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Volume 5 | Issue 6 | 2023
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ISSN: 2643-6930 (Print) Editor Stephen A. Roosa

Association of Energy Engineers | 3168 Mercer University Drive | Atlanta, Georgia 30341 PhD, CEM, BEP, REP, CSDP
ISSN: 2643-6949 (Online)
Strategic Energy and
Environmental Planning
Stephen A. Roosa, Ph.D., CEM, Editor-in-Chief
Vol. 5, No. 6—2023
Contents
5 Editor’s Desk; What Are Virtual Power Plants?
8 Guest Editorial; Securing Social Acceptance to Advance the Energy

Transition
12 U.S. Natural Gas Prices in a Tailspin; Stephen A. Roosa
23 Economic Evaluation of Hybrid Power Systems in Rural Pakistan;

Zeeshan Munir and Muhammad Tahir Amin
53 Oil Import Risk Management: Case of Zambia; Lloyd L. Chinjeng
79 Call for Papers
JOURNAL OF THE ASSOCIATION OF ENERGY ENGINEERS®
ISSN: 2643-6930 (print)

ISSN: 2643-6949 (on-line)
2 International Journal of Strategic Energy and Environmental Planning
Stephen A. Roosa, Ph.D., CEM,

CSDP, REP, CRM, CMVP
Editor-in-Chief
sroosa@aeecenter.org
EDITORIAL BOARD MEMBERS

Eric A. Woodroof, Ph.D., CEM, CRM, USA; Dr. John Gilderbloom, University of Louisville, USA;
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Institute for Scientific Research; Dr. L.J. Grobler, CEM, NWV-Pukke, South Africa; Steven Parker,
PE, CEM, Editor-in-chief, International Journal of Energy Management, USA.; Dr. Wayne Turner, CEM,
Oklahoma State University, USA; Natalie MacDonald, PE, Dewberry’s Raleigh MEPS Group;
Muhammad Bilal Sajid, Ph.D., CEM, CEA, U.S.-Pakistan Center for Advanced Studies in Energy,
NUST, Islamabad; Hardik Miyani, University of Illinois at Chicago; Natasha Vassallo, CEM, CMVP,
USA; Matthew J. Hanka, Ph.D., University of Southern Indiana, USA.
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Volume 5, No. 6 5
Editor’s Desk
What Are Virtual Power Plants?
A virtual power plant (VPP) is a network of decentralized, medium-

scale power generating systems such as wind farms, solar parks,
combined heat and power systems, energy storage systems that
supply power to consumers [1]. VPPs have also been defined as
cloud-based distributed power plants that aggregate the capacities
of distributed energy resources (DER) for the purposes of enhancing
power generation, trading, or selling power on the electricity market,
and providing demand-side options for load reduction [2]. By pooling
diverse electric generation assets, and linking them through a central
control center, the VPP can be designed to adapt in relationship to the
electric grid as a single controllable entity in a manner like microgrids
[3]. Regardless, the interconnected units are remotely dispatched
through a common control center and though interconnected, they are
independent in their operation and ownership [1].
A VPP uses advanced software and technology to monitor and
coordinate power generation assets and controllable loads, simulating
the processes that would be expected from a conventional electrical
power plant [3]. The bidirectional data exchange between the
individual plants and the VPP not only enables the transmission of
control commands but also provides real-time data on the capacity
utilization of the networked units [1]. During periods of peak load,
the VPP relieves the load on the grid by smartly distributing the
generated electricity [1]. The power generation and consumption of
the networked units in the VPP can be traded on an energy exchange
[1]. If provisionally configured, it is possible to sell and purchase units
of electricity using a smartphone.
The real-world working applications for virtual power plants
are diverse. Though counterintuitive, a VPP may not necessarily
involve the actual deployment of electrical generation sources [3].
Many VPPs in the U.S. tap utility demand response and critical peak
pricing programs as resources. When aggregated, they mimic certain

characteristics of a traditional power plant delivering peak capacity,
energy, or grid reliability regulation services as needed by a utility or
independent system operator [4]. In Europe, a VPP typically refers
to aggregating supply side resources, most often a diverse pool of
renewable distributed energy generation (RDEG) and/or wholesale
renewable energy sources [5].
More confounding, the term VPP might also refer to the ability
of commercial consumers in countries such as Denmark to purchase
wholesale capacity via an auction from baseload fossil fuel facilities
for short periods of time [3]. Statkraft, a Norwegian company, has
operated one of Europe’s biggest power generation facilities as a VPP
since 2011 [6]. Their VPP in Germany has a 12,000 MW capacity,
enough power for five million homes [6].
VPPs often provide services to the host grid in exchange for
preferred pricing. Flexible power equipment (e.g., motors and pumps)
can be operated on optimized price schedules by using electricity when
it is inexpensive and electric demand is low [1]. The VPP’s central
control system helps stabilize grid power before balancing is required
[1]. If a grid imbalance is imminent, the signals from the operators
are processed in the central control system and converted into control
instructions for the pre-qualified units that keep the grid in balance
by delivering frequency control reserves [1]. If an unexpectedly high
feed-in develops, it is possible to shut down generation assets within
seconds and avert critical grid situations [1]. When excess electrical
supplies are available, they can be stored. According to Andreas Bader,
vice president for sales for Statkraft, “We can connect batteries from
Spain with wind farms in Germany, and that makes it scalable” [6].
Virtual power plants can be used to establish virtual microgrids.
Microgrids can be configured to operate either as a VPP or to mimic
their capabilities and services. Distribution scale forecasting can help
host utility companies predict when distributed generation might
create distribution system imbalances, or when dispatchable, localized
power can be provided if generation prices are increasing [2]. When
such events happen, VVPs can help provide peaking power. Because
VPPs can be aggregated at various levels, they can be used for both
Volume 5, No. 6 7
electric grid reliability and operational optimization [2]. As the

networking capabilities of VPPs improves, they will likely become a
resource to help improve electric grid reliability and resiliency.
Stephen A. Roosa, Ph.D., CEM, CSDP, REP, CRM, CMVP

Editor-in-Chief
Louisville, Kentucky
sroosa@aeecenter.org
References
[1] Next. Virtual power plant. https://www.next-kraftwerke.com/vpp/virtual-power-plant,
accessed 28 November 2019.
[2] Zurborg, A (2010). Unlocking customer value: the virtual power plant. Energy.gov, accessed
15 February 2023.
[3] Roosa. S. (2021). Fundamentals of Microgrids, Development and Implementation. CRC Press.
ISBN: 978-0-367-53539-1.
[4] Roosa, S. (2022, November). Heads up! The microgrids cometh! International Journal of
Strategic Energy and Environmental Planning, 4(6), pages 5-8.
[5] Kashyap, S. (2017, October 12). What is the difference between microgrids and virtual
power plants? https://www.quora.com/What-is-the-difference-between-microgrids-and-
virtual-power-plants, accessed 11 November 2018.
[6] Ziady, H. (2019, November 7). No wind? No sun? This power plant solves renewable
energy’s biggest problem. CNN Business. https://www.cnn.com/2019/11/07/business/
statkraft-virtual-power-plant/index.html, accessed 23 December 2019.
Guest Editorial
Securing Social Acceptance to

Advance the Energy Transition
Community opposition has been identified as one of the biggest roadblocks to

advancing the energy transition from fossil fuel to renewables. How will the social
acceptance needed to mitigate this risk be achieved?
From Roadblocks to Reality

To support a credible pathway to limit global warming to 1.5°C,
the production of renewable energy needs to triple from 2022 levels by
2030. Hope of achieving this ambition rests with our ability to rapidly
plan, finance, approve, and construct an enormous pipeline of new
energy projects. The sheer scale and pace of the infrastructure buildout
required will undoubtedly impact the communities that host the new
electrical generation and energy storage projects. Expanded networks
of upgraded and extended transmission distribution systems will be
needed, criss-crossing communities throughout the world. Roadblocks
preventing the efforts to deliver these sustainability projects need to be
eliminated.
The disproportionate consequences of these new clean energy
projects beyond city centres already impact rural areas, including
farming and Indigenous communities. This has resulted in conflicts
among parties, costly negotiations, and painfully slow progress.
SHOCKED is among the largest studies conducted of C-suite leaders
in the global energy sector. This study revealed that 70% of respondents
(N=450) agreed that community opposition is one of the greatest
obstacles that prevents the approval of new energy projects [1]. The
study’s findings (based on interviews with participants in 15 countries
that occurred in February and March 2023) indicate that community
perception of these projects, either positively or negatively, significantly
impacts progress towards a net zero energy future. How we approach
community engagement and education is crucial to quelling opposition
Volume 5, No. 6 9
and garnering the consensus needed for the energy transition from fossil
fuel to renewables.
Demystifying the Transition to Reduce Risks

About three-quarters of the energy leaders who participated
in SHOCKED believe the energy sector needs to get better at
educating communities on the need for transition. Achieving net zero is
unattainable without community engagement; authentic conversations
with community representatives are needed to demystify the intents and
goals of the transition. Discussions must detail the costs of the energy
transition, examine the trade-offs needed to build more resilient systems
capable of weathering future shocks, and consider the long-lasting
benefits of decarbonization.
Successful community engagement begins with the awareness and
understanding that comes from transparent and fact-based educational
programs. Having had first-hand experience of undelivered promises
from past development schemes, many individuals and communities are
aware of the risks associated with infrastructure projects and sceptical
of their benefits. We need to learn from past mistakes—understanding
that past engagement approaches have led to mistrust—and rebuild
relationships through authentic communication with those affected. The
sooner that investors, developers, and governments engage communities
in fact-based, dispassionate, and non-political discourse about the
potential of disruptions and the expected impacts of energy projects,
the sooner we can move to a position of informed discussion. These
discussions must include the many benefits of these energy projects,
such as improving the environment, creating local investment and
employment, and obtaining supplies of clean energy. Another benefit of
this process is that environmental and financial risks are reduced.
It is the public that will ultimately see long-term benefits of the energy
transition; it is also the public who will shoulder its near-term burdens,
whether through energy price volatility or community disruption. To
garner their support, it is important that widespread awareness of
both the short-term pains and long-term gains of transitioning to a
low-carbon energy system be understood. Education programs must
be grounded in the latest science, delivered over the long-term, widely
disseminated across all types of communities and generations, and

leverage the use of mass media.
A Consistent and United Voice

Cooperative efforts are key to implementing sustainability projects.
In addition to deeply investing in community education to demystify
the transition, we need to harness a consistent, unified, and trusted
voice. Opinion leaders and institutions that speak with authority
must responsibly come forward; governments and global bodies all
have important roles. There are opportunities for central agencies,
such as the United Nations, to speak to the practical, community-
based issues regarding the transition (i.e., the costs and benefits it will
derive) in addition to the global, intergovernmental actions already
being advocated. The reach and credibility of these bodies should be
complemented by trusted local voices who can speak to the challenges
and opportunities related to the energy transition with a consistent
and supportive perspective. This process contributes to greater public
awareness, fosters cooperative efforts, enhances a greater understanding
of the challenges, and highlights the value of the work being proposed.
Authentically Engaging to Build Understanding

Most energy companies are aware of their obligations to engage
with communities. Minimal or mandated community consultation falls
short of harnessing the genuine community support needed to drive
a more rapid transition. Opposition to projects, leading to delays or
cancellations, is often the result of communities not feeling respected or
heard. Energy companies need take the time to meet with communities,
listen to their concerns, and demonstrate a collaborative approach
whereby solutions are co-designed.
Creating a two-way conversation with diverse voices is also
important; by engaging stakeholders early and with the right intent,
many physical, social, or cultural barriers are more easily overcome.
Energy projects whose drivers are understood and designed from the
start to meet the community’s future needs are less likely to receive
opposition in the planning phase and more likely to deliver ongoing
social returns. This helps create more connected, productive, and
Volume 5, No. 6 11
shock-resilient communities. This is a key element in securing the

permits and approvals needed to construct and operate the new energy
infrastructure.
Turning Opposition into Opportunity

Reducing community opposition to the buildout of future renewable
energy infrastructure will be challenging. Potential roadblocks need to
better managed. Individuals and communities must understand their
roles, why this change is occurring, how it will happen, and its benefits
and risks. We need to work together so that people have the context and
information required to accept change, rather than actively oppose it.
This requires consistent, authentic messaging, effective collaboration,
and meaningful engagement at all levels—including international
bodies, local governments, energy companies, and project proponents—
to help communities participate in, and benefit from, the transition to a
net zero energy future.
References
[1] GHD (2023). SHOCKED, key findings. https://shocked.ghd.com/research, accessed 19 June
2023.
AUTHOR CONTACT
Tej Gidda, Ph.D., M.Sc., B.Sc. in engineering, is an educator and
engineer with over 20 years of experience in the energy and environmental
fields. As GHD Global Leader—Future Energy, Tej is passionate about
moving society along the path towards a future of secure, reliable, and
affordable low-carbon energy. His focus is on helping public and private
sector clients set and deliver on decarbonisation goals to achieve long-
lasting positive change for customers, communities, and the climate. Tej
enjoys fostering the next generation of clean energy champions as an
adjunct professor at the University of Waterloo Department of Civil
and Environmental Engineering. Email: tej.gidda@ghd.com.
U.S. Natural Gas Prices in a Tailspin

Stephen A. Roosa, Ph.D., CEM, CSDP, REP, BEP, CRM
ABSTRACT
In the U.S., natural gas electrical generation plants are replacing

coal-fired plants that are being taken out of service. Despite the growth
of renewables, natural gas has become the fossil fuel-of-choice for
electrical generation. While natural gas emits less greenhouse gases
than coal, prices for natural gas have been highly variable. The price
in September 2022 was about four times the price in February of 2023.
What are the causes of this volatility? What are its impacts? This article
explores the import role of natural gas as an alternative to coal and
considers its recent price volatility.
ENERGY RESOURCES
The recent changes in fuel use in the U.S. have been remarkable.
There has been a transition from using primarily coal for electrical
generation to using a mix of fossil fuels and renewables. Natural gas
is being substituted for coal as many coal-fired electrical plants have
been retired. Since 2010, over 500 coal-fired power units in the U.S.
have been taken off-line; they had once provided over 100 GW of
electrical generation capacity. Another 58 GW will be retired by 2035.
Some of the coal-fired plants are being retired due to environmental
compliance issues but most mainly due to economics. Coal plants are
comparatively expensive to maintain and operate. They are subject
to coal price volatility, and delivery and supply problems which
introduce financial risks. Most importantly, renewable generation
and natural gas are now less expensive in many regions of the U.S.
Renewable energy, particularly wind, solar and biomass resources,
are continuing to capture market share for the generation of electricity.
U.S. wind power has grown by more than 60% since 2017 to about 143
Volume 5, No. 6 13
GW of capacity [1]. However, a portion of the electricity generated

by wind power is unusable in some locations due to a lack of energy
storage.
The U.S. electric power sector operated about 74 gigawatts (GW)
of solar photovoltaic capacity at the end of 2022, which is about three
times the capacity available at the end of 2017 [1]. Much of this growth
in solar capacity has been in Texas and California, where natural gas has
been the primary fuel source for the generation of electricity [1]. The
increased use of natural gas and renewables rather than coal to generate
electricity (see Figure 1) reduces utility sector greenhouse gas emissions.
With the increasing reliance on renewables for electrical
generation, it has been predicted that renewables will incrementally
continue to displace the use of both coal and natural gas over the
next two years [1]. The price stability of renewable generation is
an important consideration. Once installed, the price of electrical
generation by renewables is stable. Not so with coal and natural gas.
Coal prices have varied from $50/ton to over $400/ton (see Figure
2). Natural gas prices have been highly volatile over the past year and
this variable pricing has been disruptive (see Figure 3).
The Importance of Natural Gas

Despite their pricing stability, solar and wind generation technologies
provide intermittent electrical power. Natural gas can provide base-load
generation upon demand. Natural gas is used to produce more than 1/3
of the electricity in the U.S. Natural gas has in the last decade displaced
coal as the leading fuel used for electrical generation (see Figure 1).
Natural gas is an important fuel which helps reduce greenhouse
gasses. Supplies in many regions of the U.S. are readily available. It is
relatively clean-burning, emits less greenhouse gases than coal, and is
usually less expensive than most liquid petroleum fuels [2]. Natural gas
has been referred to as a bridge fuel, one that supports an incremental
transition to renewables. When used in a combustion process, coal
produces about 0.88 kg of CO2/kWh; natural gas produces about 0.60
kg of CO2/kWh. When fuel requirements allow for the use of natural
gas, it is a fuel that enables dispatchable electrical generation and is
preferred by many utility companies [2].
Figure 1. U.S. electricity production by energy source (2018-2024) [1].

Volume 5, No. 6
Figure 2. U.S. coal prices from 2020 to 2023 ($s/ton) [7].

15
To export natural gas, it must be liquified. The market of liquified

natural gas (LNG) is growing and the infrastructure to support its sale
on international markets is being augmented. LNG is fast becoming an
important addition to the world’s energy supplies [3]. The U.S. is now
the world’s leading exporter of LNG with most being shipped to the
European Union [3].
NATURAL GAS COSTS
What is up with the price of natural gas? Natural gas is priced in

units of one million British thermal units (MMBtu) [6]. A standard
NYMEX natural gas contract is for 10,000 million Btus and uses the
average of the natural gas prices from Henry Hub’s 13 interconnected
pipelines [6]. Since 1990, Henry Hub has been the central location
(hub) for fixing the prices of natural gas futures contracts [6]. The hub
is owned by Sabine Pipe Line, a subsidiary of Chevron (NYSE: CVX).
Natural gas prices have experienced substantial volatility over the
last 20 or so years with highs reaching $14 and lows below $2 per
million Btu (see Figure 3). Prices for natural gas recently peaked on
August 22, 2022 at $9.85. This was due partly to the combined effects
of the increased demand from U.S. electric utilities, the lingering
COVID-19 pandemic, and the supply curtailments by the Russian
Federation after initiating the war in Ukraine. By March 23, 2023
the price had dropped to $1.94, a decline of about 80%, which was
due partly to a warmer-than-normal winter in Europe [4]. By July 7,
2023, the price had only somewhat recovered and stood at $2.56. Price
variability is often a function of inflation, short-term availability, and
the laws of supply and demand.
When historical natural gas prices are adjusted for inflation, the
volatility is more pronounced; prices ranging over the past 20 years
range from a high of $22 to lows of about $2 (see Figure 4). Severe and
prolonged weather conditions in regions that use natural gas for heating
are often the cause of increases in demand. Some observers have noted
that the use of fracking technologies in the U.S. have increased supplies
and contributed to more sable pricing [5].
Volume 5, No. 6
Figure 3. Henry Hub natural gas prices, $s/million Btu (2000-2023) [8].
17
Figure 4. Inflation adjusted Henry Hub natural gas prices, $s/million Btu (2000-2023) [8].
Volume 5, No. 6 19
Impacts of Volatile Natural Gas Prices

The price volatility of a commodity is defined by the degree of price
variation in the marketplace. It is typically measured by the percentage
of change in prices that occur over a given time period. Natural gas
prices have been particularly sensitive to short-term supply and demand
shifts in recent years because of the commodity’s highly inelastic nature,
a characteristic of many energy commodities but particularly true of
markets for natural gas [9]. For natural gas consumption, this volatility
often has chaotic economic impacts. In the short-term, consumers
are limited in their ability to switch fuel sources. Because it is a fuel-
of-choice, production infrastructure is thought to be operating near
capacity [9]. Regional prices also vary due to the relative quantities of
natural gas being produced and the amounts being held in storage.
Natural gas providers have often cited increases in commodity
prices as one of the primary drivers of higher-than-expected consumer
utility bills [10]. This volatility increases product prices to the end
users. The volatility of natural gas tends to increase regionally during
the heating seasons. Utility companies that provide natural gas fill their
storage systems during the summers when prices tend to be lowest.
The companies often set their retail prices twice each year to attempt
to accommodate pricing variability. Utility companies that use natural
gas to generate electricity tend to be less profitable when its price is
higher and very profitable when its price is lower. Volatile natural gas
prices create uncertainties and financial risks and may increase the
cost of capital, causing pipeline and other infrastructure investments
to be more expensive [9].
Increases in natural gas prices in the winter season of 2022-2023
caused substantial financial burdens on retail customers despite the
drop in the pricing. Higher prices for natural gas stresses low-income
families who depend on it for heating; they often have difficulties paying
their utility bills. In the U.S., some local governments provide financial
assistance for low-income customers. When prices fall quickly utility
rates are fixed for the near term and often cannot be immediately passed
on to consumers. The public utility commissions in some U.S. states are
taking action to provide consumers with credits or reductions in future
rates to partially offset the drop in natural costs [10].
CONCLUSION
Natural gas is an important fuel source as it can be used to provide

base-load generation upon demand. It has usurped coal as a primary
fuel for electrical generation. When substituted for coal it helps reduce
greenhouse gasses.
Fuel price volatility creates financial risks for the utility business
and has social consequences. Finding ways to mitigate the variability
of the price for natural gas offers short-term solutions. However, in the
long-term prices ultimately respond to laws of supply and demand.
The availability of low carbon-emitting energy sources also influences
demand for natural gas. In the U.S., power from zero-carbon energy
sources provided 41% of the electricity mix in 2022 and this share has
been increasing since 1990 [11]. This clean energy mix includes power
from nuclear plants, hydroelectric dams, solar and wind [11]. While
nuclear energy has a central role, most of the increase has come from
the rapid build-out of solar and wind power, whose costs have declined
in the past two decades [11]. This transition increases the potential that
fossil fuels will continue to experience price volatility.
If you are an energy engineer or energy services contractor who
developed a set of energy conservation measures (ECMs) for buildings
that reduce the use of natural gas, the savings estimates can be skewed,
particularly for projects that require long-term financing. For example,
if a project’s savings was calculated in September 2020 with natural gas
prices over $9, its actual savings due to the implementation of the ECMs
would be substantially less in the near term because prices fell below $3.
Going forward, there are far fewer ECMs that would be economically
viable using the cost of natural gas in March of 2023.
The past spikes in natural gas prices are “another excellent reminder
of the urgent need to reduce our reliance on fossil fuels in our homes
and energy system,” said California Commissioner, Darcie Houck [10].
Reducing our dependency on fossil fuels and using more renewables
for heating and electrical generation, can help to stabilize utility costs.
The prices for renewably-generated electricity are much less volatile
than prices for natural gas. However, if there is an over-dependence
on intermittent renewable energy resources for electricity generation
Volume 5, No. 6 21
and a lack of energy storage, natural gas will be needed to supplement

capacity to meet peak demand conditions and avoid curtailments.
References
[1] U.S. Energy Information Administration (2023, January 19). Today in energy. Increasing
renewables likely to reduce coal and natural gas generation over next two years. https://
www.eia.gov/todayinenergy/detail.php?id=55239&utm_source=LinkedIn&utm_
medium=EIAsocial&utm_id=Amplification, accessed 1 February 2023.
[2] Roosa, S. and Freedenthal, C. (2018). Natural gas purchasing, in the Energy Management
Handbook (9th edition), page 637. The Fairmont Press: Lilburn, Georgia.
[3] Roosa, S. (2018). U.S. Becomes the world’s leading liquefied natural gas exporter.
International Journal of Strategic Energy and Environmental Planning, 4(4), pages 5-6.
[4] Trading Economics (2022). Natural gas. https://tradingeconomics.com/commodity/
natural-gas, accessed 4 February 2023.
[5] Miller, R. (2023, March). How fracking has contributed to U.S. CO2 emission reductions.
International Journal of Strategic Energy and Environmental Planning, 5(2), pages 59-66.
[6] Hodge, N. (2012, February 2). Who is Henry Hub? Natural gas prices explained. https://
www.energyandcapital.com/articles/who-is-henry-hub, accessed 2 February 2023.
[7] Trading Economics (2023, February 4). Coal. https://tradingeconomics.com/commodity/
coal, accessed 4 February 2023.
[8] macrotrends (2023, February 2). Natural gas prices - historical chart. https://www.
macrotrends.net/2478/natural-gas-prices-historical-chart, accessed 2 February 2023.
[9] Mastrango, E. (2007, August 17). Analysis of price volatility in natural gas markets.
U.S. Energy Information Administration. https://www.eia.gov/naturalgas/articles/
ngprivolatilityindex.php, accessed 21 June 2023.
[10] Plachta, A. (2023, February 3). California regulators fast track utility bill relief as
natural gas prices soar. https://www.yahoo.com/news/california-regulators-fast-track-
utility-133000323.html, accessed 4 February 2023.
[11] Weise, E. (2023, March 1). Clean energy record: More than 40% of US electricity
now comes from carbon-free sources. USA Today. https://www.usatoday.com/
story/news/2023/03/01/clean-energy-hits-record-us-2023-sustainable-energy-
factbook/11324041002, accessed 1 March 2023.
AUTHOR BIOGRAPHY
Stephen A. Roosa, Ph.D., MBA, CEM, BEP, CSDP, REP, CBCE,
CMVP, is an energy engineering professional focused on developing
solutions that bridge the gaps between energy and sustainability. He
is a former senior process engineer and energy manager for a Fortune
100 company. He is presently the President of RPM Asset Management
and a Senior Energy Consultant for Ameresco, LLC. He is the AEE’s
Director of Sustainable and Local Programs. He has taught over
100 seminars and workshops on the topics of energy management,
sustainable development, renewable energy and microgrids.
Dr. Roosa has received numerous awards during his career,

including the AEE International Energy Manager of the Year Award,
the AEE Energy Project of the Year, the U.S. Federal Energy and Water
Management Project Award, the U.S. Army Corps of Engineers National
Energy Engineers Systems Technology Award, the U.S. Department of
Defense Joint Chiefs of Staff Citation for Energy Management the AEE
Distinguished Service Award, and the Honorable Order of Kentucky
Colonels Medal of Distinction. He is a past AEE president, an AEE
Fellow, Legend in Energy, and a member of the Energy Manager’s
Hall of Fame. He has written and edited several books and over 100
articles related to energy conservation, energy engineering, energy
management, renewable energy, and sustainable development. Email:
sroosa@aeecenter.org.
Volume 5, No. 6 23
Economic Evaluation of Hybrid Power

Systems in Rural Pakistan
Zeeshan Munir and Muhammad Tahir Amin
ABSTRACT
This research explores the effectiveness of modern hybrid renewable

generation systems in rural areas. Innovative researchers now seek
fast and effective analysis methodologies to appraise low-cost energy
alternatives. In third world countries such as Pakistan, people face
shortages of electricity. This is caused by heavy reliance on traditional
energy resources; such technologies make it challenging to meet national
energy requirements. It is important to identify and resolve new research
methodologies in the energy sector to meet sustainable development
goals. Therefore, we propose using hybrid renewable energy assets
that deploy combinations of renewable energy resources (e.g., solar,
biomass, wind, and energy storage). During our research we considered
the available methodologies used in the United Kingdom and United
States. We conducted research to analyze four different combinations
of renewable and non-renewable energy resources to determine the
best and lest costly solutions to supply electricity to rural locations in
Pakistan. Case alternatives were selected and assessed using Hybrid
Optimization Model for Electric Renewables (HOMER) software. This
was applied to hybrid renewable power generation systems to determine
the best combination of potential resources to overcome the challenge
of providing low-cost electricity in rural areas.
INTRODUCTION
There is growing demand for electrical energy in rural areas of

many third-world countries. Advanced countries are using renewable
energy resources to fill this electrification gap. Renewables have become
important economically, especially in the public sector.

Countries like Pakistan suffer from a shortage of electricity; it is
especially dire for people living in remote areas of the country. Most
of Pakistan’s population lives in scattered villages. The country’s power
generation depends primarily on non-renewable energy resources
(especially coal, oil, and liquefied petroleum gas). Only 0.3% of the
total generation uses renewable energy resources such as wind, solar,
and biogas [1]. Pakistan’s government has taken initiatives to provide
electricity to rural areas, yet more than 30,000 villages are not properly
electrified [2]. The areas that are not connected to the electric grid
include southern Punjab province, interior Sindh, Baluchistan province,
and many areas of Azad Jammu and Kashmir.
The lack of electricity presents difficulties and economic hardship
for people living in Pakistan’s rural villages. Many remote areas are far
away from a central grid interconnection. Homes experience electrical
shortages for 10 to12 hours daily due to load shedding. People living
in these areas suffer from a lack of electricity and their lifestyles are
awkward; they are socially disconnected from other regions. In addition,
they lack advanced technological devices in their homes due to the lack
of electricity. Recently, people have interconnected globally with new
communication technologies. Without electricity, many rural areas lack
internet access.
The remote villages are found in hilly areas of Pakistan; it is
challenging to install transmission lines to distribute electricity locally.
Despite these challenges, the private board of power generation and
the government have supported the use of locally available resources
to generate energy. While the government has taken the initiative to
provide rural electrification, the projects cannot proceed due to the high
costs of installing transmission lines. Many researchers have suggested
ways to overcome this energy crisis, yet few practical solutions are
offered [1,3].
It has been suggested that if renewable energy technologies were
utilized in remote areas far from the national grid, the electrification
issues might be minimized. Because these remote areas have renewable
energy resources, hybrid renewable energy systems (HRES) can meet
their energy needs. In this research project, the proposed solution is to
Volume 5, No. 6 25
deploy a hybrid power system using different combinations of energy

resources and a battery storage system. These combinations include
solar photovoltaic (PV), battery energy storage, wind power, and diesel
generators. Though diesel fuel is a non-renewable energy resource, it is
used to provide backup generation during peak periods of the day; it
can be started quickly to meet urgent needs. This research will compare
and analyze the economics of different distributed hybrid generation
combinations (e.g., solar and biomass, solar and diesel generators,
and others). The objective is to meet the electrical energy demands of
remote areas at the lowest cost without connecting to the main electric
grid to provide electricity.
Solar Photovoltaic
Solar photovoltaic power is likely the best choice to support energy
requirements in remote locations with high solar insolation. At present,
the world’s solar PV generation capacity is increasing at an annual rate
of over 35%; the total generating capacity was about 942 GW in 2021.
Silicon (Si) and gallium arsenide (GaAs) monocrystalline, sun-oriented
cell efficiencies are near their hypothetically anticipated quantities.
Monocrystalline and polycrystalline wafer Si cells remain the primary
commercial PV innovation with module generation costing around
$1.50/W. Thin-film PV technologies considerably decrease the expense
of sun-powered cells. Cadmium telluride (CdTe) thin-film sunlight-
based cells have recently exhibited efficiencies of 16.5%. The cost of
CdTe thin-film solar PV modules is about $0.76/W.
Despite having some of the world’s highest electricity tariffs, the
total installed solar PV capacity in Pakistan in 2022 was only 568 MW.
Many locations across the country have new solar developments under
construction.
Hybrid Power Systems

A hybrid power system is a system that does not depend solely on
single source of power generation. In these systems, more than one
resource such as solar, wind, and diesel function in concert to generate
electricity. These resources are available at any time. We selected hybrid
distributed generation systems for study because they increase the system
functionality and reliability. Hybrid power systems depend on multiple

generation technologies which minimizes the use of energy storage
systems. If one energy resource is not available to provide electrical
generation, then the hybrid system can use another resource to meet the
electrical demand.
BACKGROUND AND LITERATURE REVIEW
The world’s focus on energy supplies has increased due to population

growth. The environmental issues associated with our patterns of
energy use have increased global warming awareness—a core issue for
environmentalists. Researchers are trying to find ways to reduce the
impacts of global warming to conserve life on this planet. Many power
engineering students in the world’s universities have researched ways to
overcome this problem. An often-suggested solution is to use renewable
energy resources to generate electricity for domestic and commercial
applications to lower atmospheric greenhouse gas (GHG) emissions.
Many researchers have introduced the concept of HRES to reduce
reliance on fossil fuels that increase GHG emissions [4].
Combing wind and solar PV systems enhances project feasibility
in locations with good potentials from both sources. These sources
are complementary and allow autonomy if one source is unavailable.
Renewable energy is the best technique to overcome the electrical energy
supply challenges in locations too far away from grid interconnection
points. A hybrid power system shares the electrical loads and helps
supply a country’s energy needs, thus reducing the duration of load
shedding. The cost of a hybrid power system could be lower due to
reduced transmission costs making it economically feasible. Using
distributed energy resources, we can generate electricity near populated
areas without constructing lengthy and costly transmission.
Research in Hybrid Energy Systems

There are numerous researchers who support various aspects of
using distributed electrification solutions. Murugaperumal and Vimal
suggested that rural electrification is important to support sustainable
Volume 5, No. 6 27
development agendas in rural areas and improves education and public

health in households [5].
Many researchers have suggested using hybrid electrification
systems. Gbadamosi et al. observed that using hybrid power systems
with renewable energy resources is more economical; they noted
that hybrid systems decreased energy costs by 45% [6]. Lau et al.
assessed the potential use of hybrid photovoltaic (PV) and diesel
energy systems in remote locations [7]. They observed that a hybrid
solar PV and diesel system is both feasible and economical and helps
reduce dependence on diesel resources. They also mentioned that
while a hybrid PV/diesel system with battery energy storage might
not significantly reduce the total cost of energy (COE), “it has been
able to cut down the dependence on diesel.” Irwan implemented
new techniques in Malaysia for a hybrid power system. He suggested
that wind power can be used for a cooling system in the photovoltaic
modules installed in the hybrid power system [8]. Emrani et al.
explored the optimal design of hybrid renewable power systems
coupled with energy storage [9].
Using HOMER, Fahmy, Farghally, and Ahmed performed an
economic analysis of a solar PV-biomass gasifier hybrid power system
to provide 250 kWh/day with a 19 kW peak load for a poultry house
located in Egypt [10]. They mentioned that a hybrid system consisting
of solar PV (12 kW), a biomass gasifier (20 kW), and battery storage
(270 kWh) is the most economically feasible [10]. It provided the lowest
COE, about $0.224/kWh, with minimum GHG emissions.
Installing separate hybrid power systems may minimize energy
shortages in rural areas. Misra and Sharma note that the implementation
of isolated hybrid energy systems enables energy access and reduces the
dependency on fossil-based electricity [11]. Khare et al. mentioned
different issues related to hybrid power systems and suggested optimum
sizing, modeling, control system, and feasibility analysis [12]. We can
now calculate the electrical loads of villages and employ different hybrid
systems according to the electrical demand requirements.
Bhandari et al. considered the differences in the power produced
by solar energy and wind turbines depending on variable weather
conditions [13]. They suggested that if an energy storage system
is added for backup, the reliability of hybrid power systems can be

improved.
Shahzad et al. performed a technical and economic analysis of an
off-grid hybrid system [3]. They analyzed combinations of different
renewable energy resources using HOMER software. Their research is
helpful in developing ideas and making policies to implement a new off-
grid hybrid power system. They concluded that solar and biomass are
reliable energy resources; governments should consider implementing
them to achieve cost-effective results in off-grid electrification systems.
Givler and Lilienthal determined that for hybrid power systems, a
backup diesel generator enhances solar PV output during both peak
hours and during poor resource periods [14]. If we integrate a diesel
generator with solar PV systems, we can generate electricity that is more
reliable and less expensive than using solar-only systems.
Munuswamy et al. performed an analysis of a hybrid power system
using HOMER software [15]. This study indicated that an off-grid
renewable energy power system is more feasible and cost-effective than
using electricity from a grid source. Singh et al. researched different
combinations of renewable energy resources using HOMER software
for a hybrid power system [16]. Their study found that hybrid power
systems can generate less costly electricity, but the combination of
energy resources should be grouped after sensitive economic analysis.
They determined that if different quantities of biomass are used in
selected combinations, the output may differ. Targets can be finalized by
knowing the exact potential of biomass.
Garrido et al. performed a sensitivity analysis of hybrid power
generation systems consisting of solar PV, biomass, and one diesel
generator in Mozambique [17]. They indicated that if the demand
load is continuously variable, the solar PV-biomass system is preferred
because it is more reliable.
Bouzelata explored the system design and performance of the
hybrid power system [18]. They mentioned that the system’s power
quality can be enhanced if doubly-fed induction generators are used.
Li et al. conducted a techno-economic feasibility study of an
autonomous hybrid wind, solar PV, and battery power system for a
household in Urumqi, China [19]. Using HOMER software, they
Volume 5, No. 6 29
performed a sensitivity analysis; they determined that solar energy

is more efficient than wind energy, and it contributed more to their
proposed hybrid power system [19]. They mentioned that if the primary
load increases, the net present cost (NPC) values of the system increase
accordingly; however, the system’s COE decreases until the primary
load remains less than 20 kWh/day and increases afterwards. Sen and
Bhattacharyya evaluated off-grid power systems with renewable energy
technologies using HOMER software in India [20]. They considered
four renewable resources (i.e., hydropower, solar PV, wind power, and
diesel generation) to meet the energy demands for Palari, a remote
village. They evaluated and provided an optimal off-grid option and
compared this model with the existing conventional grid extension using
HOMER. They mentioned that a hybrid power system consisting of
hydro, solar PV, wind, and diesel generators is more economical and
sustainable than a grid extension.
Past research specific to hybrid systems for Pakistan is limited.
Ahmad et al. evaluated the potential of hybrid power resources in
Pakistan; they analyzed wind, solar, and biomass resource potentials of
a selected area of Pakistan [21]. They determined that the Kallar Kahar
site location, situated in Punjab province is a potential site for installing
renewable energy technologies for a 50 MW project using local and
foreign investments. Khan et al. performed a techno-economic analysis
of a solar PV, wind, and biogas hybrid power system for a remote area
in the Punjab province of Pakistan [22]. They optimized results by
considering different fuel resources including animal dung and crop
residues. The results show that if animal manure is used, a hybrid solar
PV, wind, and biogas power system would be more economical than
other possible solutions.
Solar Radiation Information Resources

Tahir and Asim claimed that the Pakistan Meteorological Department
(PMD) began estimating sunlight-based insolation information in 1957
for five meteorological stations [23]. There was a lack of surface
information until 1996, but afterwards, they found good information
about solar radiation in the country. They stated that solar-based
worldwide light is the aggregate of the shaft radiation and diffused light
stored on a flat surface, ordinarily called insolation or light [23]. They

mention that “direct typical light is the radiation received on a surface
which is constantly opposed to the sun, though worldwide tilt radiation
is complete radiation received on a tilted surface.” Sun-powered vitality
is captured and used by three distinct advancements: sun-oriented
photovoltaic, sun-powered warmth, and focused sunlight-based power.
These advances utilize various parts of sun-oriented radiation. The
precise and dependable information on sun-based vitality assets is a key
component in the effective utilization of these advances.
Solar Radiation Data and Energy Potentials

Solar radiation potentials were studied by Tahir and Asim [23]. Their
survey used three classes depending on the result of the examination:
1) the potential of solar energy in specific areas; 2) the worldwide
investigation of solar energy; and 3) diffused and direct radiation
information [23]. Worldwide insolation levels were estimated for various
wavelengths using sun-powered insolation and daylight-term data. The
sunlight-based vitality potential was exhibited as the month-to-month
mean day-by-day estimations of worldwide flat seclusion (complete sun-
based radiation occurrence on a level surface) having the same intensity
and radiation. These are known as iso-radiation lines at interims of
0.58 kWh/m2 (50 Cal/cm2). The sun-based insolation information for
the five stations utilizing these constants concurs with the estimated
data with less than a 10% error. The examination of estimated and
anticipated month-to-month mean day-by-day, sun-based insolation
is found in Figure 1. It shows that most areas have the highest solar
radiation levels during the summer season.
According to Tahir and Asim, solar potentials in the different
areas and regions of the country have different values [23]. Sindh and
Baluchistan provinces have more than 5.11 kWh/m2 (440 Cal/cm2),
while Punjab and Khyber Pakhtunkhwa provinces have potentials
ranging from 4.65 to 5.11 kWh/m2 (400 to 440 Cal/cm2). The northern
regions and Kashmir are under 4.65 kWh/m2 (400 Cal/cm2). The most
extreme sun-powered radiation is received in June in the cities of Quetta
and Zhob which is 7.90 kWh/m2 (680 Cal/cm2).
Volume 5, No. 6 31
Figure 1. Annual average daily solar radiation levels in Pakistan [24].
Research Gap
With reference to recent studies noted in the literature review and
related work in the field of renewable technology, the research gap is
based on the renewable energy technologies used to generate electricity
in under-developed areas of Pakistan. During the research, it was found
that hybrid electrical generation systems using solar PV modules often
lack energy storage capabilities. Battery storage with biomass and solar
PV modules are cost-effective and may be more economically feasible
than combinations of wind, solar, and biomass without storage batteries.
This combination of technologies is often overlooked by researchers.
METHODOLOGY
The research methodology should reﬂect the nature of the research

and help the researcher tackle the research subject. This study depends on
applied research which targets solutions to immediate problems facing a
society or an industrial organization. Nallaperumal mentions that applied
research concentrates on discovering solutions for pressing practical
problems [25]. The purpose of this research is to solve the electric
generation capacity problems faced by Pakistan’s rural areas and the lack
of utilization of renewable resources and energy storage systems.
Research Methodology
This research focuses on evaluating the economics of renewable
energy in a specific remote location in Pakistan that has the resources to
generate electricity. The data needed for research work consider reliable
resources. The Hybrid Optimization Model for Electric Renewables
(HOMER) software is used to evaluate the economics of different
combinations of renewable energy resources. It helps determine the best
combination of energy resources for a specified location using solar PV
modules, wind turbines, the national grid, and battery energy storage
systems. Data for potential renewable energy resources are required to
perform the analysis.
For this research, the total electrical load of the connected energy
consumers is required to evaluate the various combinations of distributed
generation systems and determine which are the most reliable and
efficient. The combinations assessed by this study are: 1) Case I: solar
PV, diesel generation, and storage batteries; 2) Case II: solar PV, diesel
generation, storage batteries, and wind; 3) Case III: solar PV, biomass, and
storage batteries; and 4) Case IV: solar PV, biomass, storage batteries, and
wind power. All four configurations used a battery energy storage system.
After careful comparison, this research determined the best configuration
for a suitable solution to meet the load demand of the specified remote
region.
Diesel is a fossil fuel. For our assessment, diesel generation is used for
emergency purposes because it requires less time for startup to meet peak
electrical loads. The HOMER software helps assess which combination
Volume 5, No. 6 33
of systems is best suited to meet the electricity needs for any specific
location within a specified budget; it estimates the combination’s capital
and operational costs. This assessment provided an evaluation report
based on the NPC that includes capital and operational costs, lifecycle
value, and a salvage value of the equipment. Equation 1 explains how to
calculate the NPC.
NPC = TAC ÷ CRF (1)
Where:
TAC = total annualized cost or annualized value of net present cost
CRF = capital recovery factor, ratio used to calculate the series of
equal annual cash flows
HOMER as a Tool for Research

HOMER is a software tool developed by U.S. National Renewable
Energy Laboratory (NREL) in 2009 which has been used by many
researchers and designers to optimize different configurations of hybrid
power systems. Hybrid systems use more than one technology for
electrical generation. This software tool is ideal for the evaluation of
any type of hybrid power system on a technical and economic basis.
It is used for feasibility studies before installing components into the
existing power system and for the development of a new energy-
generating systems. HOMER can be used to determine the optimum
combination of technological resources for stand-alone, off-grid, and
grid-connected power systems. Electric or heating loads are provided
as an input for simulations. Different configurations of renewable and
non-renewable energy resources can be evaluated in terms of NPC
and COE. HOMER performs a simulation of the different proposed
configurations by balancing the hourly energy use each day so that
a proposed hybrid power system can generate and distribute electric
power to the consumer loads.
Methodological Framework
An economic evaluation determines the influence of renewable
energy integration into the system and storage based on the COE
and NPC. HOMER evaluates the feasibility and optimization of

microgrid systems prior to installation in the following ways: 1) performs
simulations, 2) provides a sensitive analysis of the configurations, and 3)
optimizes the simulated system [26].
Connected load and energy resources are the main components of
the system. For this study, all electric loads are simulated; the various
hybrid system components include solar PV modules, diesel generators,
wind generator, battery storage and converter. The equipment capacity
used in the HOMER design was self-assessed by the HOMER software
according to the system requirements to meet the electrical demand load
at the lowest cost of energy.
A pre-HOMER analysis was performed that assessed the load
requirements for the remotely-located houses and the locally available
renewable resource potentials. The primary load data for ten houses and
one agricultural farm were obtained from the electricity department of
Pakistan. Electrical load data were then entered into the software. Next,
resource components (i.e., solar PV, wind turbine, biomass generator,
DC-AC converter, and an electric power storage system) were selected
through the software and an analysis was performed for the hybrid off-
grid systems.
After optimization of the proposed hybrid power system, a sensitivity
analysis was performed using suitable constraints. These included
variations in solar radiation and biomass values, varying the solar panel
capacities, and adding more converters to meet the system requirements
for technical and economic analysis. The post-analysis of the COE
was performed by comparing the existing electricity rates to the results
obtained by optimization. The tariffs are set by the National Electric
Power Regulatory Authority of Pakistan.
COMMUNITY LOAD ASSESSMENT
This research analyzed four different hybrid power systems (Cases

I-IV) to determine which was the most cost-effective. The goal was to
meet the energy demands of the ten houses and one agricultural farm.
These structures are in the village of Chitterperi, found in Azad Jammu
Volume 5, No. 6 35
and Kashmir, Pakistan.

The demand for electricity in rural areas is much lower than in
urban areas. In this study, the electric demand for the selected houses
and farm is marginal. Energy usage in this community is for water
pumps, pedestal fans, electric lights, freezers, televisions, electric irons,
and electric heaters. However, electric demand from agriculture may
increase during crop cultivation and harvesting periods due to the use
of water pumping motors, electric sprayers, and machines for cutting
crops.
The peak electrical load considered was the peak load of any
house; simply the maximum demand for electricity that occurred over
a specified time period. The average load requirement for residential
households and agricultural premises located in remote areas was
obtained from the Electricity Department of Azad Jammu and Kashmir,
which is responsible for the transmission and distribution of electric
power throughout the states of Azad Jammu and Kashmir. The primary
electrical load assessment for the residences and agricultural farm
considered the consumer requirements during the peak periods of the
day. Load calculations for agricultural farms and residential communities
are described in Tables 1 and 2, respectively.
The total electrical load of agricultural farm is 13.48 kWh/day.
The total electrical load of one house in the summer season is 6.66
kWh/day; the total load for 10 houses is 66.6 kWh/day. Primary and
peak electrical loads for both the cases (residential and agricultural) is
next calculated. Primary and peak loads for the agricultural sector are
approximately 13.48 kWh and 4.68 kW, respectively. For households in
the study, the primary and peak demand is calculated as 66.6 kWh and
7.78 kW, respectively, for one day. Therefore, for the selected location,
the total daily peak load demand of the power system is 12.46 kW.
The electric requirements of the agricultural sector and rural
residential houses with daily peak electrical load demand for a typical
summer day are shown in Figure 2. Electricity demand graphs clearly
represent the change in the load profile through all 24 hours in a day.
Figure 2 also shows the critical electricity load requirements throughout
the day and when loads are higher than normal. Many people may not
be at home during the daytime due to employment.
Table 1. Load calculation for agricultural farm (one day).
Table 2. Load calculation for the community (10 houses).

Volume 5, No. 6
Figure 2. Hourly load profile during a typical summer day.

37
Most residents are at home in the evenings and at night, prompting

increases in electrical demand. Many of the people living in the area
are farmers. Farmers use pumping machines for irrigation purposes,
so electricity is demanded during the daytime. Water system electric
pumps or motors are utilized mostly during the day from 6:00-18:00,
representing the need for electricity for agricultural activities during
daylight hours.
The monthly demand for electricity varies throughout the year. The
maximum load demand occurs in the months of June, July, and August.
This is due to seasonal activities and irrigation needs. Hourly and
monthly electrical load demand data were obtained from the electricity
department of Azad Jammu and Kashmir, Pakistan.
RENEWABLE ENERGY RESOURCES
An assessment of the potential of using various forms of renewable

energy was conducted. This includes solar, biomass, and wind energy
resources. This prompted the development of hybrid system design
options (i.e., Cases I-IV).
Solar Radiation Potential

The location chosen for this research has abundant solar potential
to generate electric power. Chitterperi is a small town located 4 km
from Mangla Dam in the Azad Jammu and Kashmir states of Pakistan.
Data for the solar resource potential or solar radiation were obtained
by using the HOMER software tool for Chitterperi (33°7.1′N latitude,
73°40.2′E longitude) and the NASA surface meteorology and solar
energy databases.
Summer in Pakistan begins in March and ends in August; the
maximum solar energy potentials occur during the months of May and
June. Annual scaled average solar radiation for Chitterperi is 5.24 kWh/
m2/day. The maximum solar radiation for the months of May and June
is 7.27 kWh/m2/day and 7.54 kWh/m2/day respectively. These data
indicate that Chitterperi is a near-optimum site for this research because
it has high solar radiation potentials; thus, electricity can be efficiently
produced using solar PV modules. Figure 3 represents the daily solar
radiation and clearance index for the chosen location throughout the year.
Volume 5, No. 6
Figure 3. Daily solar radiation and clearness index.

39
Biomass Potential
Biomass needs to be considered as a means of mitigating the issue
of climate change. It is a renewable source of energy that can used to
generate electricity.
Pakistan is an agricultural country (61% of Pakistan’s population
live in rural areas) and produces large quantities of agricultural wastes.
The country has biomass resources available in rural areas. More than
half of the people have livestock (e.g., cattle, buffalo, and goats) that
produce millions of tons of manure annually.
Animal manure produced from dairy farms can be used for the
generation of electricity. Total manure production from the animals can
be calculated according to the universal formula of manure calculation.
Equation 2 is used to estimate the total output of manure from the
animals. The biogas potential can be estimated by summing the
production of each animal’s manure using Equation 3.
M = ∑I x N x m (2)
Where:
M = the total animal manure produced in one year, calculated in tons
n = number of specified groups of animals
Ni = the total number of animals
mi = the manure produced per head
VB = ∑i x N x m x k x K (3)
Where:
VB = the volume of obtained biogas from manure in one year (m3)
kDMi = the dry matter content in the manure of certain animal
KOMi = the organic matter content in dry matter
VBi = the specific biogas output from the organic matter (m3/ton)
The manure concentrations are used to produce biogas energy.

Biogas energy produced from animal manure can be estimated using
Equation 4. The electric power from the available animal dung can be
calculated by Equation 5.
EB = ∑i n=1 Ni x mi x kDMi x KOMi x vBi x eBi (4)

Volume 5, No. 6 41
Where:
EB = the energy potential from manure in kWh.
eBi = the heat energy which is obtained from animal manure as
kWh/m3
P = EB ÷ Ke x Tc (5)
Where:
P = electric power in kW
Ke = coefficient of electric efficiency of the plant
Tc = the total operating hours of the plant throughout the year
The manure is collected from the dairy farm and heated to obtain
the natural byproduct of methane gas. This gas is used in electrical
generation plants as a fuel to power the generators.
Table 3 shows how the biogas and dry contents are produced during
the conversion of manure to useful methane gas, and how much power
can be generated. There are a total of 22 buffalo and cows on the dairy
farm. The total manure production from the animals is about 0.231
tons/day. Manure production per head totaled 4.38 tons per year for
buffalo and 3.285 tons per year for cows [3]. The electricity generation
capacity using the manure produced from the farm’s buffalo and cows
was estimated to be 3.99 kW.
Wind Energy Potential

Wind energy potentials can be measured by wind speeds in a specific
location based on hub height above ground level. Wind speeds, strength,
and consistency vary widely throughout the world. It is estimated that
the Earth’s total wind energy potential is 1 million GW [27]. If only 1%
of this availability is utilized, the world’s total electricity demand could
be met. World wind power generation capacity reached 743 GW in
2020, with another 94 GW estimated to have been added on 2021.
Pakistan has abundant potential for wind power generation which
is estimated to total roughly 346,000 MW. In this research, a wind
turbine generator (WTG) of 3 kW capacity is used. Wind speed varies
throughout the day (see Figure 4). For the chosen location for this
research, the average wind speed is 5.69 m/s.
Table 3. Estimated power production from animal manure. 42 International Journal of Strategic Energy and Environmental Planning
Figure 4. Wind energy potential.

Volume 5, No. 6 43
System Configurations
For the hybrid power system configurations modeled in this study,
the primary components were: a diesel generator, a wind turbine
generator, photovoltaic (PV) panels, and a biogas-fueled generator. All
four configurations used a converter and battery energy storage system.
For our assessment, four specific configurations of hybrid power systems
were evaluated:
Case I: Hybrid generation system using solar PV, diesel, and
batteries.
Case II: Hybrid generation system using solar PV, diesel, batteries,
and a WTG.
Case III: Hybrid generation system using solar PV, biomass, and
batteries.
Case IV: Hybrid generation system using solar PV, biomass, batteries,
and a WTG.
Initially, the Case I power system was analyzed, and then the
other cases were analyzed in sequence. The results of four cases
were compared using an economic evaluation that considered each
configuration’s NPC, COE, capital cost, operational costs, fuel costs and
any other necessary costs.
RESULTS
The results of the analysis of the four hybrid energy systems

(identified as Cases I-IV) are next described. Each hybrid system
configuration was assessed based on its net present cost, cost of electricity,
capital cost, and operation and maintenance costs.
Case I: Hybrid System Using Solar PV,

Diesel Generation and Batteries
The optimized results of a hybrid power system using solar PV,
diesel generation and battery storage are discussed in this section. For
Case I, the primary load of 80.08 kWh was modeled as being connected
to the hybrid power system. The schematic diagram showing all the
necessary equipment and energy resources of the modeled design is
shown in Figure 5.
The designed hybrid system used a 14 kW biogas generator, 19.1
kW solar panel, and an 83.4Ah capacity battery with 8.34 kW DC-to-
AC inverter. Houses have electric AC loads, which require AC power to
operate correctly. The converter changes DC electricity to AC.
Five schemes were analyzed using HOMER software to find
the optimal result. These different results are compiled by the
HOMER software tool, which stimulates all the possibilities of various
configurations to the one that best fulfills the load requirements at
the lowest cost. For the optimized Case I hybrid system, the NPC was
$195,624, the COE was $0.518/kWh, the capital cost totaled $89,730,
and the operation and maintenance costs were $22,472.
Case II: Hybrid System Using Solar PV,

Diesel, Wind and Batteries
In this hybrid configuration the same load is connected to the hybrid
PV, diesel, generator, wind turbine generator, and battery energy storage
system to find the best possible solution to meet the energy demands of
the selected site. The only change made to Case I configuration is that a
WTG is added to obtain a more resilient solution to meet the electricity
Figure 5. System configuration for Case I.

Volume 5, No. 6 45
demand. HOMER software automatically sets system architecture

according to the system configuration. For this hybrid power system,
a diesel generator of 14 kW, solar PV 19.1 kW, a battery of 1 kWh
capacity, a 3 kW WTG, and a converter of 8.34 kW is used (see Figure 6,
mentioning a diesel genset, WTG, solar PV panels), and battery energy
storage. For the Case II hybrid system, the NPC was $203,393, the COE
was $0.538/kWh, the capital cost totaled $23,769, and the operation
and maintenance costs were $41,960.
Case III: Hybrid System Using Solar PV, Biomass and Batteries
The hybrid configuration modeled for Case III uses a combination
of solar PV, biomass, and batteries for energy storage. The schematic
configuration for this system is shown in Figure 7. The suggested design
for this hybrid system is a biogas generator of 14 kW, solar PV of 0.557
kW, converter of 0.021 kW, and a battery of 1 kWh capacity. There
were different schemes suggested for this configuration by the HOMER
software, but the best results using the stated resources is quantified
and prevented. For the Case III hybrid system, the NPC was $106,808,
the COE was $0.283/kWh, the capital cost totaled $8,700, and the
operation and maintenance costs were $47,746.
Figure 6. System configuration for Case II.

Figure 7. System configuration for Case III.
Case IV: Hybrid System Using Solar PV,

Biomass, Wind and Batteries
Figure 8 shows the schematic design for Case IV. In this case, the
hybrid configuration uses solar PV, biomass, a WTG and battery energy
storage. The equipment’s capacity is 1.69 kW for solar PV, a biomass
generator of 14 kW, converter of 0.250 kW, a 3 kW WTG, and battery
energy storage of 1 kWh. After considering all the suggested results by
HOMER, the best results were determined. For the Case IV hybrid
system, the NPC was $133,775, the COE was $0.354/kWh, the capital
cost totaled $30,193, and the operation and maintenance costs were
$50,381.
Comparison of Hybrid System Configurations

The four hybrid power generation configurations were compared
based on their NPC, COE, capital cost, operation and maintenance
cost, and annual electrical production. Table 4 provides the data for the
four cases. Case III has the lowest NPC, COE, and capital cost values
of $106,808, $0.283/kWh, and $8,700, respectively. However, Case I
offers the lowest operation and maintenance costs; Case IV provides the
most electrical power production.
Volume 5, No. 6 47
Figure 8. System configuration for Case IV.
Based on the NPC, COE, and capital cost, Case III is preferred
among the configurations considered. The Case III system met the
electrical demands of the agricultural and community; extra power
was not needed. Based on a comparison of the hybrid systems, the
Case III solar PV, biomass, and battery energy storage configuration
was the most economically feasible solution to provide electricity to
remote rural areas making it the optimum solution. Data from Table
4 indicate that a small hybrid power system having available biomass
with or without a wind generator is a more feasible solution than any
hybrid power configuration using a diesel genset due to the high cost
of diesel fuel.
DISCUSSION
Comparing the various combinations of technologies utilized for the

purpose of electricity generation, the applied methods use renewable
energy resources. Solar energy is available in many developing countries
like Pakistan, which can generate electric power and be stored in
batteries in the form of DC.
Experiments show that bioenergy is a potential fuel source to meet
Table 4. Economic comparison of Case I-IV configurations of hybrid power systems.
Volume 5, No. 6 49
energy demands. Bioenergy can be used for transportation to create

biodiesel which can be used to generate electricity. Biomass fuel is a
by-product, residue, or waste product from different resources like wood
waste, horticulture, animal dung, and crop residues. It is unnecessary to
use food-based feedstocks.
In addition, biomass is an important energy resource that can be
found easily in many parts of the world. Biomass comprises natural
substances, including wood, horticultural deposits, and manure of
animals and humans. Biomass is a mixture of carbon dioxide and
methane gases. Biomass is used to obtain methane gas, which when
combusted in a Rankine cycle process creates steam. A turbine can be
used with a generator to generate electricity. For our assessments, animal
manure was considered, collected from agricultural farms and the
chosen biomass resource. As Pakistan is an agricultural country, farmers
use animal manure to fertilize crops in the agricultural fields. If manure
is used for power generation purposes, the electricity needs of rural
areas might be met at the lowest price due to the availability of biogas
resources.
CONCLUSION
This research presents an economic evaluation of different

combinations of hybrid renewable energy systems to be used in remote
areas of Pakistan. Different hybrid power system configurations are
analyzed using the HOMER software tool to obtain the optimum
solution to overcome the current energy issues in the remote areas of
developing countries. Renewable hybrid power systems are suggested
as a solution to reduce reliance on fossil fuels and decrease GHG
emissions [4].
Different scenarios were analyzed by considering various
combinations of renewable and non-renewable energy technologies to
meet the electricity needs of agriculture and the community residing in
the specific location chosen for this study. The different configurations of
a distributed hybrid energy systems were analyzed to find the optimum
solution to produce electricity and make it available to people living in
remote areas Pakistan.

Four hybrid distributed generation systems with battery energy
storage (Case I-IV) were analyzed. The proposed configurations used
various combinations of diesel generation, solar PV, wind power, and
biogas with battery energy storage. It was determined that an optimized
hybrid biomass, solar PV power generation system with battery storage
was the most economically efficient solution that satisfied the electric
load for 10 rural residences and an agricultural farm. The net present
cost, cost of electricity, capital cost, and operational costs for this hybrid
system (identified as Case III) are $106,808, $0.283/kWh, $8,700, and
$47,746, respectively.
Moreover, a sensitivity analysis of the optimum configuration (Case
III) was performed that considered various available solar potentials,
biomass resources, and system sizing. The results indicate that electricity
costs are reduced from $0.283/kWh to $0.205/kWh. The hybrid
power system saves about $0.178/kWh as the cost of electricity from
the existing conventional grid-connected power system is $0.383/kWh.
Therefore, the hybrid power system with renewable energy and battery
storage can meet the electrical load demand of the people living in
remote areas of the country with minimum energy costs.
The government of Pakistan should take serious initiatives to employ
this type of hybrid power system. It is proven to generate electricity
with the lowest costs and can provide electricity to the remote areas of
Pakistan since solar energy and other renewable energy resources are
locally available.
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AUTHOR BIOGRAPHIES
Muhammad Tahir Amin is a Ph.D. scholar and laboratory
engineer in the mechanical engineering department at the Mirpur
University of Science and Technology (MUST) in Mirpur, Azad Jammu
and Kashmir working from 2014. He obtained his Bachelor of Science
and Master of Science degrees in mechanical engineering from MUST.
He then joined public works Department District Bhimber Azad
Kashmir as assistant engineer. He joined the Mechanical Engineering
Department of MUST in 2014 as junior lecturer. His fields of research
are energy and thermal power systems. Tahir is currently continuing
research, focusing on cutting-edge advancements in energy generation
and thermal power systems. Through his diligent work, Tahir aims
to make valuable contributions to sustainable energy and promote a
greener and more efficient future. Email: tahir.me@must.edu.pk.
Zeeshan Munir is a junior scientist focusing on advanced methods

to generate power to meet energy demands. He completed his Bachelor of
Science in electrical engineering from Mirpur University of Science and
Technology, Mirpur AJK, Pakistan. He completed his Master’s Degree
in power engineering from the University of Southern Queensland,
Australia. During that time, he conducted research regarding renewable
energy resources and the best ways for resource development and
allocation in the power energy sector. Email: engr.zeeshan92@gmail.
com.
Volume 5, No. 6 53
Oil Import Risk Management:

Case of Zambia
Lloyd L. Chinjenge, Ph.D.
ABSTRACT
This article considers Zambia’s oil import risks and its the effects
on the country’s socioeconomic situation. The failure to manage risk
can result in rising costs and breakdowns in the transport, agricultural,
and mining activities which are crucial to the Zambian economy. The
purpose of this case study is to analyze Zambia’s oil import risks and
determine ways to mitigate them.
A multiple linear technique is used to investigate the connections
between Zambia’s oil import risks along the supply chains. The findings
indicate that when physical concerns are not considered, the financial
risks are transport costs, foreign exchange losses, demurrage, inflation,
credit and liquidity. If physical risks are considered, the nation will
import more oil. It will avert risks associated with the distribution of oil
which are greatly influenced by correlations among the various types of
risks.
To mitigate exchange rate risk, it is recommended the Ministry of
Energy (MoE) or oil marketing companies establish hedging instruments
such as forward contracts and options with banking institutions. The
energy regulation board can then use the hedged exchange rates for fuel
pricing. Further, transport infrastructure and storage could be upgraded
to strategic reserves. Forward physical contracts will then serve as the
risk control method. Oil risk researchers should apply models that focus
on long-term mitigation strategies for oil import risks.
INTRODUCTION
Oil is strategically important to Zambia as the country lacks proven

oil reserves. Zambia wants to secure an uninterrupted availability of
oil at an affordable price; however, oil exporters located in the Middle

East, Africa, and Latin America, suffer from political instability or
have a high risk potentials [1]. These risks include oil price volatility,
fluctuating foreign exchange rates, transport losses, demurrage,
inflation, credit, liquidity and storage fees. In combination, such
volatilities cause devastating economic chain reactions which tend to
increase oil prices [2].
Zambia’s 2019 National Energy Policy states objectives that include
ensuring the development and management of the petroleum industry
and supply security. Therefore, supply risk management in the provision
of quality petroleum products is fundamental to Zambia’s economic
growth and development. The purpose of this embedded case study is to
analyze the risks associated with imported oil in Zambia considering the
losses incurred by the system (e.g., ocean, pipeline, road, rail transport,
foreign exchange, demurrage, inflation and storage) and to suggest
mitigation approaches [3].
Status Policy Reforms

In late 2021, the government through the Ministry of Energy (MoE)
announced reforms in the petroleum subsector that included placing the
Indeni Petroleum Refinery under care and maintenance. The Tazama
(Tanzania-Zambia-Mafuta) pipeline would be converted into a finished
products pipeline to pump only diesel fuel. The Indeni refinery would
become a storage facility for the diesel that will be transported through
Tazama plus become a biofuel blending facility. Further, Indeni was
expected to undertake fuel marking at various marking points. The
government reforms were expected to be implemented during 2022.
Pricing Mechanics
In the petroleum industry two petroleum price reviews were
implemented. The first was in January 2021 when the wholesale
prices of petrol, diesel, and low sulphur gasoil (LSGO) were increased
while maintaining constant prices at the pump. This was achieved by
suspending the value added tax (VAT). Further, the excise duty was
eliminated for diesel fuel and reduced by 1.43 Zambian Kwacha (ZMW)
per liter on gasoline. The constant fuel prices on the domestic market
Volume 5, No. 6 55
were sustained by government subsidies in the form of price supports

that were issued by contracts with oil marketing companies (OMCs) [3].
However, the price support to OMCs was discontinued when the
contracts elapsed in December 2021; this led to an increase in the
wholesale and retail pump prices [4]. International oil prices generally
increased throughout the year while the ZMW strengthened against
the U.S. dollar from K22.61 in June 2021 to K16.81 by year’s end. For
this reason, a possible reduction in the pump prices which might have
resulted from the appreciation of the ZMW against the U.S. dollar was
averted by the increase in the international oil prices [5].
Infrastructure
Toward the end of the 2021, reforms were pronounced placing the
Indeni refinery on maintenance; refining of petroleum feed stocks would
cease in the upstream. In addition, a policy directive mandated that the
Tazama pipeline would only transport LSGO. The cycle of petroleum
price reviews changed from 60 days (i.e., the petroleum feedstock cargo
consumption period) to 30 days to become more cost reflective and
responsive to changes in international oil prices and currency exchange
rates. Thus, the Energy Regulation Board (ERB) started performing
monthly petroleum price reviews.
The developing petroleum subsector is one of the main drivers
of the Zambian economy. International oil geopolitics is impacted by
the energy independence goals of countries such as the U.S. This has
triggered greater oil price volatility, aggravated oil production instability,
and impacted petroleum transport security. As a large oil consumer,
Zambia faces severe oil import challenges. The country lacks domestic
petroleum production and oil imports continue to increase; import
dependence is due to lack of commercially viable petroleum reserves.
Dependence on oil imports will continue due to growing domestic diesel
use, especially in the mining industry.
The unstable political situation in oil exporting regions creates
supply disruption risks for importing countries including Zambia. For
example, the war in Yemen, with Iran and Saudi Arabia involved,
creates regional instability. Disruptions lead to imbalances between
supply and demand in the international oil market, causing global oil
prices to fluctuate. Since the global oil market is highly integrated, the
oil prices of exporters are also affected [3].
There are also transportation risks. Most oil is transported by ship,
hence the straits and canals in the maritime transportation network are
exposed to risks due to political instability, terrorism, piracy, conflicts,
and other events. For example, the political instability in the Middle East
threatens the safety of the Bab el Mandeb and the Suez Canal; if certain
straits or canals are closed, key oil shipping lanes are affected [5]. In July
2023, intervention by the U.S. navy prevented Iran from seizing two
internationally flagged oil tankers in the Gulf of Oman, a failed effort
by Iran to disrupt the international oil trade.
Due to the political risks of exporters, transportation risks, and oil
price uncertainty, oil import and transportation decisions are challenging
for importers who want to manage financial risks. Thus, this study aims
to analyze the risks associated with oil importation in Zambia [5].
BACKGROUND
Zambia is a land-locked country. The problem with oil import risk

in Zambia is related to the fact that imported products include diesel
fuel, petroleum, liquefied petroleum gas, heavy fuel oil, and A1 jet fuel.
Oil must transported overland or by river to limited port facilities. The
condition of the primary infrastructures in the petroleum supply chain
(i.e., the pipeline and the fuel terminal in Ndola) remain a physical risk.
Constructed in the 1960s, these assets now require additional investment
to improve their operating efficiencies.
When the refinery was constructed, the Zambian mining industry
needed more heavy fuel oil (HFO) than lighter products such as
petroleum and diesel fuel [6]. This meant that the petroleum feedstocks
had to contain purer crude oil. Crude oil is less costly than finished or
processed products. Over time, the product mix in the country migrated
from heavy toward lighter fuels, causing changes in imported petroleum
feedstocks. The feedstocks refined at the refinery included pure crude
oil, diesel fuel, and heavy naphtha.
Zambia also imported diesel, mixed the expensive diesel with
Volume 5, No. 6 57
crude oil, and then reprocessed the material into diesel and other
products [6]. This structural absurdity, coupled with the long distances
from the coast, was primarily responsible for the high cost of fuel. If
Zambia imported and refined the pure crude oil, feedstock costs would
have been less, lowering pump prices. The proposed solution to the
feedstock configuration was for the Indeni refinery to be upgraded to
process pure crude oil through the installation of components such as
a hydro-cracker. The implications of both options had been previously
highlighted in numerous studies presented to government [7].
IMPACT OF OIL PRICES
Oil production and consumption happens in different regions of the

world. The imbalance between oil supplies and demand is increasing.
The international oil trade exhibits two important patterns of risk: 1)
the global crude oil markets which expose participants to risks from oil
price fluctuations; and 2) the global oil supply network, in which physical
disruption is the most crucial risk.
Global crude oil prices impact pump prices in Zambia. To ameliorate
high pump prices, the government stabilized prices using subsidies.
While this provided temporary respite to consumers and the economy,
the treasury had to finance the deficits incurred on most petroleum
cargoes as it procured products at international market prices but sold
them below cost.
Despite government efforts toward price stabilization, petroleum
pump prices in Zambia were among the highest in the sub-Saharan
region. Financial losses were attributed to pipeline losses, fuel price
adjustments being unaffected when the trigger band was exceeded, and
high levels of petroleum product consumption [7].
Financial risks also result from oil price fluctuations between
the Zambian kwacha to the U.S. dollar, poor transportation, poor
infrastructure, and losses due to operations. Prior to the introduction of
the open account system in 2016, Zambia’s government issued letters
of credit (LOC) to finance imported petroleum feedstocks and finished
products. Irrevocable LOC were issued for 110% of the estimated cargo
value for cargoes in accordance with contracts signed in February 2016

[7]. However, this system introduced fiscal challenges which included
dependence on the treasury to guarantee payment of shortfalls in
trading rates and refinancing charges. Under this system, suppliers
usually demanded payment of past arrears before fuel cargoes berthed
and off-loaded at the port. This led to the accumulation of demurrage
charges [7]. The open account process proved advantageous to the
government compared to LOC. The suppliers under open account
supplied products without serious challenges as payment was affected
within 90 days; this provided enough time to sell the fuel and discharge
the debts.
Purpose of the Qualitative Case Study

The purpose of this qualitative, embedded case study is to gain a
deeper understanding of oil import supply risks in Zambia, understand
their implications on the country’s socioeconomic development, and
suggest ways to mitigate the risks. Although oil import risk management
appears prominent in the related literature, empirical studies on the
subject and the results of this study provide insights into the process
of determining the importance of oil import risk management [8,9].
This study contributes to the international oil technical and business
literature; it provides knowledge of the oil import issues in Zambia
within the existing oil import risk system.
This study also informs decision makers in global and local
Zambian organizations designing oil import risk strategies. It helps
them understand ways of ensuring oil security and risks associated with
undersupply. This research could have social change implications by
reallocating resources lost in the management of Zambia’s oil imports
(e.g., the social cash transfer arrangements in which government has had
huge under recoveries). The documented experiences of oil import risk
to Zambia may point leaders to new ways of ensuring imports of oil by
reducing risks. Recognizing that oil import risks exist within boundaries
of Zambia can foster social change by challenging accepted assumptions
about managing the diversity oil supplies. This research may fill gaps in
understanding how oil import risks may impact the country’s oil security.
Understanding these risks can help analysts improve oil security, an
Volume 5, No. 6 59
under-researched area of oil import risk management.

Therefore, this research drives a deeper understanding and
clarification of how certain organizations in Zambia perceive oil import
risks and offers clarity in answering the central research question: what
is oil import risk management and what are its implications on Zambia’s
socioeconomic development? Other questions are relevant. What are
important aspects of oil import risk for Zambia and their impacts on the
county’s socioeconomic development and its strategic petroleum reserve?
How are oil importation risks in Zambia related to transportation? Why
is it important to assess the impact of oil importation in Zambia due to
liquidity? What are the impacts of oil importation risks in Zambia that
result from variable exchange rates?
CONCEPTUAL FRAMEWORK
This embedded case study is framed by the key concepts that focus on
oil import risks. Outcomes consider risk management in discussing the
theories and implications of risk regarding liquidity, foreign exchange,
transportation, oil storage and demurrage [9].
Risk Management
Risk management is a scientific management method to identify,
measure, and analyze risks plus manage them effectively to achieve
maximum security at a minimum cost [10]. For this study, the first
stream of risks is concerned with hedging techniques for managing
the financial risks associated with the purchase of oil, while the second
stream is focused on the physical hazards associated with oil exporters
and oil transportation. Many capital asset pricing models developed in
the mid-1960s infer that risks measured by the security-to-overall market
volatility ratio are rewarded by an increased rate of return.
Risk management techniques that help manage disruption and
equipment failures include the goal programming model, predictive
risk index, quick risk assessment, process environment risk assessment,
analytic strategies, and agent-based infor mation flow [10,11].
Five mitigation strategies (add capacity, redundant suppliers, safe
management, increase flexibility, and robust planning) offer solutions

[10,11]. Abrahamsen and Aven (2008) compare accepted risk criteria,
such as the fatality acceptance ratio and as low as reasonably practicable,
with those from decision theories (e.g., the expected utility theory and
the rank-dependent utility theory) [10-12]. To help understand oil
import risks, we assess fundamental, technical, and political of factors:
Fundamental: These factors include the volume of oil supply and demand,
the volume and cost of futures contracts, producer spare capacity,
the amount of strategic oil reserves, the rate of oil substitution (with
coal, nuclear, renewables, unconventional oil, etc.), and technological
advancements in oil discovery and recovery. They have long-term
effects on market dynamics which determine the general trends in
oil prices [13].
Technical: These factors have short-term impacts on oil market dynamics.
They include the storage capacity of crude oil and oil products in
demand-side facilities (refineries and government-owned facilities),
the capacities of oil containers and tankers, plus the restrictions of
other facilities, etc.
Political: These factors include short-to-medium term impacts on market
dynamics. They include sanctions, wars, terrorist attacks on industry
infrastructure, etc. International oil trade exhibits two main patterns:
the global oil market, where participants are exposed to risk from
changes in oil prices, and the global oil supply chain (OSC) network,
where participants are at risk from physical interruption of supplies.
Oil geopolitics is impacted by the energy security strategies of the
U.S. and other countries. Along with causing oil price volatility,
this has created oil production instabilities, and has disrupted the
security of petroleum transport channels.
Types of Risks
The specific risks of importing oil include those associated with
events that affect individual suppliers rather than events impacting
international oil markets. Internal political instabilities that limit
the productive capacities and export quantities generated by an oil-
producing nation have implications for the energy security of countries
Volume 5, No. 6 61
that rely on imported crude oil. The specific risks associated with oil
export and transportation decisions are often difficult for oil importers
to control. Financial uncertainties due to the internal political risks of
exporters, transportation risks via waterways, and oil price uncertainties
are beyond the control of importing countries. These problems are
underexplored. Examples include systemic risks, operational risks, and
credit risks.
Systematic risks: Systematic risks in oil importation involve risks affecting
relatively large numbers of suppliers and large segments of the
global oil market. This is caused by events such as an unanticipated
surge in the global demand for oil or the actions of major oil-
producing nations seeking to strategically weaponize oil supplies
[11]. Such events make it difficult for oil importers to formulate
strategies to ameliorate their effects; the result is often higher oil
import prices [13].
Operational risks: Operational risks are referred to as inherent uncertainties,
such as uncertainties in customer demand, supplies, and costs.
Operational risk can be caused by disruptions brought on by
calamities such as earthquakes, floods, hurricanes, terrorist attacks,
etc., or by currency devaluation, labor interruptions or recessions
[13].
Credit risks: When just the oil price uncertainties are considered, the
actual financial risks will be substantially larger than they appear as
there are cost consequences in some scenarios. Additionally, more oil
will be purchased in the forward market to hedge against the same
risks if physical concerns are considered. When physical hazards
considered, the correlation among risks may have a significant
impact on where forward oil purchases are made.
There are other types of risks. Security of supply is crutial, and non-
oil-producing landlocked countries like Zambia require more product
stock in the country to cover the risk of serious disruptions, whether
supplied by road, rail, or pipeline. This can be complemented by
additional product stocks held outside the country; currently, Zambia has
ownership of 230,000 m3 in Dar-es-Salaam. Another key consideration
is the physical security of the pipelines, particularly if a new product

pipeline is developed. The security risks increase as the contents of the
crude oil pipeline cannot be readily used or sold. In addition to the
volatility of international oil prices, most of Zambia’s financial losses
from oil importation result from the currency fluctuations.
Many earlier studies only considered oil price fluctuations when
attempting to research oil procurement process risks. The amount of
cash flow in the system is critical to enhance the flow of petroleum
products into the country. The banking system must be capable of
responding to this need. Though they may be highly rated, global banks
financing oil transactions that lack of liquidity or collateral suffer from
inconclusive transactions.
LITERATURE REVIEW
The main purpose of this discussion is to present some of the

theoretical and empirical arguments underlying debates on the risks
associated with Zambia’s oil imports. There is no single theoretical
framework to inform our predictions. It is necessary to engage this study
in different branches of financial and macroeconomic literature.
Risk Management
One approach to managing risks focuses on hedging strategies to
control the financial risks of crude oil procurement. Another approach
is concerned with the physical risks of crude oil exporters and oil
transportation. The capital-asset pricing model inferred those risks.
When measured by the security to overall market volatility ratio, the
reward was an increased rate of return. Others proposed risk assessment
using Bayesian networks, fuzzy logic, and hybrid networks.
Risk management processes include environmental risk assessments,
predictive risk index, rapid risk assessment, the goal programming
model, the analytic hierarchy process, and agent-based information
flow. Six categories of risks (supply, capacity, disruption, equipment
failure, environment, and delay risk) and five mitigation strategies (add
capacity, redundant suppliers, safe management, increase flexibility, and
Volume 5, No. 6 63
robust planning) have been suggested. Some researchers compare risk

acceptance criteria like the fatalities acceptance ratio or accidents as low
as reasonably practicable. Decision theorists like the expected utility or
the rank-dependent utility theories.
Risk management literature for the process industries is heuristic
as their planning activities are complex. Pervasive service composition
(PSC) takes a strategic shift from long-term manufacture to short-
term manufacture and from the make-to-stock to the make-to-order
paradigm. It provides an excellent opportunity to extend the existing
planning models to incorporate research methodologies (RM), and
build new methodologies for integrated PSC-RM. Research has evolved
in two directions: early work has been mainly qualitative, while recent
efforts have focused on quantitative approaches.
Qualitative and Quantitative Studies

Some researches consider hedging strategies to control financial risks.
An example is an integrated operational hedging strategy combined
with financial hedging which better manages the financial risks of
fluctuating oil process associated with procurement. The inventory
and the nonlinear complex crude distillation unit (CDU) fractionation
index (FI) model are used for crude oil operational hedging; call and
put options are often used for financial futures hedging. To minimize
the conditional value at risk (CVaR) associated with the total costs, the
quantity of crude oil procured from the spot market, and the quantities
of each contract in each time period are determined. To control the
financial risks various spot, futures, and option contracts, operational
plans, stochastic programming strategies, volatility analysis, and forward
pricing scenarios are used.
Strategic, tactical, and operational decisions must be made to support
supply chains. The oil industry’s supply chain includes exploration,
extraction, crude oil procurement, storage logistics, transportation of
crude, refinery operations, distribution, and transportation of final
products to points of sale. To advance energy security, improving the
oil supply chain affects the performance of oil companies, impacts
governmental policy-making, and requires strategic planning.
One approach is to consider availability of resource, applicability of
technology, and acceptability (the 3-As) to analyze the major oil firms
in terms of their perception of energy development and its potential.
Other researchers constructed an evaluation framework based on four
factors: availability of energy resources, applicability of technology,
acceptability by society, and the affordability of energy resources (the
4-As). It has been used to identify, analyze, and examine how China’s
energy security has changed over 30 years of reform. Such studies help
us understand and evaluate energy security.
Instructive studies have focused on evaluating the oil importing risks.
Some have used two-phase models to evaluate oil importing risks from
the perspective of supply chains by introducing external supply and
dependence stages. Focusing on oil import portfolio improvement, others
have modeled the global oil supply chain considering the risk exposure
of exporting countries, and then used optimization methodologies to
consider a variety of risk exposures.
These studies offer new perspectives and imply the need to study
Zambia’s oil supply network. A macro perspective of the global oil
supply chain (OSC) is necessary when investigating the oil import
risks of countries such as Zambia. The global OSC refers to the entire
process by which oil consumers acquire oil from external suppliers and
deliver refined products to the consumers. The risks inherent along the
stages of global OSC can be classified as risks arising from the supply
chain network or external risks from the perspective of supply chain
theory. The 4-As framework is the better approach to systematize these
risks.
Research designs may use a two-dimensional risk matrix and
evaluate the risks incorporated into the 4-As framework. According to
actual features of Zambia’s OSC, a quantitative analysis is conducted,
policies aiming at managing oil importing risks are examined, and
potential problems are presented using the 4-As framework. The supply
chain or network, comprises an integrated chain in which all entities
collaborate to supply products or services.
As there are supply-side, transportation-side, demand-side, and
market-side components in the global OSC, there are four risk factors
that portray the risks in different stages along the supply chain. The risk
of availability measures suppliers’ availability for consumer demand by
Volume 5, No. 6 65
external oil supply and distribution. The risk of accessibility of transportation

reflects the stability of acquisition in the aspect of transportation [14].
The risk of acceptability of infrastructure refers to uncertainty of port
infrastructure, emergency management and so on, which emphasizes the
acceptability of oil importing countries. Finally, the risk of affordability of
economy measures the uncertainty of importers’ ability to afford imported
oil, occurs in the process of purchasing through trade [14]. After oil
arrives in-country and is discharged from the ports, oil is distributed and
transported by the domestic supply chain. The risks of availability of
suppliers, accessibility of transportation, and affordability of economy
occurring abroad are uncontrolled. For importers, it is necessary to
evaluate these uncontrolled risks, which helps to better monitor the risks
throughout the entire oil importing process [15].
A two-dimensional risk matrix including internal and external risks
can be created to evaluate oil import risk comprehensively. Based on the
quantitative evaluation, the oil imports portfolio can be improved more
reasonably and accurately using risk identification with the 4-As. The
internal disruption risk of OSC can be described by three factors which
describe the availability of oil suppliers, accessibility of transportation,
and acceptability of importing countries’ infrastructure [15]. Each
specific risk factor can be described by using various indicators.
Using Frameworks
The qualitative literature considers hazard analysis, safety
management, frameworks, plus accident and contingency databases.
Qualitative studies consider first degree hazards or sources of risk from
the second-degree hazards resulting from accidents. Philosophical
aspects of risk acceptance criteria and the role of statistical decision
theory within safety management have been considered. Barrier and
operational risk analysis (BORA) considers avoiding ignition, reducing
release, avoiding escalation, and preventing fatalities.
Hazard analysis algorithms have been proposed that include deviation
analysis, malfunction analysis, and accident analysis algorithms. They
use process state variables to identify the fault propagation relationships.
Frameworks have surfaced using decision support systems involving case-
based reasoning to assist decision makers in preventive and interceptive
construction; they apply fault tree analysis and case hierarchy diagrams.
Researchers often use four assessments in their framework: 1)
condition assessments to detect chemical, physical, and biological
impairments; 2) causal pathway assessments to determine causes and
their sources; 3) predictive assessments to estimate risks and benefits of
managerial actions; and 4) outcome assessments to evaluate the results
of the decisions.
Impacts of Exchange Rates

This section summarizes literature regarding oil import risk
management which includes foreign exchange risk. An ERB analysis
based on an average of the eight suppliers revealed that at an exchange
rate of K13/US$1, diesel fuel incurred a loss of K2.07/liter for
deliveries in June 2019; petroleum would incur a loss of K0.15/liter. At
an exchange rate of K12/US$1, diesel fuel posts a loss of K1.24/liter;
petroleum registers a profit of K0.54/liter. The analysis revealed that
both products would post profits at an exchange rate of K10/US$1;
diesel fuel would post profits of K0.43/liter, while petroleum would
post profits of K1.93/liter [7,16]. The exchange rate in July 2023 was
K17.6/US$1.
Exchange rates have a larger role in forward contracts because the
transactions use the U.S. dollar [17]. When the importer enters into a
forward agreement and the local currency weakens, the importer must
pay more in local currency units for that forward contract.
The oil industry supply chain comprises various strategic, tactical,
and operational risks at all stages of exploration, oil procurement,
storage logistics, transportation, refinery operations, distribution,
and transportation of final products [17]. The processes involved in
oil importation, supply, demand, other uncertainties, and risks have
attracted attention from researchers [16]. Some studies involving
the importation and transportation of oil use parameters to describe
hazards without accounting for their stochastic nature [16]. Physical
dangers are often overlooked as a means of reducing financial risks.
Empirical Review
Nour et al. found that the generalized error distribution (GED)
Volume 5, No. 6 67
value-at-risk approach is more effective than the well-recognized

historical simulation with aggressive moving average (ARMA) forecasts
to evaluate and forecast risks crude oil prices and its spillover effects
[16]. A two-stage stochastic programming (SP) approach has been used
with optimal midterm refinery planning to address three sources of
uncertainties: market demand, prices, and production yields of crude
oil and products [18]. The process proposed involved: 1) Markowitz’s
mean-variance (MV) model that minimizes the variance of the expected
value; 2) the two-stage SP that minimizes the expected recourse costs;
3) incorporation of the MV model within the SP framework; and
4) reformulation of the previous model by adopting mean-absolute
deviation as the operational risk measure. Two-stage approaches are
viable when deterministic models minimize the total production costs
and raw material procurement. In the second stage, a scenario analysis
technique controls for risks (i.e., changes in demand, market prices, raw
material costs, and production yields).
The domains of logistics and operations management have given
risk analysis and management attention due to supply, demand, price,
and other variables. In terms of oil procurement, due to the volatility of
crude oil prices, a crude oil importer faces large financial risks. Several
crude oil risk management solutions have been presented based on the
examination of correlations between spot and futures prices.
Many past studies only considered oil price fluctuations when
attempting to assess risks in the oil procurement process. The traditional
hedging strategy is based on the minimization of the variance of the
import portfolio, and the obtained minimum-variance hedge ratio is
assumed to be time-invariant. Generalized autoregressive conditional
heteroskedasticity (GARCH) class models have now been created,
and the time-varying hedge ratio is optimized since the variance and
covariance of the crude oil spot and futures prices are time-varying.
Recently, new methods like the vine copula and polynomial projection
models have been proposed to calculate the optimal hedging ratio.
Oil import risks include the exporter’s country risk and transportation
risk. Data from the International Country Risk Guide (ICRG) are often
used to represent the country’s risk of oil exporters. For transportation,
the first concern is the expense of transportation. Oil spills in confined
shipping lanes can also result in a blockade, negatively impacting global

oil markets and damaging the marine environments [18]. The potential
of oil spill risks is considered when determining the best maritime routes
for the transportation of crude oil. However, it is inadequate to consider
only the dangers associated with oil spills because straits and canals are
also vulnerable to transportation threats from extreme occurrences (e.g.,
conflicts and piracy).
Several researchers have addressed oil supply risks. Discussing and
arguing the security of supply dependence is often complicated by
a lack of clarity about the risks involved. Four distinct hazards have
been identified as being useful to consider: source dependency, transit
dependence, facility dependence, and structural risks.
Regardless, there are additional elements that need to be considered
for managing financial risks, such as the supply of crude oil and
transportation, but studies on these topics are scarce. In contrast to the
previous literature, this study seeks to determine whether it is necessary
to consider physical risks when planning the import and transportation
of crude oil to reduce overall financial risk. This study supplements the
existing literature. The risk-averse attitude of the importer is modeled
by the conditional value-at-risk approach.
On an international level, European import dependency is known:
only five of the 33 European countries are self-sufficient or net energy
exporters, and nine of them are more than 95% dependent on imports.
Diversifying sources of energy imports reduces risks associated with
supply disruptions. Examples of risk categories needing examination
include disruption, delays, regulatory risks, systems risks, environmental
risks, forecasting, financial, intellectual property claims, the market,
stock, capacity, etc.
RESEARCH METHOD AND DESIGN
This study reviewed literature published by the MoE, books,

policy papers, research, and conference proceedings. The review then
examined the collected information concerning the oil import risks in
Zambia. The literature on the subject was collected through search
Volume 5, No. 6 69
engines such as Google Scholar, Yahoo Finance, Zambia archives,

and the University of Zambia library. Oil is Zambia’s largest import
commodity accounting for 17.4% of the total value of imports [19].
The literature that was not relevant to the study was discarded. The
method of analysis presented in this study adopted a triangulation
approach to qualitative data analysis.
Population and Sample

The study made use of information obtained from the MoE. The
study used data obtained from studies carried out by the ministry, policy
briefs, and parliamentary submissions. The MoE documents were
prioritized because they are from a credible source who is the custodian
of the data [20]. These documents are crucial to explaining the risks
that Zambia faces in terms of its oil imports [20].
Materials/Instrumentation
This study presented consent forms to various institutions where
secondary data were provided and later analyzed the data collected
based on their relevance to the study. Interviews were also held with
various department heads after the delivery of the consent forms
[21,22].
Study Procedures
Consent forms were delivered to the various institutions requesting
interviews and data. Two interviews were then held with different
departmental heads from the institutions visited [23]. The data were
collected from Zambia’s Ministry of Transport and Communication,
Ministry of Mines, Tazama pipeline, Indeni refineries, and Ndola
energy [7,24].
Data Collection and Analysis

The study relied on both primary and secondary data obtained from
reliable sources and other government line ministries. Interviews and
meetings were conducted to get the required data from the Zambian-
based institutions. The obtained data were then analyzed by the
researcher and some data were discarded based on their contribution
to the study. The researcher then used triangulation to analyze the risks
that the oil markets are facing in Zambia [25].
Ethical Assurances
The participants in this study were assured that personal
information would not be shared with anyone outside of this research
team. Privacy is valued and respected; as such, no one has access to the
individual responses provided. The information provided is identified
by a unique number and will not be available to anyone except the
research sponsor [25].
FINDINGS AND RESULTS
The key findings indicate that financial losses were primarily due to
oil price volatility, exchange rates including currency depreciation, and
demurrage payments.
The Causes of Losses on the Finished Petroleum Products

The causes of the losses during the period are: 1) the lag in the
changing of the domestic wholesale prices that was inconsistent with
the prevailing international oil prices i.e., in certain instances, the
prices were not revised despite the trigger band of 2.5% by ERB being
exceeded; 2) exchange rate loses stemming from the overall deprecation
of the Zambia kwacha against U.S. dollar; and 3) expenditures on
demurrage [26].
Lag in the Change of Wholesale Prices

To retain profitability, it is typically essential that the wholesale
prices remain higher than the cost of procuring the products. However,
in certain instances the wholesale prices of the petroleum products had
fallen below the unit cost of procuring them [27]. This is attributed to
fluctuations in international oil prices which make up a large portion of
the price build-up of imported petroleum products, whereas wholesale
prices have maintained a relatively low variance [28,29].
Deprecating Kwacha
Zambia is a net importer of all the petroleum products. A weakening
kwacha over the years has contributed to losses on the petroleum
products as a result of exchange rate losses [30].
Volume 5, No. 6 71
Demurrage Payments
Accumulated demurrage payments (fees payable to the owner of a
chartered ship due to a failure to load or discharge the ship within the
time agreed) made to the supplier’s amounted to $8.4 million (U.S.);
these costs ultimately affect the profitability of the finished petroleum
products [4].
The Ministry of Energy asserts that the Tazama pipeline and Indeni
refinery in Ndola are the main components in the Zambian petroleum
value chain [7]. Tazama Pipelines Limited being the main importation
transportation conduit has a pipeline that runs from Kigamboni in Dar-
es-Salaam to the refinery. It provides feedstock to the refinery and has a
monopoly on most of Zambia’s crude oil imports that are transported
via the Tazama pipeline and refined domestically at the government-
owned Indeni refinery. However, oil importation is prone to risks.
The Ministry of Finance further asserts that pipeline losses were
1.48%. The average total consumption and loss per crude oil cargo
totals 9.98%. This means that for a cargo of 100,000 MT costing $70
million, the consumption and loss could translate to approximately
$7 million of crude oil feedstock prior to sale. Fuel price adjustments
are not affected in time to match the actual cost of the crude oil cargo
leading to loss [29].
IMPLICATIONS OF THE FINDINGS
This study concluded that the operation of the fuel supply chain in
Zambia is not optimized. The fuel supply system is inefficient due to the
inherent losses incurred in the importation of petroleum feedstocks. If
the rate of supply chain losses continues, the Zambian government will
be unable to pay suppliers on time; this will negatively affect the supply
of petroleum products in the country [31]. The government will be
unable to adhere to the contractual obligations of paying the suppliers
for finished and commingled feedstocks [32]. Loss of confidence in the
sector and the open account system will send an imperfect signal to oil
suppliers; they may choose to withhold cargos or exact fees [31].
Recommendation for Managerial Practice

This study provides the following recommendations. Most of the
financial losses result from the fluctuations of the kwacha to the dollar.
To mitigate exchange rate risk, it is recommended that the Ministry
establish hedging instruments such as forward contracts and options
with the banks. The ERB can then use the hedged exchange rates for
fuel pricing; hence, forward purchases are guided by more than oil
prices and transportation costs. These managerial insights can aid crude
oil importers in making better decisions by helping them comprehend
the significance of physical hazards [33,34].
There is also a need to reduce the allowable losses for the Tazama
pipeline which are currently at 1.48% to 0.85% to align it to best
industrial practice [34]. Benchmarking the elements in the petroleum
price build-up is important to ensure predictability and facilitate
reasonable negotiations with suppliers. The supplier should be compelled
to provide the Ministry with the final invoices immediately after a vessel
docks to allow the ERB to use actual invoices and not proformas for fuel
pricing [34].
Adherence to payment timelines for petroleum feedstock suppliers is
recommended. This will eliminate demurrage costs and costs associated
with shutting down and starting up the pipeline and the refinery.
Finally, the MoE should subscribe to the world standards for crude
cost lines to understand how the supplier’s cost lines deviate from the
accepted standard for cost lines (e.g., freight costs) [35]. This would help
determine if there is a need to renegotiate the contractual price schedule
[35].
SPECIFIC RECOMMENDATIONS
New contracts for oil need to identify timelines in addition to the

quantities. The proposed timeline is one year with the last three months
marking the commencement of the procurement process for the next
tender. The number of suppliers should be reduced to five: three
international suppliers with options for joint ventures with Zambian-
owned companies, and two Zambian-owned companies. Joint ventures
Volume 5, No. 6 73
with Zambian-owned companies would get special preferences. There

is a need to renegotiate contracts in the short-term based on the
standardized price schedule to lower the landed cost to the Zambian
government. The government must disengage from the procurement
process in the medium-term and remain engaged to balance strategic
reserves for emergencies or price stabilization. The government should
develop a strategy to operationalize private sector procurement of
petroleum products. Full information should be provided to ERB
regarding the landed costs for both crude and finished products [36].
There is a need for bilateral contracts between the Zambian
government and oil producing countries. Suppliers will then be
encouraged to obtain fuel from countries where there is a framework for
cooperation. Suppliers should be compelled to provide the Ministry with
the final invoices for the crude oil supplied; this would allow the ERB
to use the actual invoice and not the pro-forma for fuel pricing. Regular
reconciliation of the proforma and the final invoices should be handled
by the buyer, in this case the Zambian government.
Invoice submissions to the MoE by the supplier should include
test certificates indicating the actual specifications [37]. Adherence
to payment timelines for crude petroleum feed-stock suppliers by the
Ministry will eliminate demurrage costs and costs associated with
shutting down and starting up the pipeline and the refinery [37]. The
price of fuel should be self-financing and should be reviewed every 60
days per ERB guidelines. There should be strict adherence to the ERB-
reviewed fuel prices each time the 2.5% trigger band is exceeded.
CONCLUSIONS
Energy, especially conventional fossil energy, is an important

security prerequisite for the economic development of all countries and
regions. The U.N sustainable development goal 7, ensuring access to
affordable, reliable, and sustainable modern energy for all, emphasizes
this important resource. At present, the competition for energy among
countries in the world is increasing and becoming a source of conflict
among countries.
This analysis quantifies the risks associated with Zambia’s oil

imports. It simulated the optimal size of Zambia’s strategic petroleum
reserves under different supply interruption scenarios. This provides the
scientific basis for grasping the current situation of Zambia’s oil imports
and formulating Zambia’s oil resource security policies. In addition,
this study calculated the supply and transportation risks of Zambia’s oil
imports and innovatively introduced the relationship with Zambia into
the calculation of supply risks. Alternative energy has been included in
the model of the strategic petroleum reserve as a factor affecting the
strategic petroleum reserves [36].
In the case of Zambia, we find that the main risk factors affecting
Zambia’s oil import security are variable. Saudi Arabia and Russia have
the lowest supply risk; the marine transportation risk of Zambia’s oil
imports from Middle Eastern countries is much higher than that from
East Asian and South Asian countries [38]. Zambia’s oil imports from
the Middle East are more susceptible to supply risks; oil imports from
South and East Asian countries are more susceptible to transportation
risks. This reflects the fact that the impact of oil import risks on the
volume of oil imports varies from region to region. Middle Eastern
countries have strong oil export capacities but are politically unstable;
Asian countries have weak oil export capacities but are politically stable.
When oil supply interruptions increase, alternative fuel development
initially increases and afterwards declines; strategic petroleum reserves
gradually increase. When the conversion rate of alternative fuels
increases, the inflection point of the change of alternative fuel openness
increases. If Zambia’s government is committed to improving the
conversion rate of alternative energy resources, the importance of
petroleum will continue to decrease. This will ultimately reduce the size
of Zambia’s strategic petroleum reserves and help cope with long-term
oil disruption crisis.
To better ensure the security of oil supplies, Zambia should consider
the construction of the One Belt and One Road project as an opportunity
to build a community of shared interests and destiny for Asia-Europe-
Africa energy cooperation, and enhance information communication
and financial support mechanisms. This can help eliminate the
remaining barriers to oil trading and promote greater integration of
Volume 5, No. 6 75
energy markets. In addition, Zambia’s government should actively

develop renewable energy sources, promote alternative energy vehicles,
and replace oil with biomass energy.
Types of supply risks include operational risks and external
environmental risks. Zambia’s oil supply risks are associated with supply
disruptions from the dependence on supplies from specific countries;
these risks can be reduced by diversifying sources of energy imports
[28]. Diversification enhances the security of the oil supply by reducing
excessive dependence on a single supplier.
In conclusion, the fuel supply chain in Zambia is not operating
optimally as the findings show that pipeline losses are 1.48% and the
average loss per crude oil cargo is 9.98% [39]. In particular, the oil
importation process suffers from transportation, exchange rate, supply,
pricing, and human risks.
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AUTHOR BIOGRAPHIY
Lloyd Lishandu Chinjenge is a Ph.D. candidate in management
sciences at the Paris Institute of Technology’s business school of École
des Ponts Paris Tech. He has a bachelor’s degree in chemical engineering
majoring in energy. His post-graduate studies are in sustainable energy
engineering and petroleum engineering. He has taught at University of
Zambia, worked in the sugar and cement industries and public service
in various energy management positions for over 19 years. He holds

Master of Science degrees in energy and environment, and a Doctor
of Engineering honoris causa. He is an AEE member, a Fellow of the
Engineering Institution of Zambia, Society of Petroleum Engineers
(USA), and member of the Association of Consulting Engineers of
Zambia. He lecturers at University of Zambia in alternative energy.
Lloyd is motivated to teach, share his life experiences, and vision to
impart theoretical knowledge into practice for students in renewable
energy, production management, and thermal-energy related courses.
Email: lloydchinjenge@gmail.com.
Volume 5, No. 6 79
Call for Papers
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an official bi-monthly publication for members of the Association of Energy
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Volume 5 | Issue 6 | 2023

Volume 3 | Issue 3 | 2021

International Journal of Strategic Energy & Environmental Planning

ISSN: 2643-6930 (Print) Editor Stephen A. Roosa

8 Guest Editorial; Securing Social Acceptance to Advance the Energy

12 U.S. Natural Gas Prices in a Tailspin; Stephen A. Roosa

23 Economic Evaluation of Hybrid Power Systems in Rural Pakistan;

53 Oil Import Risk Management: Case of Zambia; Lloyd L. Chinjeng

79 Call for Papers

JOURNAL OF THE ASSOCIATION OF ENERGY ENGINEERS®

ISSN: 2643-6930 (print)

Stephen A. Roosa, Ph.D., CEM,

EDITORIAL BOARD MEMBERS

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What Are Virtual Power Plants?

A virtual power plant (VPP) is a network of decentralized, medium-

pricing programs as resources. When aggregated, they mimic certain

electric grid reliability and operational optimization [2]. As the

Stephen A. Roosa, Ph.D., CEM, CSDP, REP, CRM, CMVP

Securing Social Acceptance to

Community opposition has been identified as one of the biggest roadblocks to

From Roadblocks to Reality

Demystifying the Transition to Reduce Risks

disseminated across all types of communities and generations, and

A Consistent and United Voice

Authentically Engaging to Build Understanding

shock-resilient communities. This is a key element in securing the

Turning Opposition into Opportunity

U.S. Natural Gas Prices in a Tailspin

In the U.S., natural gas electrical generation plants are replacing

GW of capacity [1]. However, a portion of the electricity generated

The Importance of Natural Gas

Figure 1. U.S. electricity production by energy source (2018-2024) [1].

Figure 2. U.S. coal prices from 2020 to 2023 ($s/ton) [7].

To export natural gas, it must be liquified. The market of liquified

NATURAL GAS COSTS

What is up with the price of natural gas? Natural gas is priced in

Impacts of Volatile Natural Gas Prices

Natural gas is an important fuel source as it can be used to provide

and a lack of energy storage, natural gas will be needed to supplement

Dr. Roosa has received numerous awards during his career,

Economic Evaluation of Hybrid Power

This research explores the effectiveness of modern hybrid renewable

There is growing demand for electrical energy in rural areas of

important economically, especially in the public sector.

deploy a hybrid power system using different combinations of energy

Hybrid Power Systems

functionality and reliability. Hybrid power systems depend on multiple

BACKGROUND AND LITERATURE REVIEW

The world’s focus on energy supplies has increased due to population

Research in Hybrid Energy Systems

development agendas in rural areas and improves education and public

is added for backup, the reliability of hybrid power systems can be