LilitLilitLilitLilit MelikyanMelikyanMelikyanMelikyan and and and and HasmikHasmikHasmikHasmik GhukassyanGhukassyanGhukassyanGhukassyan

AlmatyAlmatyAlmatyAlmaty13 April 201113 April 201113 April 201113 April 2011

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94

96

98

100

35%

97%

59%

38%

Changes in apparent electricity consumption* (2007 = 100)

Annual household electricity inflation rates

90

92

94

2006 2007 2008 2009 2010 2007 2008 2009 2010

35%

2* Generation minus exports. Source: State Statistical Agency.

� 1 million: 1 million: 1 million: 1 million: An estimate of the number of people who spend much of the winter without electricity, heat

� 10%:10%:10%:10%: Although nearly three quarters of the � 10%:10%:10%:10%: Although nearly three quarters of the population lives in rural areas, they only account for 10% of electricity consumption

� $2.2 billion:$2.2 billion:$2.2 billion:$2.2 billion: The financing gap associated with Tajikistan’s programme for building large hydropower plants, new electricity transmission infrastructure

� Vertically integrated state monopoly� Hydropower dominates generation assets

� Collections: From 54% (2004) to 72% (2009)

� 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

� 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◦ 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

5Source: Pamir Energy Information note

53%

62%

47%

72%2007 2009

National poverty

rate

Extreme poverty

rate

4 or more children

17%

6

Source: State Statistical Agency

96%

97%

98%

99%2007 2009

390

419

477 2007

2009

Average monthly household electricity consumption (kWh)

93%

94%

95%

96%364

357

327

7

Share of households using electricity

Source: State Statistical Agency

40%

26%

44%

32%

2007 2009

Half the population heats with wood and dung . . . With implications for health, deforestation

Wood Electricity Dung Coal Other

17%13%

4%

10%12% 12%

8Source: State Statistical Agency

� 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 � 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%

International affordabilityInternational affordabilityInternational affordabilityInternational affordability benchmarksbenchmarksbenchmarksbenchmarks(share of household expenditures devoted to energy spending)(share of household expenditures devoted to energy spending)(share of household expenditures devoted to energy spending)(share of household expenditures devoted to energy spending)

ElectricityElectricityElectricityElectricity HeatHeatHeatHeat WaterWaterWaterWater

World Bank 10-15% 3-5%World Bank 10-15% 3-5%

WHO 10%

UNECE 15%

UK gov’t 10% 3%

US gov’t 6% 2.5%

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34%

26%

40%

32%

Average

Poorest quintile

35%32%

38%

55%Average

Poorest quintile

National Dushanbe Rural Other urban

32%

11Share of household expenditures devoted to energy, 2009 data, maximal values.

Source: State Statistical Agency.

59%

63% � Official survey data imply that food + energy

Share of household spending devoted to food (2009)

National Poor Non-poor

56%

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energy expenditures absorb 100% (or more) of many household budgets

Source: State Statistical Agency

� 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 other energy prices, quantities◦ No change in real household incomes

� Results: share of poor household expenditures devoted to:◦ Electricity could rise up to 8% ◦ Energy overall could rise up to 56%

� Implications:◦ Even more pressures on household budgets◦ Can social policy mitigate this impact?

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23%

27%

20%18%

12%

� Only 0.5% of GDP devoted to social protection in 2009

� Household electricity and

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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%

� Our simulation indicates that a lifeline would lift more people out of severe poverty than other social assistance policies◦ This is consistent

Average Average Average Average monthly monthly monthly monthly electricity electricity electricity electricity consumconsumconsumconsum----ptionptionptionption((((kWh)kWh)kWh)kWh)

BaselineBaselineBaselineBaseline2009 2009 2009 2009 7.5 7.5 7.5 7.5

dirham dirham dirham dirham per per per per kWhkWhkWhkWh

Scenario Scenario Scenario Scenario 1 2011 1 2011 1 2011 1 2011 tariff at tariff at tariff at tariff at 9.9 9.9 9.9 9.9

dirham dirham dirham dirham per per per per kWhkWhkWhkWh

Scenario Scenario Scenario Scenario 2222

Cost Cost Cost Cost recovery recovery recovery recovery level level level level 13.1 13.1 13.1 13.1 dirham dirham dirham dirham per per per per kWhkWhkWhkWh

Scenario 3Scenario 3Scenario 3Scenario 3Cost recovery Cost recovery Cost recovery Cost recovery level (13.1 level (13.1 level (13.1 level (13.1

dirham/kWhdirham/kWhdirham/kWhdirham/kWh) ) ) ) with lifeline with lifeline with lifeline with lifeline (100 (100 (100 (100 kWh kWh kWh kWh at at at at 1.0313 1.0313 1.0313 1.0313

dirham/kWhdirham/kWhdirham/kWhdirham/kWh))))

Share of electricity expenditures in total household expenditures, by poverty Share of electricity expenditures in total household expenditures, by poverty Share of electricity expenditures in total household expenditures, by poverty Share of electricity expenditures in total household expenditures, by poverty level, under different tariff scenarioslevel, under different tariff scenarioslevel, under different tariff scenarioslevel, under different tariff scenarios

◦ 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%)

per per per per kWhkWhkWhkWh dirham/kWhdirham/kWhdirham/kWhdirham/kWh))))

All households

357 2.0% 2.7% 3.6% 2.6%

Poor 332 2.8% 3.9% 5.3% 3.7%

Very poor 339 3.6% 5.2% 7.2% 5.1%

Not poor 373 1.7% 2.2% 2.9% 2.1%

Assumptions: a) household electricity consumption remains unchanged; b) households consume the same amount of electricity under different tariffs; c) household incomes remain unchanged; andd) lifeline limits are applied to all households.

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� World Bank/EC-led reform: ◦ Proxy-means testing

◦ Improved management

Characteristic Used for urban

households Used for rural households

Household size * *

Gas oven *

Generator *

Electric radiator * *

Indicator composition of Tajikistan’s proxy Indicator composition of Tajikistan’s proxy Indicator composition of Tajikistan’s proxy Indicator composition of Tajikistan’s proxy means testing pilotmeans testing pilotmeans testing pilotmeans testing pilot

management

� Two-year pilot Khatlon oblast (until 12/2012)

� Annual allocations will be 400 somoni ($91), paid out quarterly through Amonatbank

Electric radiator * *

Refrigerator *

Satellite dish * *

Car or truck * *

Computer *

Household head’s employment sector *

Household Head’s Education *

Housing Roof Material * *

Number of Children under 15 * *

Oblast * *

No of disabled of 1st category and disabled children in the household

1

*

Total Number of Variables 11 9 Source: Robert van Leeuwen (Team leader), EU/ Mott MacDonald , “Presentation of the PMT system in Tajikistan” , November 2010.

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� Combine:◦ The present system

◦ A lifeline tariff regime

◦ Some categorical targeting

� Connection subsidies (gas and electricity)

� Subsidies or vouchers to encourage the use of clean

Transitional scheme?Transitional scheme?Transitional scheme?Transitional scheme?Other social assistance measures Other social assistance measures Other social assistance measures Other social assistance measures

◦ Some categorical targeting

� A recent ADB study finds that many features of Tajikistan’s existingassistance programme could be combined with such a scheme, thereby facilitating its introduction

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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

� 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 � 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

�

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� Improve energy poverty component of living standard survey data

� Conduct willingness-to-pay surveys regarding possible tariff increasesregarding 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

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Thank you.... Thank you....

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