Energy Poverty Today: Best Practices and Recommendations
This article offers recommendations and delineates some best practices regarding the Energy Poverty and Energy Access topics. These, however, should not be seen as universal solutions, for there are differences from one case to the other – different climate conditions, cultural backgrounds and social contexts, economic structures, fiscal frameworks, business environments etc.
- More than 1.1 billion people are presently deprived of energy access.
- 25% of clinics and hospitals in 11 African countries have no power source of any kind, while most of the others have generators that are not reliable.1
- In Africa alone, 600.000 people die every year from indoor pollution caused by firewood and charcoal heating and cooking. Globally, the figure reaches 4 million/year – more than malaria, tuberculosis and AIDS combined.2
- Most of the 36.000 yearly deaths of women in Nigeria alone, during pregnancy or childbirth, happen because of clinics such as those described above.2
- A recent study on small companies in Ghana shows that blackouts halved their revenues and cause a cumulated impact of 2% on the country’s GDP.4
- In some African countries, more than 80% of primary schools lack energy access.2
- 54 million Europeans are unable to keep their home adequately warm. Almost 30% of Europeans are energy poor.
Energy Access. Best practices. Recommendations
50 years ago, a process of electrification in regions that lack this possibility would have been entirely in the hands of utility companies. Of course, at that time, no other solutions than direct grid connection was available.
Nowadays, the number of business actors interested in lifting remote areas from poverty has increased and their field of activity is more diverse than ever. Who would be interested in bringing electricity to hundreds of millions of people and thus unlock countless business opportunities? Well, who wouldn’t?
Apart from utilities and energy players of all sorts, there are strong business cases for banks and other financial institutions able to credit the payment of energy assets, but investment in small businesses (mainly in the agriculture sector). Such actors are also interested in teaming up with mobile operators, in having their credits reimbursed by these means.
For their part, mobile operators and ICT companies in general are themselves interested in exploring this vast group of potential customers. Then, education and medical care improve, job opportunities are created, and foreign investors showcase their products and services in a growing economy.
The people that gain energy access further propagate the benefits. Not only do they become clients of various service providers actor, but they are able to develope their own small business opportunities in agriculture, tourism, farming etc.
The majority of the African population rely on firewood for heating and cooking. The daily routine of collecting fuel, handled mostly by women and children, takes long hours and exposes them to multiple forms of violence and abuse.
Often referred as the leap-frog model, distributed generation (mostly PV, since the big share energy poor population live in regions with high solar potential) and micro-grids are the unlocking technologies for so many areas without energy access. It is important to understand the value brought by the process to everyone: customers, business players, the state etc.
Outside the box solutions are also available. The OffGridBox is a great solution for rural electrification, as well as for off-grid living and disaster relief. It consists of a compact system, the size of a small shipping container, that includes solar panels, inverter and battery pack, but also a parallel system that collects clean water.
How to solve medical problems that require electricity? Portable power units are available in the form of autonomous medical suitcases, which have been deployed very successfully.
There are also approached that can be qualified “way outside the box,” which can be applied in situations of lack of energy access. An example is the foot power washer, a solution for rural areas all around the world.
How can Romania tackle the energy access issue? As a reminder, although Romania still has a few tens of thousands of households without energy access, the problem is marginal in comparison with the one of fuel poverty.
There are two categories of population without access to energy networks:
(1) Some areas located at relatively manageable distance from the grid. For them, a connection to the grid is a must, while the investments need to be socialized, included in the distribution and transport tariffs for all the customers.
(2) Off-grid networks. As already mentioned, the companies interested in this kind of solution are typically in the telecom industry. For this reason, the funding for off-grid solutions can also involve other business actors, as well as structural funds and public expenditure.
An energy supply contract should be no different from a TV contract, for instance. It should be as easy to sign as a mobile phone contract, cutting down the obligation of providing numerous documents and the mandatory process of filling in dozens of forms.
Fuel Poverty. Best practices and policy recommendations
At the end of January 2018, the European Commission launched the EU Energy Poverty Observatory, a platform that aims to bring together best practices, to raise awareness and “support informed decision making at local, national and EU level.” The initiative has strong support from Brussels and the attention level significant.
One important point raised by the Vice-President for the Energy Union, Maros Sefcovic was the definition of vulnerable consumers. While noticing that a common definition for vulnerable consumers would be a mistake, because energy poverty itself is a different reality for each member state., he acknowleged that the most important answer to energy poverty is energy efficiency.
Indeed, the key to tackle energy poverty is a mix of different measures already identified by experts. The remedies can produce measurable and significant benefits only if implemented together and simultaneously. And most of them are, indeed, related to energy efficiency.
First, considering the numerous and difficult problems that must coped with by vulnerable consumers, well-targeted financial aid is still necessary in the years to come.
Then, switching from old and inefficient appliances to new ones is an important tool to tackle fuel poverty. A partnership between the state (which can support such a program at least for a while), utility companies (that can invoice the zero-interest installments in the electricity bill), financial institutions (which will find the proper financial model), and retailers and manufacturers can really make a difference.
Needless to say that attractive offers will boost demand for white appliances, which will generate more jobs, more income to the state’s budget, and lower energy bills. Some business models even consider the appliances as rental assets, making them available for customers in exchange of a monthly fee for the duration of use.
Changing the old light bulbs with new LED technologies can have a major impact on a household monthly consumption. The acquisition can also be made with zero-interest installments through the energy bill, and the state can also put in place a subsidy scheme.
In India, the state did so and started a program in 2015, which helped dramatically decrease the technology cost. This translated into billions of dollars of energy savings.3 Moreover, some studies indicate that since 2010, the LED technology has dropped its cost by no less than 95%.4
An extensive program of insulation of blocks of flats, a not-only-at-the-boulevard-insulation approach, will tremendously help inhabitants to keep warm, both from technical and financial perspective.
The myth perpetuating the idea that technology and digitalization is in the sole benefit of rich people should be busted. Take, for instance, the smart meter technology. This type of technology allows vulnerable customers to monitor their consumption in real time, helping them understand basic energy efficiency measures and changing their behavior, while also anticipating the level of the bill.
Moreover, payment flexibility is a must for vulnerable consumers. Being able (and allowed by regulations) to negotiate a flat monthly fee instead of paying relatively low bills in the summer period and sky-high bills in winter time will help customers predict their expenditures and reduce debt-related problems.
Although these are just some examples, the combined use of these measures can cut the energy bill in half.
Franklin D. Roosevelt once said that “The test of our progress is not whether we add more to the abundance to those who have much; it is whether we provide enough for those who have too little.” In this note, a society that ignores those deprived of resources is itself a poor one.
by Andrei Covatariu, EPG Senior Analyst