Wednesday, July 20, 2011

The poor left out in the cold during Central Asia’s winters

This is a piece that I co-wrote with my boss for my summer internship at UNDP. Read the original post on the United Nations Development Programme Europe & CIS Blog.

Nobody likes paying higher prices, for anything. In January 2010, when the government of Kyrgyzstan doubled household electricity and heating tariffs, it helped spark a revolution. In neighbouring Tajikistan, up to 1 million people spend much of the winter without reliable electricity supplies. Winter electricity supplies have become increasingly erratic in Kyrgyzstan as well. How can funds be raised to build power plants and transmission lines needed to address these issues, if not through higher tariffs? And if the poorest and most vulnerable households in Central Asia are not even connected to central electricity grids—but instead rely on coal and firewood to get through the winter—do tariff levels even matter?

Recent research by UNDP sheds new light on these questions. Based on analysis of official household survey data in Kyrgyzstan and Tajikistan, research shows that access to electricity and gas supplies has declined since 2007—even as governments in both countries have raised tariffs, attracted foreign investment into the power sector, and boosted small hydropower and other renewables. In Tajikistan, rural areas now account for only around10 percent of electricity consumption—even though three quarters of the population lives in rural areas. In Kyrgyzstan, 78 percent of low-income households in 2008 were reporting interruptions in electricity service on a weekly (at least) basis.

Somewhat surprisingly, these data indicate that the shares of household budgets claimed by energy and communal service bills in these countries are at or below the 15 to 20 percent affordability thresholds commonly used by the World Bank, the United Nations, and the Organization for Economic Cooperation and Development (OECD). This conundrum is also being investigated in a working paper (pdf) by the European Bank for Reconstruction and Development. The disconnect between the seeming affordability of tariffs and widespread energy poverty may be due to the fact that many poor households in Tajikistan and Kyrgyzstan do not have access to these services in the first place. It may also be due to the fact that cut-offs for non-payment of electricity bills are still a rarity. On the other hand, many in Central Asia continue to nurture Soviet-era beliefs that the state should supply electricity and water “for free”—particularly since both countries are rich in water and hydro-electric potential. This may explain why the large increases in household electricity and water tariffs that have taken hold after 2007 may be hard to swallow —particularly in Kyrgyzstan.

How are households coping with winter electricity shortages? According to these data, nearly half of Kyrgyzstan’s low-income households are relying on coal for winter heating. Half of Tajikistan’s households heat with firewood, cotton stalks, and dung. In addition to exacerbating the country’s severe deforestation problems, these heating patterns pose household health risks.

These studies also found that social assistance—which was significantly increased in Kyrgyzstan in 2010 in order to shield poor households from the effects of tariff hikes—are unable to address household energy insecurity. In Kyrgyzstan, these benefits disproportionately favour non-poor households, a distortion also found in Tajikistan by the World Bank (pdf). In Tajikistan, where benefits are very low (only $2 per month on average), deep reforms of the social policy architecture are now being piloted. Better targeting of larger social benefits, as well as the expansion of off-grid local energy solutions (like small hydropower plants), seem to be part of the answer.

At present, Central Asia is suffering from summer heat and drought, not from winter energy shortages. But because hydropower dominates national energy balances in Tajikistan and Kyrgyzstan, this summer’s water shortages could have an impact on next winter’s energy supplies—particularly for Tajikistan. In any case, these problems seem unlikely to diminish in the foreseeable future.

What do you think? What are the best solutions for Central Asia’s water and energy challenges?