This paper presents an integrated approach to dealing with the twin problems of environmental degradation and capital costs associated with the rapid expansion of electric power in developing countries. The integrated resource planning framework developed here calls for a careful balancing of supply and demand side options. Interruptible technologies are an important option in those developing countries where capital is scarcer and shortage costs are higher. When environmental costs of conventional generating technologies are included, the balance shifts even further in favor of demand side measures. This integrated perspective at the planning phase must be complemented by pricing policies that accurately reflect the cost of providing electric power, and organization structures that provide strong incentives for efficient operation.