Page 1 of 24- Word Count: 4,844 Examining the issue of centralization and decentralization in the development of soft and hard energy path in the developing world

A reliable and affordable energy supply is a fundamental prerequisite for reducing poverty, promoting investment, and boosting economic growth in the developing world. Among the different challenges that developing countries face, chronic energy crises are harrowing. The crises result from the unsatisfactory state of the central grid, a misguided energy mix, and illinformed policies, among other things. The possibility of solving energy crises through a variety of alternative solutions is worth exploring. This review discusses two paths of energy development side by side: a traditional “hard” path of energy development (i.e., central grid extension powered by fossil fuels and nuclear energy expansion) and a relatively recent “soft” path of energy development, which is based on energy conservation and the deployment of renewable energy resources. This paper focuses on one central axis of the discussion: centralization vs. decentralization. This discussion, in turn, has technological, economic/business, and political dimensions. Finally, the paper discusses the significance of the debate from meeting the developing world’s energy demands. The paper intends not to prefer one or another path of energy development, nor it gives recommendations on diffusing or adopting those development paths. Instead, it explores the literature’s central arguments that might help frame the questions for further research. While this debate could be used to ask interesting questions that might help solve the energy crisis in the developing world, the Preprints (www.preprints.org) | NOT PEER-REVIEWED | Posted: 2 February 2021 doi:10.20944/preprints202102.0084.v1 © 2021 by the author(s). Distributed under a Creative Commons CC BY license. Page 2 of 24Word Count: 4,844 discussion informs countries to advance policies specific to their circumstances under the umbrella of a sound and thoughtful energy productivity policy framework.

paper compares and contrasts the role of soft versus hard energy technologies in ameliorating energy crises.
The paper first discusses a brief history of soft versus hard technologies debate and then major contentions underlying the framework's discussion. This debate revolves around many dimensions, including the size of facilities and the degree of centralization, among many other things. This paper focuses on one major axis of the debate: centralization vs. decentralization. This debate, in turn, has technological, economic/business, and political dimensions. Relevant literature is used to synthesize arguments. Finally, the paper discusses the significance of the debate from meeting the energy demands of the developing world. The paper intends not to prefer one or another path of energy development, nor it gives recommendations on diffusing or adopting those development paths. Instead, it explores the literature's central arguments that might help frame the questions for further research.

Soft vs. Hard Paths:
As Lovins defined, iv soft path broadly consists of renewable energy resources and energy conservation (or "energy efficiency"). In contrast, a hard path epitomizes a centralized energy system, which is mostly powered by fossil fuels. Within a centralized energy system, giant power plants running in central locations usually generate energy, and then transmission and distribution networks transmit this energy to consumers. This means a centralized system has three significant components: generation, transmission, and distribution. Alanne and Saari paints an example of a centralized energy system in the following image: v

Image1: Centralized Energy System
In contrast, the Soft path is typified by a distributed energy system. Since energy is produced and consumed locally, a distributed system does not require big transmission networks. Therefore, a distributed system usually has two big components: generation and distribution. Ackermann, Pepermans, and their colleagues discuss in length the matter of definition of both these systems. vi Ackermann and his colleagues assert factors including purpose, scale, setting, delivery, technology, modus operandi, environmental impact, possession, and diffusion of distributed generation should dictate the basis of definition. Using this scheme, a distributed energy system or soft path constitutes small-scale (under 200 kWe) energy production and conversion units that are put in proximity with consumption point for use by a limited number of people. vii Usually, decentralized or distributed are independent and autonomous. Alaane and Saari draw an example of a "standalone" distributed energy system in the following image: viii

Image2: Distributed Energy System
Overall, the literature lacks consensus about the general lexis of distributed, centralized energy systems and their respective soft and hard paths. Therefore, strict or absolute definitions are tantamount to futility or at most reduction. However, there seems consensus on the features that define these paths and systems. Lovins' assertion that hard energy technologies must give way to soft technologies come from a detailed cost-benefit analysis of both technologies. He counts the following characteristics of soft energy technologies: xiv a) They rely on the ever-existing renewables such as sun and wind b) They are diverse so that the entire energy supply is a sum of modest contributions from different sources c) They are flexible and easy to understand d) They match in scale and geographic distribution to end-user needs In short, for Lovins, features like scalability, flexibility, diversity, and renewability characterize soft technologies. Talking about hard technologies, he asserts that a power station is inefficient because it produces a huge amount of waste heat. xv However, soft technologies, such as solar mini grids, are very efficient. As opposed to capital-intensive hard technologies, soft technologies are simple and have a small unit size, which helps moderate overheads. While hard technologies lead to a lot of energy wastage in the generation, transmission, and distribution of energy resources, soft technologies cause additional savings by abolishing distribution losses. xvi Moreover, soft technologies also decrease misjudged projections associated with massive power grids. Contrasted with hard technologies, which maximize economic risks to capital in disasters and breakdowns, soft technologies appear reliable by minimizing those risks. In light of these assertions, Lovins' conclusion for a soft paradigm is edifying. For him, the soft path is resilient and stable. "However, the hard path is brittle;" xvii it might fail if technical and social conditions are not met 'continuously' and 'indefinitely.' Thinking of the energy system as an information system, Alaane and Sari (as cited from Robertson;2002)  The drawbacks of centralized and benefits of distributed in this table are in parallel with the Lovins paradigm. However, Robertson differs from Lovins when he counts the benefits of centralized and drawbacks of the distributed systems. For him, a centralized system is good in terms of expertise, knowledge, and decision making because it facilitates finding information and leads to a clear division of responsibility. As for distributed systems' drawbacks, they are more "fragmented" than centralized, have multiple nodes of information, and require more experts as the decisions are subordinated to local decision-makers.
Lovins did not consider the difficulty and time required to implement some soft technologies; in fact, the implementation could be considerably exhausting. Like the time-tested hard technologies' barriers such as nuclear siting, regulatory issues, and funding issues, soft technologies also need to overcome the institutional obstacles. But Lovins assert that institutional barriers would be comparable. xix I disagree and suggest that it would be difficult for soft technologies to eliminate the institutional barriers at local, provincial, and national levels because of the limited experience, relative novelty, and strong institutional inertia. Further, it might be true that soft energy technologies better serve the dispersed population in rural areas, but would they meet the energy demands in big cities with crowded areas and commercial buildings.

Centralized power plants would be required for industry and commerce. While Lovins and others
talk about diseconomies of scale accrued due to centralized grids, they ignore technological innovation in the foreseeable future. For example, Lovins failed to predict and thus consider the falling prices of natural gas due to advanced fracking technologies.
In addition, the 'pro-centralized' literature above overlooked some of the benefits associated with distributed energy, such as the new local market opportunities, increased competition, and the use of local fuels and information networks. Similarly, the 'pro-distributed' literature disregarded the increased need for training, local distribution of emissions, and the potential risk of hazards in consumption location because of additional devices.
Finally, the overwhelming importance of conservation by Lovins and other prodistributed researchers hurt growth in different countries. A growing population coupled with rising growth in the developing world, could still mean mounting demands for energy. If developing countries do not build central grid capacity, this could ultimately exacerbate gaps between the already unbalanced supply and demand. Consequently, they will see additional blackouts, falling industrial growth, and an overall busting economic growth. Government intervention in such an emergency might lead, paradoxically, to an increase in centralization. Other people disagree with the claims of lower cost for soft technologies. Overall, data from the US EIA suggests that the capital investment required to adopt the soft energy path is larger than the capital investment needed for a large energy path. xliv

Image3: Average construction cost
Another set of data from the EIA on average power plant operating expenses for major US investor-owned electric utilities (2006 through 2010) indicates hydroelectric the least expensive, while gas turbine, photovoltaic, and wind plants the most costly options. xlv Research also talks about financial barriers that include low returns on investment, high transaction costs, lack of experience with energy access financing, and the unsuitability of existing credit facilities. xlvi However, it seems that these researches didn't consider the possibilities of technical breakthroughs that might reduce soft energy costs significantly.
While some of these issues, such as lack of experience with energy access financing and unsuitability (unavailability) of existing credit facilities, make sense, other barriers such as low returns on investment and high capital costs are contested. Issues such as transaction costs are very contextual as it depends on a host of factors. Transaction costs might be higher in one setting but could be lower in other. For example, Sivaram talks about the extension of OffGrid Electric xlvii in two different locations: East Africa (Kenya, Tanzania, and Rwanda) and India. xlviii The customers had to pay through mobile banking for solar systems. Sivaram contends that the gains are more in East Africa than in India because India regulates mobile banking while East Africa leaves it unregulated (transaction costs were lower in Africa than in India). Secondly, in India, villagers enjoy kerosene subsidies, which keeps its price very low.
Another concern that the research talks about, specifically in the context of the developing world, is the scalability of the soft energy approach, i.e., would it be able to ramp up a generation to suffice nations' energy demands. In this regard, the total costs might increase as the soft energy path incur the costs to use backup energy capacity from a central power system. Also, would individuals be able to raise money for the development of the expensive soft path?
Therefore, a lot of research proposes the government to grant subsidies to make soft technologies attractive. xlix This raises the concern that consumers might end up paying more taxes to support subsidies, which might not be socially optimal. The counterargument is that the centralized energy system is already subsidized. So comparable subsidies to soft technologies will not make any difference to consumers. In addition to transmission losses and distribution thefts, an entrenched bureaucratic culture marked by poor organization, planning, and project implementation among power operating companies only compounds the problem.
Power shortages are also rooted in the irrational and increasingly unaffordable energy mix. High reliance on thermal (which in turn are run by natural gas, oil, or coal) and hydropower lvi seldom assure a continuous flow of power. lvii Politicians and policymakers in those countries have made a little real attempt to diversify the nations' energy supplies and to shift dependence from expensive and imported oil lviii towards potentially cheaper and cleaner resources available in their countries. These countries have high renewable energy potential, which has been elaborated in many studies. lix For example, energy experts estimate that Pakistan has a total renewable energy potential of about 167.7 GW, more than enough to meet its total demand for electricity. lx Alternatively, how would be the impacts of removing any current incentives for conventional power utilities? Would soft technologies be more cost-effective for rural, dispersed areas than urban areas? How would the developing countries finance the soft technologies?
Each question raised above requires a detailed discussion and investigation. In terms of policies, this review's debate informs countries to advance policies specific to their circumstances. These policies should be under the umbrella of a sound and thoughtful energy productivity policy framework. After conducting needs and gaps assessment exercise, such a policy framework should consider move and reliance on a path that produces more output (with the same or less inputs), ameliorate energy security, address environmental degradation, and stimulate economic growth. The policy framework and its successive implementation require careful deliberations by concerned institutions and ministries to advance the policy framework's strategic goals and overcome finance and technology challenges. Finally, developing countries would show their firm resolve in promoting energy productivity reforms (whether it is a move to a soft paradigm or pursuing a diverse paradigm) and eradicating obstacles to successful energy productivity policy implementation. Only then can the world surmount the policy challenge of realizing universal sustainable energy.