This paper critically reviews existing energy demand forecasting methodologies highlighting the methodological diversities and developments over the past four decades in order to investigate whether the existing energy demand models are appropriate for capturing the specific features of developing countries. The study finds that two types of approaches, econometric and end-use accounting, are used in the existing energy demand models. Although energy demand models have greatly evolved since the early 1970s, key issues such as the poor-rich and urban-rural divides, traditional energy resources, and differentiation between commercial and non-commercial energy This paper-a product of the Environment and Energy Team, Development Research Group-is part of a larger effort in the department to study climate change and clean energy issues. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The author may be contacted at gtimilsina@worldbank.org.commodities are often poorly reflected in these models. While the end-use energy accounting models with detailed sector representations produce more realistic projections compared with the econometric models, they still suffer from huge data deficiencies especially in developing countries. Development and maintenance of more detailed energy databases, further development of models to better reflect developing country context, and institutionalizing the modeling capacity in developing countries are the key requirements for energy demand modeling to deliver richer and more reliable input to policy formulation in developing countries.
Energy Demand Models for
Acronyms and Definitions
DefinitionsA few terms appear recurrently in this report: tool, model, method, methodology, approach and framework. We give the dictionary meaning of these terms and indicate how we have used them in this paper.A "tool" is "the means whereby some act is accomplished" or "an implement used in the practice of a vocation". In this paper, we use the term to imply an implement or a kit that is used in analyzing energy demand or forecasting demand or in analyzing the energy system in its part or whole.A "model" is defined as "a simplified description of a complex entity or process". In this paper, we use models to imply a simplified representation of a complex problem or process, often in mathematical terms, that helps us in conceptualizing and analyzing the problem. In this sense, a model can be a tool or can employ a number of tools in a systematic way.A "framework" is defined as "a structure supporting or containing something" or "a simplified description of a complex entity or process". In this paper, we have used this term interchangeably with a model.A "method" is defined as "a way of doing something, especially a systematic way; implies an orderly logical arrangement (usually in steps)". We have used the term to mean a logical, systematic approach for accomplishing a task.An "approach" is defined as the "ideas or actions intended to deal with a problem or situatio...