Mitigation Analysis

Baseline Scenario

The energy baseline scenario for 1990-2025 period was based on a macroeconomic scenario that assumes a sustained economic development, where the barriers that currently restrict the country's economic development will be overcome but without major structural changes taking place; the oil industry reduces its participation in the gross domestic product (GDP) while the manufacture industry share increases it as a result of the aluminum and petrochemical industries development; a moderate decrease in the contribution of the service sector is also assumed. Regarding demographic assumptions, a reduction in population growth rate and few changes in income levels structure are assumed. Table III.1 shows the main parameters of this scenario.

In the sectoral energy demand scenarios, changes in energy use intensities are assumed as a result of improvements in the equipment efficiency, a better energy management, and changes in life style. A gradual increase in energy prices is set forth until they reach their opportunity cost (FOB export costs) in the case of oil fuels, or their marginal cost, in the case of natural gas and electricity.

The scenario assumes that there will be transformations in the energy system as a result of economic development, but no further efforts will be made to establish specific policies or measures to control or reduce greenhouse gas emissions.

Supply Side

A national electricity expansion plan for 1994-2023 period, was developed (Jimenez,1996) with the participation of the national electric sector institutions, including the utilities, who provided the required data for this study. The demand of electricity will grow 3.85% annual during the 1994-2001 period and will then be maintained in 3.6% for the rest of the period. Figure III.7 compares the power capacity without expansion with the estimate of power demand; as can be noticed, both parameters coincide in 2016.

Using the ELECTRIC Module of the ENPEP twelve cases were analyzed with the adoption of three hydroconditions and four variants for each hydrocondition. The alternative which presented the total lowest cost and the lowest risk is the case that considers the recovery and reconditioning program for the thermal stock, the start-up of Caruachi hydro power plant in the year 2003 and the hydrocondition of a rainy year. Figure III.7 shows the results of the installed capacity expansion for this case. Hydroenegy generation increases up to the 2011, and from that year , the increase corresponds to thermal generation with natural gas.

The assumptions on oil and gas supply are based on the expansion plans of the national oil industry, which takes into account increases in the production and capacity of all sources.

Demand Side

Industrial Sector: The main assumption is the maintenance of the base year structure for the whole study period, in relation to final use and energy source split; energy intensities by final use for the industrial sector will change over the study period, depending on the final use, regardless of the industrial branch in which the change takes place. On the other hand, this evolution deals mainly with improvements of energy efficiency of final equipment, since structural changes and fuel switching are accounted by other indicators.

Transportation Sector: The evolution of passenger-kilometers (PKm and ton-kilometers (TKm), was built bearing in mind the ratio of those parameters to total population in industrialized countries during the eighties. To achieve such levels at the end of the study period, those parameters will have to increase faster than population.

The structure of each transport branch by mode will change slightly over the years; the maintenance of each transport mode structure by vehicle age and fuel was assumed. Neither relative aging nor renewal of the vehicles' stock is considered. The average fuel consumption will change as a result of improvements in the vehicles energy efficiency, changes in habits, management measures undertaken by transport companies, etc.

Residential Sector: The main assumption for the future development of this sector is the maintenance of the base year level of each final use penetration for all income levels. The main changes are: (i) a relatively high level of penetration of natural gas devices wherever is possible (cooking, water heating and air conditioning), (ii) a small penetration of solar energy for water heating, and (iii) a significant increase in the share of improved equipment for all possible uses.

Results

Primary energy production, that was 1000 MBOE in 1990, would double in year 2010 and would be 4.6 times higher in 2025. Table III.2 shows that this high increase, which reaches 4.4% annually, is basically due to fossil fuels production that account for most of the energy production, basically encouraged by exports that grow at about 5.0% per year. As it can be noticed in Table III.3, final consumption and fuels for electrical generation grow at lower rates, 3.3% and 2.6% per year, respectively.

On the other hand, final energy consumption,which was 189 MBOE in 1990, would almost double by year 2010 and would almost triple by year 2025. This represents a growth of 3.3% annually during the period, which is lower than the average growth assumed for the GDP (3.9%), and higher than population growth (2.2%). This means a reduction in the energy use intensity and an increase in the per capita energy consumption. The final fossil fuel consumption grows at 3.3% interannually, while electricity consumption grows at 3.0%. Natural gas shows the highest growth (4.2% per year), which implies an important penetration of this fuel in consumption, by increasing its participation in the total final consumption from 33.0% in 1990, to 44% in the year 2025.

With respect to consumption by sectors, the industrial sector shows the highest growth, with an annual rate of 4%. The consumption growth of the residential, services, and other sectors is moderate (1.6%) and is placed below the assumed population growth. The transportation sector increases 2.7% per year, which is just over the population growth but lower than the GDP growth rate.

These results show that under this scenario, there will be structural changes in energy consumption by sectors and by fuels, that could be summarized in a penetration of natural gas and a higher participation of the industrial sector in the final energy consumption.

Tables III.4 show the estimates of C02 emissions generated by the energy sector activities, distributed by sectors and fuels. In general, it is shown that the growth of emissions is somewhat lower than energy consumption, which is mostly due to a higher use of natural gas against liquid fuels that have a higher carbon content.

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