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PSIA Energy Tajikistan research funded by UNDP Bureau for Europe and the CIS

PSIA Energy Tajikistan research funded by UNDP Bureau for Europe and the CIS. Lilit Melikyan and Hasmik Ghukassyan Almaty 13 April 2011. Growing household energy insecurity in Tajikistan. Changes in apparent electricity consumption* (2007 = 100).

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PSIA Energy Tajikistan research funded by UNDP Bureau for Europe and the CIS

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  1. PSIA Energy Tajikistanresearch funded by UNDP Bureau for Europe and the CIS LilitMelikyan and HasmikGhukassyan Almaty 13 April 2011

  2. Growing household energy insecurity in Tajikistan Changes in apparent electricity consumption* (2007 = 100) Annual household electricity inflation rates * Generation minus exports. Source: State Statistical Agency.

  3. Tajikistan’s energy sector: Some numbers to consider • 1 million: An estimate of the number of people who spend much of the winter without electricity, heat • 10%: Although nearly three quarters of the population lives in rural areas, they only account for 10% of electricity consumption • $2.2 billion: The financing gap associated with Tajikistan’s programme for building large hydropower plants, new electricity transmission infrastructure

  4. Electricity: Barqi Tojik • Vertically integrated state monopoly • Hydropower dominates generation assets • Collections: From 54% (2004) to 72% (2009) • Technical and commercial losses: From 19% (2004) to 14% (2009) • Household tariffs: • Cross-subsidized by other users • Committed to raise them

  5. Electricity: Pamir Energy • A public-private partnership in Gorno Badakhshan • 25 year concession • Shareholders: IFC and Aga Khan Development Foundation • Service: More than 90% of 29,000 households receive electricity from Pamir Energy • Difficult start but strong progress • Average supply per day: 23.5 hours • Losses: down to 20% (from 39%) • Tariffs: • More rapid growth than at Barqi Tojik • Lifeline scheme funded by SECO (around $5million) • expiring end of 2011 • Subsidy scheme: for up to 200 kWh per month in winter and 50 kWh per month in summer, the consumers pay 0.25 ¢/kWh Source: Pamir Energy Information note

  6. Income poverty trends Source: State Statistical Agency

  7. Link between grid connections, electricity supplies has been broken Average monthly household electricity consumption (kWh) Share of households using electricity Source: State Statistical Agency

  8. Share of households heating with various fuel sources Source: State Statistical Agency

  9. Reliable electricity supplies: Estimated benefits • Income-poverty elasticity estimate in 2010-2012 PRSP suggests that higher GDP growth could lift 120,000 people out of poverty • One megawatt of additional installed capacity in small hydropower plants creates 40 “green jobs” (UNDP-Tajikistan) • In other countries, extensive use of diesel generators has been found to reduce GDP by up to 40%

  10. How much household spending on energy is too much?

  11. Is household energy spending at “unaffordable” levels? Share of household expenditures devoted to energy, 2009 data. Source: State Statistical Agency.

  12. After food and energy spending, what’s left over? • Official survey data imply that food + energy expenditures absorb 100% (or more) of many household budgets Share of household spending devoted to food (2009) Source: State Statistical Agency

  13. What happens if electricity tariffs rise to cost-recovery levels? • Simulation of impact of raising household electricity tariffs from $0.019 kWh (at present) to $0.034/kWh • Assumptions: • No reduction in volume of electricity consumed • No change in other energy prices, quantities • No change in real household incomes • Results: share of poor household expenditures devoted to: • Electricity rise to 8% • Energy overall rise to 56% • Implications: • Even more pressures on household budgets • Can social policy mitigate this impact?

  14. World Bank research • Only 0.5% of GDP devoted to social protection in 2009 • Household electricity and gas subsidies are included • Only half of this share is received by poorest households (1st, 2nd quartiles) • Poverty rate only reduced by 0.3%

  15. The debate: Cash transfers versus lifeline tariffs Share of electricity expenditures in total household expenditures, by poverty level, under different tariff scenarios • Our simulation indicates that a lifeline would lift more people out of severe poverty than other social assistance policies • This is consistent with other research results for small countries with high poverty and connection rates • Under scenario 3 the extreme poverty rate would fall by 5% (from 20.2% 19.1%) Assumptions: a) household electricity consumption remains unchanged; b) households consume the same amount of electricity under different tariffs; c) household incomes remain unchanged; and d) lifeline limits are applied to all households.

  16. Social assistance to mitigate the impact of energy prices • World Bank/EC-led reform: • Proxy-means testing • Improved management • Two-year pilot Khatlon oblast (until 12/2012) • Annual allocations will be 400 somoni ($91), paid out quarterly through Amonat bank Indicator composition of Tajikistan’s proxy means testing pilot

  17. Introducing cash transfers is advised—but, in the meantime? • Combine: • The present system • A lifeline tariff regime • Somecategorical targeting • A recent ADB study finds that many features of Tajikistan’s existing assistance programme could be combined with such a scheme, thereby facilitating its introduction Other social assistance measures Transitional scheme? • Connection subsidies (gas and electricity) • Subsidies or vouchers to encourage the use of clean fuels (e.g., LPG) • Subsidies for energy efficient household appliances, insulation, and other energy-saving technologies—possibly via vouchers—could be considered • Potentially assistance with firewood harvesting

  18. Other policy recommendations • Enabling legislation/regulations need to be adopted for: • The 2010 Renewable Energy law • Energy efficiency legislation • National Heating strategy . • Resolve uncertainties regarding” • Extent of rehabilitation or expansion of the central heating system • Other alternatives: • Centralized: (electricity, piped gas) • Decentralized (LPG) • Financing for energy efficiency, decentralized renewables: • UNDP-proposed trust fund • Credit lines through local banks to fund renewables

  19. Research recommendations • Improve energy poverty component of living standard survey data • Conduct willingness-to-pay surveys regarding possible tariff increases • Use computable general equilibrium, macroeconomic models (e.g., PAMS) to more fully model the impact of tariff, other policy changes. • Apply social cost benefit analysis

  20. Thank you....

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