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- Introduction and Background
- Audience
- Background
- Scope
- Issues, Trends and Findings
- Understanding the Residential Sector
- Policy and Regulatory Frameworks
- Energy Efficiency Results and Markets
- Social Safety Net Programs
- Conclusions and Recommendations
INTRODUCTION AND BACKGROUND
Audience
Officials at the national and municipal levels, donors, financial institutions, and NGOs.
Background
Brief overview of the situation driving this study. The most significant utility cost for urban households is for heating. Combined with the expected tariff increases for electricity, water and waste water, vulnerable households will be most impacted and affordability of basic services will become a major issue. Without the tariff reforms, the restructuring and investment necessary to rehabilitate existing utilities and/or save them from collapse will not occur.
A more sustainable social safety net must be in place to ease the financial burden that increased tariffs place on households and public budgets. One key aspect this safety net system should include is improved energy and water efficiency in addition to the more traditional approaches of social welfare payments and lifeline tariffs. While the nature of the affordability problem and the traditional approaches to address it have been covered in other analyses, it is necessary to document and analyze actual experience with end-use energy and water efficiency as a means to reduce utility costs to households, especially more vulnerable households. This study will improve that documentation and, to the extent possible, analyze the effects of end-use efficiency improvements on household incomes. The approaches documented in this study will be selected based on their relevance for broader dissemination and application.
Scope
The Scope will include the issue of affordability and experience with energy and water efficiency solutions to reduce bills of residential end-users from four major utilities: heat, electricity, water and wastewater. Build upon previous studies by explaining the current and expected impacts of tariff increases of all four major utilities on households, with a focus on vulnerable households in urban areas. It will advance existing knowledge through case studies of specific completed projects. To the extent possible, quantify the impact of tariff reforms in terms of percentage of household income (by income level) needed to cover combined utility services in the selected countries. To demonstrate the magnitude of the affordability problem into the future, the study will show the relative impact of tariff reforms on vulnerable households currently (and 5 years ago if data allow), and what the impact will be when all four utility tariffs reach economic levels (assume in 5 years).
Questions to be addressed in this study include:
What are the actual cost savings achieved through energy efficiency promotional programs?
What are the actual costs incurred by consumers and governments as a result of energy efficiency promotional programs?
What is the net financial gain or loss to households that adopt energy efficiency measures advocated under efficiency promotional programs?
How do the benefits of energy efficiency investments compare to alternative policy measures to help families deal with rising utility costs?
What are the supporting actions of the utility that are associated with success in energy efficiency programs? These might include introduction of new or improved meters, updated customer enumeration, introduction of improved collection procedures, increased collection effort, disconnection of customers who are not paying bills, and reduction of corruption among bill collectors.
What are the supporting policies introduced by governments that are associated with success in energy efficiency programs? These might include statements by key policy makers in support of bill payment or energy efficiency investment, increased enforcement of collection and disconnection laws and regulations.
What are the changes in tariff policy and structure that have been introduced in conjunction with efficiency promotional activities? For example, have there been tariff increases, reduction of cross subsidies, or introduction of cost of service methods?
The main body of the study will encompass the entire region and comprise a core set of findings, conclusions and recommendations related to energy efficiency promotion and investment policies. The study will provide specific recommendations for three countries including two in South East Europe. Illustrative criteria consist of: magnitude of need, receptiveness of governments to reform, interest in using energy efficiency to lower energy costs, progress in improving local governance, and ability to attract aid and investment (from USAID, IFIs, etc.) The analysis will discuss the municipal and housing issues/barriers that must be addressed in order to introduce energy and water efficiency on a broad scale and as an effective means of easing the financial burden on vulnerable households.
Recommendations will suggest ways that the audience can address affordability concerns in their work. The Alliance will lead the research effort with active participation from USAID and input from housing and energy experts in the E&E region.
The study will use two principle sources of data: data from existing studies and analyses, and new (not previously published) data that will be collected and documented in a set of case studies conducted in at least 20-30 locations across the E&E region. All of the case studies should use comparable data collection categories and methods to facilitate comparative analysis. A standardized questionnaire that identifies the research questions and definitions of data to be collected will be developed and used.
ISSUES, TRENDS AND FINDINGS
Major issues, trends and findings related to affordability and efficiency of end-use of energy and water. New knowledge will be developed through case studies presented in this section that illustrate findings and add to existing literature and information. Where feasible, offer comparative analysis of how the issue areas listed below are similar or different within geographic sub-regions (e.g. South East Europe, Central Asia, Ukraine and Russia, etc.) The geographic sub-regions may be substituted with other categorizations based on discussion with USAID.
Understanding the Residential Sector – People and Their Homes
The state, quality and occupancy of urban housing, including the age and quality of building design and materials; whether housing is privatized or not; trends in renovation and new construction; and experience with condominiums or home owner associations and housing maintenance companies. Socioeconomic trends in housing, with particular attention to income disparities among residents and whether “lower income” residents are grouped together in designated neighborhoods or integrated into housing with middle- and high-income residents. The urban residential housing in this study will be categorized in a manner that allows for better understanding and identification of barriers to energy and water efficiency (such as ownership of apartments, ownership and legal responsibility of particular installations related to heat and water use in multifamily buildings, etc.). The similarity (and differences) of the physical housing stock across countries will be assessed and conclusions drawn about the cross-border applicability of energy/water efficiency measures as well as policy and institutional steps.
Policy and Regulatory Frameworks
The laws and institutions that govern and influence utility services in the residential sector will be discussed in terms of how they affect affordability of power, heat, water and wastewater and the introduction of end-use efficiency. The key questions this section aims to answer are:
Have utility tariffs and affordability changed in the last 5 years, and if so, which policies and institutions affected this change, and what has been the impact on vulnerable households? Trends in how bills are calculated (according to square meters of heated space or metered consumption, and if "social tariffs" are applied) and issued (do all utility service consumers receive bills or do utilities not issue bills to non-payers incl. vulnerable households), how non-payment is addressed (e.g. cut-offs in case of non-payment) will be examined.
What policies and institutional actions and arrangements demonstrate best practices for how to improve the affordability and efficiency of residential energy and water use? Examples of such policies and institutional actions include: contractual arrangements, role of housing associations, privatization of housing management companies, physical system constraints, etc. How do these issues and approaches effect and influence the introduction of end use efficiency measures in residential units, esp. vulnerable households? The institutional barriers identified in the reform process will be summarized with recommendations on how to overcome them, where possible.
Energy Efficiency Results and Markets
Analysis and discussion of findings based on documented experience (incl. case studies from previous section, new case studies and other literature) of successes and failures with residential energy and water efficiency efforts. Findings on the availability of energy efficiency products and services, such as weather stripping and insulation, water saving technologies and measures, energy auditing, heat cost allocation devices, and labeled energy-efficient appliances. If verifiable data can be found, this section will quantify the amounts that residential consumers and builders are spending on energy efficiency improvements, and assess the availability of affordable, accessible financing for home energy efficiency improvements. Present quantitative information about how energy efficiency improvements can make energy and water services more affordable.
Social Safety Net Programs
Whether social welfare programs and targeted utility subsidies address affordability problems caused by rising tariffs, and whether there are any examples of energy efficiency assistance specifically for vulnerable households. Present definitions of “low income” residents and how national and local agencies target and deliver assistance to them (such as cash transfers to consumers or utilities, lifeline tariffs or other targeted bill subsidies, how carefully applications are scrutinized, and the presence of loopholes). Data from World Bank poverty assessments and similar studies will be used. Based on the information collected on energy and water efficiency, a comparative analysis of the energy efficiency approach will be made against the use of payment subsidies.
CONCLUSIONS AND RECOMMENDATIONS
The Findings and Conclusions will spell out in summary fashion the results of the work above and include but not be limited to: (a) the documented impact of energy/water efficiency in residential units; (b) which measures are particularly effective; (c) the barriers to end use efficiency (policy, institutional, physical systems, etc); (d) the comparison of energy efficiency to welfare payments and tariff approaches; and (e) the complementary actions and policies that are associated with success in energy efficiency promotional programs.
In other words, can energy efficiency serve as a viable cost-effective alternative to the more traditional lifeline tariffs and targeted subsidies? Findings about the lifecycle costs of energy efficiency approaches vs. the typical forms of assistance will be used to answer this question and make conclusions. Recommendations on ways the target audience – and the target group of beneficiaries, i.e. all urban residential apartment block residents and particularly the sub-group of vulnerable households – can improve energy efficiency in a way that (i) decreases the impact of utility costs of poor households and (ii) enables state and local governments to reduce the costs of providing social safety net assistance for utility services. Recommendations will identify the reforms needed to facilitate significantly expanded use of energy and water efficiency measures in residential facilities and for vulnerable households in particular.
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