SYDNEY - Pacific rim economies should reform their power sectors to minimise the impact of energy supply disruptions and oil price swings, a paper to be released at the annual APEC meetings here said.
The reforms should focus on making economies more resilient to these threats, said the paper prepared for top business executives attending the Asia-Pacific Economic Cooperation (APEC) forum.
With energy security emerging as a major concern and high on the agenda of the September 2-9 meetings, it was important for policy makers to understand the issues so they could be guided as they craft these reforms, it said.
"Energy security is a serious ongoing challenge to APEC and other economies. But far from implying a need to slow the process of energy reform, the challenge of energy security suggests that the reform process needs to be accelerated," the paper said.
"There is a risk that if energy security it not properly understood, and if the basis of policy formulation is not sound, then the benefits of power sector reform will be jeopardised."
The aim of the reforms should be the establishment of well-functioning energy markets, said the paper, prepared by Australia's Centre for International Economics.
This would ensure that alternative fuels developed in the future would be transparently priced and have wider economic benefits.
Crucial elements in these reforms would include breaking down the entire power structure into three: electricity generation, transmission, and wholesale and retail.
Electricity generation monopolies should be eliminated and a competitive market for power introduced, underpinned by appropriate institutional and regulatory arrangements, the paper said.
Where appropriate, regional electricity markets should be integrated to form a national grid, it added.
Government policy action should be complemented by the involvement of the private sector, said the paper, prepared for the APEC Business Advisory Council and the Pacific Economic Cooperation Council think tank.
Energy security generally refers to ensuring adequate and reliable energy supplies at reasonable prices in order to sustain economic growth.
The concept gained increasing relevance after oil prices hit record highs of nearly 80 dollars a barrel amid soaring global demand, threatening to weigh down dynamic Asian economic growth rates.
Geopolitical tension sparked by violence in the oil-producing Middle East region and Nigeria have added to the oil price volatility.
Two of APEC's members, the United States and China, are top energy guzzlers, while most of the rest are crude oil importers.
"It is crucial that policy makers recognise that the key long-term issue is resilience of the economy ... rather than simple measures such as (reducing) import dependence," the paper said.
Individual APEC economies have been implementing power sector reforms on their own, including moves to diversify energy sources, but more could be gained if further reforms are implemented, it said.
APEC as a group has also put forward some initiatives like stockholding and emergency information sharing, but some of the measures have a short-term focus -- dealing mainly with immediate supply disruptions.
"Ongoing power sector reform is crucial for APEC economies. While the APEC region is, by global standards, advanced in energy reforms, there are still significant benefits to be had from further reform," the paper said.
09/02/2007 04:40 GMT