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Description:
An energy supply chain is
an integrated system where changes made in one part affect other parts. It
is also a dynamic system where energy consumption strongly interacts with
GDP and thus the available budget. With its complexity, dynamic nature,
significant investment and political complications, an effective yet
politically feasible design of energy supply chain is far from obvious but
essential to a country’s economic prosperity and environmental
sustainability.
The strategic planning of
energy supply chains is a classic issue but not well addressed in the
energy policy and economics literature and barely studied in the operations
and supply chain management literature. Our research aims at expanding
supply chain management models and principles to address unique features of
the energy sector, and to develop new models and guidelines for building up
energy supply chains strategically.
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Rafique, R., Y. Zhao (2011). Pakistan
Energy Crisis - Breaking the Vicious Cycle. Case Study, Rutgers
Business School - Newark and New Brunswick.
“Pakistan has one of world’s
biggest untapped coal reserves, …, Pakistan to tap coal riches to
avert energy crisis.” – Reuters, April 13, 2012
Starting story: Ali is a plant manager in a
large textile firm in Lahore, Punjab province, Pakistan. The textile industry,
the back bone of Pakistan’s economy, had a total export of 5.2 Billion USD
in 2010. Ali was educated as a textile engineer and has ten years of
industrial experience. Till 2007, Ali was very satisfied with his career
and the industrial growth in the textile sector. But now things have
changed drastically – the textile industry is facing severe problems due to
the power shortages. There are 8-12 hours of electricity load shedding on a
daily basis in major cities and industrial sectors of the county. The
textile industry is unable to meet the export targets as the daily
production is disrupted by long hours of electricity shortage. About 28
million people (38% of the total labor force) associated with the textile
sector are facing unemployment due to the power outrage. [1]
The overall economic condition of the country is even
worse and it is becoming increasingly difficult for Ali to cover the
expenses of his family of two children. Even with 8-12 hours of electricity
load shedding, the electricity bill has risen to 25% of his monthly salary.
The inflation rate has risen to 17% (2010 est.) and the prices for food
items have increased by 33% over a period of two years. Official figures
indicate that there is a 20% increase in crime rate due to the increase in
unemployment (6% in 2010).
“Is it better to leave the country as everything seems to
be in a mess?” Ali says. “There is no job security even in one of the key
industrial sectors of the country; expenses are too high and standard of
living is deteriorating every day. I see neither a promising career for
myself nor a bright future for my family in
this country,” he laments.
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Rafique, R., Mun,
K.G., Y. Zhao. (2014). Energy Supply
Chain Design: A Dynamic Model for Energy Security, Economic Prosperity and
Sustainability. Technical Report. Rutgers Business School –
Newark and New Brunswick, NJ.
Abstract: Many developing countries in
Asia and Africa suffer severe energy deficiencies despite their ample
reserves of energy resources (e.g., coal, gas/oil and hydro), the so-called
dilemma of “resource rich, energy poor” by The Economist. A leading
driver of the dilemma is the vicious energy-economy cycle, where the poor
economic status,
inefficient utilization of limited budget, and energy deficiency reinforced
each other and have led
these countries into a cycle of economic downfall. How to turn this vicious cycle
into a prosperity cycle? It is a classic question but not well answered in
the energy policy/economics literature and barely studied in the operations
management literature.
We extend supply chain management concepts to address the
unique features of the energy sector and present a new class of
mathematical models for designing coal-fired energy supply chain. The model
captures the interaction among different parts of an integrated energy
supply chain from coal mining to power generation and to power consumption.
The model incorporates the unique economics of power generation and transmission
such as yield losses, and the dynamic nature of an energy supply system
such as limited reserves, and the causal relationships between energy
consumption and economy. The model attempts to answer the classic question
by determining the optimal way to build up an energy supply chain
strategically under limited budgets for energy security, economic
prosperity and environmental sustainability. Applying the model to
Pakistan's recent energy crises, we show that the solutions differ
structurally from the government's plan, and can significantly outperform
the latter by reducing the energy gaps faster, boosting the economy
stronger with much less greenhouse gas emissions.
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