developed to account for externalities and creating a holistic system, which takes into account
societal and environmental impacts as well as economic impacts of energy systems.
Carbon credits and pricing policy:

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Recognizing the importance of emissions, global climate change and its growing impact on lives
of citizens has led to nation states adopting policies to disincentives the use of carbon intensive
fuels.
Carbon pricing has some advantages, such as:
 Cost effectiveness
 Generating revenue
 Simple transparent and easy to understand concept
 Pushing for innovation
 Creating a favorable environment for low carbon technologies to flourish

2.3 Transformation of urban electrical distribution utilities

For almost a decade the electrical utility industry in some parts of the world has continued to see
unprecedented levels of changes. While the drivers of these changes, as noted above, are due to
the environment, ageing assets, economic industrial downturn, new technologies, and customer
choice, the collective impact of these has been nothing less than a transformation of the electrical
utility business.
The changes have affected in the way electricity is produced, delivered, utilized and controlled.
Customers are no longer an entity that passively receives services, rather they are an active
participant in the planning, design and operation of the electrical utility industry. Distribution
systems are no longer only receiving electrons from transmission, but also at times supplying
electrons to transmission. Generation sources are no longer only located at faraway places in
transmission, smaller generation resources, called distributed generation, are increasingly
embedded in electrical distribution systems often close to customer loads in urban areas. New
generation resources, unlike their predecessors, are renewable and intermittent in nature, and
therefore hard to predict and control. What’s more, increasing use of new technologies and
customer engagement resulting in micro-grids and ‘zero-energy’ (or ‘net-zero’) developments
challenge the basic structure of the electric utility industry. Cities have much to gain from this
transition and as cities and local governments continue to become increasingly important players
in promoting the local generation and use of renewable energy, new policies emerge.

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The transitioning of energy systems is nothing short but a conceptual clash of how energy is
distributed. We are experiencing a shift from centralized generation and AC distribution to more
distributed generation and increased use of DC power.
As this transformation advances, electrical utilities must find newer ways to maximize the use of
their physical and human resources, demonstrate efficiency on all fronts and bring tangible value
to customers. Government policy makers, regulators and utilities all need to work together to
ensure a highly reliable electrical supply at affordable rates continues to serve consumers as they
have previously enjoyed, throughout the period of uncertainty and transformation.

2.4 Solar in an Urban Environment

The development of solar energy is exemplary of the rapid growth of renewables around the
globe. While the vast majority of PV(photovoltic) and CSP(concentrated solar power) capacity
comes from large-scale solar farms, located in rather remote areas, solar PV has recently
experienced increased uptake in urban environments. Urban solar energy has several advantages
compared to other forms of renewable energy, such as wind. The latter faces greater public
opposition due to noise pollution and unpleasant aesthetics. Solar on the other hand is less of a
nuisance. Today’s solar cells and mounting systems have become less conspicuous as they can
be integrated into a building’s façade or lay on a rooftop, creating but little eyesores. Once
installed, PV can produce electricity for 25, 30 or more years with minimum maintenance.
There are of course other ways to capture the power of the sun, via passive solar energy for
example or, thermal energy. Solar thermal (not to be confused with CSP) heating is a simple yet
mature technology, which can be used to meet a variety of water and space heating needs for
residential, commercial, institutional and industrial sites. Solar thermal heating is considered to
be one of the most cost effective form of on-site renewable energy generation.
However, solar has its drawbacks, which are often more pronounced in an urban environment as
opposed to a rural one. Shading is one of the major reasons why solar may not be feasible for a
whole array of sites, especially in the downtown core, where tall buildings cast long shadows
across rooftops and vacant lands. Further, many roofs on older city buildings do not have the
structural strength to support solar arrays or the cost of reinforcement is often too high.

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2.5 Conclusion and Recommendation

2.5.1 Conclusion
In recent years, cities/municipalities have often set more ambitious goals for renewable energy
and GHG emission reduction, compared to provincial and especially federal governments.
Change in the way they generate, distribute and consume energy with the ultimate goal to reduce
its demand and manage (generate and store) it more sustainably.
The desire to improve quality of life of all its citizens has been and will remain one of the key
drivers for urban energy planning, which is a multifaceted and interconnected approach that
includes a myriad of factors. These are; energy security, economic considerations, resource
scarcity, societal/behavioral change, resilience and climate change mitigation policies to name
just a few. Whatever the motivation, significant change is only possible by designing new
infrastructure for the future and integrating ‘Energy’ into Urban and Regional Planning.
Urban Energy Planning is driven by a multidisciplinary approach aiming to address issues of
generation, conservation, and distribution from an economic, engineering, political, and social
perspective.
Participating communities and stakeholders in energy and urban planning is ultimately the best
way to set important goals of developing energy in urban areas.

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