Study on addressing energy poverty

Vulnerable consumers definition and schemes in place

The definition in place identifies energy vulnerable consumers on the basis of income and health criteria. It facilitates the identification of the most vulnerable households but fails to cover other households that might be suffering from energy poverty due to other reasons. The study proposes that the authorities adopt a definition of energy poverty, together with accompanying indicators that quantify the extent of energy poverty and enable measures resulting in long-term alleviation of energy poverty.

In North Macedonia, three types of measures cover energy-poor and vulnerable households. The first measure is a subsidy for households with vulnerable electricity and natural gas consumer(s) fulfilling the following criteria:

• Users of guaranteed minimum assistance earning a cash benefit to cover part of household energy consumption costs, and
• Persons facing social risk (motherhood, illness, old age, injury, and disability).

Furthermore, another condition includes meeting an electricity consumption limit (maximum of 3600 kW), connection power, and supply by the universal supplier. Regarding natural gas, a household must meet the following conditions:

• Gas is to be supplied from a supplier obliged to supply natural gas as a public service, and
• Annual natural gas consumption for the period October-March must not exceed 70 cubic meters.

The energy consumption limit in the measure stimulates energy consumption savings but does not directly stimulate energy efficiency.

The second measures involve co-financing energy efficiency and small renewable energy applications, such as solar thermal collector systems, energy-efficient windows and doors, biomass pellet stoves, and small roof-integrated PV power plants. The criteria for beneficiaries of this measure are vulnerable consumers and particularly the following categories:

• Employed low-income persons or an employed spouse where the monthly family income does not exceed a net income of 486 EUR.
• Retired low-income persons or a retired spouse where their monthly family income does not exceed a net income of 324 EUR.
• Vulnerable consumers as defined in the 2021 Program for Protecting vulnerable energy consumers.

These measures contribute directly to energy efficiency and alleviation of long-term energy poverty. They also mitigate climate change by reducing CO2 emissions from household energy consumption.

The third type of measure is defined in the obligations of energy suppliers toward vulnerable consumers such as their right to utilize some of the protection measures; notice of planned disconnection from the grid due to unpaid invoices, at least 40 days before the actual disconnection; supplying natural gas to vulnerable consumers during December -February, despite unpaid invoices for delivered natural gas; supplying natural gas to vulnerable consumers, despite unpaid invoices for delivered energy, if no more than 60 days have passed from the invoice maturity date and the possibility of delayed payment or payment of the debt in instalments, where debt repayment shall be made in at least six equal instalments, for which a settlement is concluded with the vulnerable consumer.

A preliminary assessment of households in energy poverty

Given that the number of energy-poor households is not exact but depends on the indicators and applied thresholds, the study proposes using an upper and lower bound for the number of energy-poor households. The lower bound used is the share of households that stated as unable to keep their homes adequately warm. The study determined the upper bound as the share of households that spend twice the national median on energy (2M) and the share of households that spend half the national median on energy (M/2). By combining the 2M and M/2 indicators, it is possible to capture both types of households -  those that overspend (due to energy inefficient homes) and those who underspend due to lack of sufficient financial resources.

The North Macedonian Statistics Office conducts the EU SILC and HBS surveys and the study proposes to use them in estimating and monitoring the number of energy-poor households in North Macedonia. Unfortunately, the consultant did not receive the required microdata and hence was not able to estimate the number of energy-poor households based on North Macedonian data. Therefore, only a rough estimate has been made. 

33% of all households in North Macedonia declare that they cannot keep their homes adequately warm. Given that the study has proposed to use the share of households unable to keep their homes adequately warm that belong to the first four deciles as a lower bound indicator, and that the reported 33% represents all households, the value of 33% can be considered an upper bound for the estimated number of energy poor households in North Macedonia. Therefore, the estimated upper bound for the number of energy poor households in North Macedonia is 237 000. Due to the lack of micro data, it is not possible to estimate the lower bound of the number of energy poor households in North Macedonia.
 

Vulnerable consumers definition and schemes in place

The current legislative framework in Albania addresses the issue of vulnerable consumers who are entitled to support. Vulnerability in the current framework refers to a disability, health, and income status. Though the current definition benefits the most vulnerable members of society, it still fails to capture the broader aspects of energy poverty. The study proposes that Albania revises its definition of energy poverty so that the authorities can measure the extent of energy poverty, and pursues measures resulting in long-term alleviation of energy poverty.

Two types of financial measures at national level are offered to vulnerable consumers (households in need) related to electricity expenses. Target groups for both measures are families receiving social assistance (social payments), disability allowance beneficiaries, old-age pensioners, paraplegics and tetraplegics, and low-income families with a monthly income below 35,000 ALL (EUR 283) per month.

The measures are general, and gender is not considered. Both measures are not expected to tackle behavioral change or small investments from beneficiaries, an approach that would increase energy efficiency, while decreasing energy consumption and subsequent greenhouse emissions from energy sources. Current measures represent short-term aid to energy-poor households and are not considered a possible solution to alleviating energy poverty. The total amount of financial support provided to applicants in the implementation interval from 2006 to today is EUR 15 million.
 

A preliminary assessment of households in energy poverty

Given that the number of energy-poor households is not exact but depends on the indicators and applied thresholds, the study proposes using an upper and lower bound for the number of energy-poor households. The lower bound used is the share of households that stated as unable to keep their homes adequately warm. The study determined the upper bound as the share of households that spend twice the national median on energy (2M) and the share of households that spend half the national median on energy (M/2). By combining the 2M and M/2 indicators, it is possible to capture both types of households -  those that overspend (due to energy inefficient homes) and those who underspend due to lack of sufficient financial resources.

INSTAT conducts surveys such as the EU SILC and HBS which are proposed for estimating and monitoring the number of energy-poor households in Albania. As no microdata was provided, only a rough estimate can be made based on the publicly available data.

37% of all households in Albania declare they cannot keep their homes adequately warm. Given that it is generally proposed to use the share of households unable to keep their homes adequately warm that belong to the first four deciles as a lower bound indicator, and that the reported 37% represents all households, the value of 37% can be considered an upper bound for the estimated number of energy poor households in Albania.  Therefore, the estimated upper bound for the number of energy poor households in Albania is 272,000. Due to lack of data, it is not possible to estimate the lower bound of the number of energy poor households in Albania.

Vulnerable consumers definition and schemes in place

Bosnia and Herzegovina has measures in place that are aimed at providing assistance in covering electricity and gas costs for the most vulnerable consumers. The current definition uses income and disability as the principal criteria for addressing the issue of energy vulnerability. Current measures are targeted towards the most vulnerable members of society and as such, they do not address the broader issue of energy poverty. The study proposes for Bosnia and Herzegovina to revise its definition of energy poverty so that the authorities can measure the extent of energy poverty, and pursue measures resulting in long-term alleviation of energy poverty.

Direct financial support in Federation of Bosnia and Herzegovina is provided to households for the purpose of reducing household electricity costs. Eligibility criteria include the amount of monthly electricity consumption and whether the person is a beneficiary of the minimum guaranteed financial support. The total number of beneficiaries from 2011-2019 was 67,936. This measure provides financial relief to vulnerable households, but does not contribute to energy efficiency improvements and, therefore, does not eliminate the major causes of energy poverty.

The second measure, available only to the population residing in the capital of Bosnia and Herzegovina, subsidizes electricity, natural gas, and district heating in the Sarajevo Canton, therefore, it only has a local impact. 

As with the first measure, the second measure does not improve energy efficiency, but provides some relief for the financial burden of household energy consumption. In conclusion, the measures in place have a limited scope and target group (targeting only the most vulnerable groups). They are insufficient in alleviating energy poverty in Bosnia and Herzegovina.

A preliminary assessment of households in energy poverty

Given that the number of energy-poor households is not exact but depends on the indicators and applied thresholds, we propose using an upper and lower bound for the number of energy-poor households. The lower bound is used for the share of households that stated as unable to keep their homes adequately warm. The study determined the upper bound as the share of households that spend twice the national median on energy (2M) and the share of households that spend half the national median on energy (M/2). By combining the 2M and M/2 indicators, it is possible to capture both types of households -  those that overspend (due to energy inefficient homes) and those who underspend due to lack of sufficient financial resources.

The Agency for Statistics of Bosnia and Herzegovina does not carry out EU SILC surveys. Therefore, the Consultant has suggested conducting the survey in Bosnia and Herzegovina as it would allow for precisely estimating the number of energy-poor households. At the same time, the Agency for Statistics of Bosnia and Herzegovina conducts the HBS but unfortunately, the Consultant has not received the required microdata. Accordingly, the Consultant was not able to estimate the prevalence of energy poverty in households in Bosnia and Herzegovina. Furthermore, due to the lack of relevant publicly available statistical information, the Consultant was not able to even make a rough estimate of the number of energy poor households in Bosnia and Herzegovina. 

 

Vulnerable consumers definition and schemes in place

Georgia's definition of vulnerability relates primarily to household socioeconomic status. This allows the authorities to assist the most vulnerable members of society. The study proposes Georgia to develop a definition of energy poverty. Such a definition would allow the authorities to identify the extent of energy poverty in aspects other than income, resulting in policies and measures to alleviate energy poverty and providing long-term support to households.

A total of 7 measures were identified in Georgia, as an energy expenses aid to households in need. Two measures  aim specifically at the reduction of household electricity costs; through a direct subsidy in the form of a tariff subsidy. Other measures include subsidies to socially vulnerable households and they cover electricity, waste disposal, communal service, and water supply costs. Criteria for all measures are set using the rating score. Some measures are targeting specific groups such as households in the high mountainous regions, residents living in the villages near the occupied area, or families with four or more children.

Due to special situation caused by Covid-19, subsidies for electricity, natural gas, drinking water, and sewage are implemented for households that consume 200 kWh or less electricity per month and 200 m3 or less natural gas per reporting month. Although some measures stimulate an energy consumption decrease, they are not expected to directly stimulate energy efficiency. All the measures represent short-term aid to energy-poor households and are not considered as a possible solution to alleviate energy poverty.

A preliminary assessment of households in energy poverty

Given that the number of energy-poor households is not exact but depends on the indicators and applied thresholds, the study proposes using an upper and lower bound for the number of energy-poor households. The lower bound used is the share of households that stated as unable to keep their homes adequately warm. The study determined the upper bound as the share of households that spend twice the national median on energy (2M) and the share of households that spend half the national median on energy (M/2). By combining the 2M and M/2 indicators, it is possible to capture both types of households -  those that overspend (due to energy inefficient homes) and those who underspend due to lack of sufficient financial resources.

The National Statistics Office of Georgia conducts the Household Income and Expenditure Survey (HIES) which can be viewed as the Household Budget Survey (HBS). Despite their similarities, the suggestion is to conduct the survey strictly in line with the EUROSTAT methodology for HBS, making sure it is comparable to the HBSs of other CPs. Furthermore, the EU SILC survey has not been conducted in Georgia. The recommendation is that the survey be conducted also in line with the EUROSTAT methodology.

The available data for Georgia based on HIES provides the basis for calculating the upper bound value for energy poor households which is estimated at 24.6%.  Due to the lack of data, the lower bound cannot be estimated. Therefore, the estimated absolute number of energy poor households in Georgia is 274,000 households, which represents an upper bound.

Vulnerable consumers definition and schemes in place

Kosovo* has only a general definition of consumers in need without precise criteria and established measures. The study proposes adoption of a definition on energy poverty that allows the authorities to measure the extent of energy poverty and to pursue measures to alleviate it.

Measures provided in the corresponding Kosovo* legal acts rely on the following information:

1. Process of implementing electricity subsidies

Inputs and clarifications are received from the Ministry of Labour and Social Welfare (MLSW). During the reporting period, a cooperation agreement was established between the former Ministry of Finance and Transfers (MFT), the Kosovo* Electricity Distribution and Supply Company (KEDS) and the Kosovo* Electricity Supply Company (KESCO), in order to subsidize electricity for families benefiting from the Social Assistance Scheme (SNS), Martyrs’ Families and War Invalids Scheme (FDIL), Blind Persons Scheme (SPV) and the Paraplegic and Tetraplegic Scheme (SPPT) for 2019. The agreement was reached on 2 June 2020.

EUR 4.5 million were allocated under the Agreement. The number of beneficiaries include 36,648 families, with 23,316 families from the SNS, 10,314 families from the FDIL scheme, 967 families from the SPV scheme and 1,953 families from the SPPT scheme. EUR 4,470,619 were spent for the first part, and the remaining EUR 29,381 for complaints. This activity has been completed.

2. Additional action/process 

A working group was established at MLSW in 2019 to devise and develop the program Protection of Consumers in Need. The group is led by the MLSW representative and the Energy Regulatory Office (ERO) representative as well as participants from other relevant Kosovo* institutions. The Working Group in 2020 was supported by the expertise of the World Bank. Accordingly, a study was conducted by the World Bank, which assisted the working group in devising the protection program for consumers in need. In 2020, the MLSW, as the responsible stakeholder, was assisted by the World Bank which provided local expertise in drafting the mentioned program document. The working group continues to support the MLSW until the finalization of this document, where after the public consultation procedure, it will be further processed by the MLSW for approval by the Government.

A preliminary assessment of households in energy poverty

Given that the number of energy-poor households is not exact but depends on the indicators and applied thresholds, the study proposes using an upper and lower bound for the number of energy-poor households. The lower bound used is the share of households that stated as unable to keep their homes adequately warm. The study determined the upper bound as the share of households that spend twice the national median on energy (2M) and the share of households that spend half the national median on energy (M/2). By combining the 2M and M/2 indicators, it is possible to capture both types of households -  those that overspend (due to energy inefficient homes) and those who underspend due to lack of sufficient financial resources.

The Kosovo Agency of Statistics conducts the EU SILC and HBS surveys which are proposed for estimating and monitoring the number of energy-poor households in Kosovo*. Unfortunately, the consultant did not receive the required microdata, thus was not able to estimate the number of energy-poor households in Kosovo* based on Kosovo* data. Therefore, only a rough estimate can be made based on the publicly available data.

40% of all households in Kosovo* declare they cannot keep their homes adequately warm. Given that the authors of the study have proposed to use the share of households unable to keep their homes adequately warm that belong to the first four deciles as a lower bound indicator, and that the reported 40% represents all households, the value of 40% can be considered an upper bound for the estimated number of energy poor households in Kosovo*. Therefore, the estimated upper bound for the number of energy poor households in Kosovo* is 133,000. Due to the lack of micro data, it is not possible to estimate the lower bound of the number of energy poor households in Kosovo*.

Vulnerable consumers definition and schemes in place

The current definition developed according to the Natural Gas and Electricity Act defines vulnerable consumers  in the context of social policy. This definition targets the most vulnerable households but fails to identify energy-poor consumers. The study proposes that the authorities adopt a definition of energy poverty, which allows for identification of energy-poor households and quantification of the issue. The authorities would subsequently be in a position to develop policies and measures to aid those energy-poor households but do not necessarily fall under the current policy framework.

In Moldova, two types of national measures and a local measure are offered to households in need for the purpose of subsidizing energy expenses. National measures are described as social assistance programs and cover the poorest families using income as a criterion and heating-related social programs as complementary to social assistance.

The local measure is a subsidy for heating costs in Chisinau and Balti. The identified measures are not expected to tackle behavioral change or small investments by beneficiaries, which would otherwise increase energy efficiency and decrease energy consumption, and subsequently greenhouse emissions from energy sources. Current measures represent short-term aid to energy-poor households and are not considered a possible solution to alleviating energy poverty.

A preliminary assessment of households in energy poverty

Given that the number of energy-poor households is not exact but depends on the indicators and applied thresholds, the study proposes using an upper and lower bound for the number of energy-poor households. The lower bound we used is the share of households that stated as unable to keep their homes adequately warm. The study determined the upper bound as the share of households that spend twice the national median on energy (2M) and the share of households that spend half the national median on energy (M/2). By combining the 2M and M/2 indicators, it is possible to capture both types of households -  those that overspend (due to energy inefficient homes) and those who underspend due to lack of sufficient financial resources.

The NBS does not conduct the EU SILC survey. The study suggests to conduct a survey in Moldova in order to precisely estimate the number of energy-poor households.

The NBS conducts the HBS. Unfortunately, the consultant did not receive the required Moldovan microdata and hence was not able to estimate the number of energy-poor households based on Moldova data. The official NBS website does not contain any other data. It therefore was not possible to make even a rough estimate on the number of energy poor households in Moldova.

Vulnerable consumers definition and schemes in place

There is a definition of energy vulnerable consumers in place.  It refers to vulnerability stemming from the health and social status. This approach provides support to the most vulnerable members of society, nevertheless, it fails to capture the broader context of energy poverty. The study proposes that authorities adopt a definition of energy poverty that enables it to measure energy poverty and pursue measures resulting in long-term alleviation of energy poverty.

There are two identified financial measures at the national level offered to socially vulnerable households for electricity expenses. Both are based on subsidies for electricity bills with eligibility criteria for 2 groups of consumers:

• First group:
  Vulnerable consumers based on the social and health status of household members who exercise their right to receive material welfare support and assistance for domestic care and support, or disability support are entitled to a subsidy covering 50% of their electricity bill for a maximum of 600 kWh of consumed electricity.
• Second group:
  Socially vulnerable households that exercise their right to receive material welfare support are also considered vulnerable consumers and are eligible for a subsidy covering 40% their electricity bill for bills up to 60 EUR. For bills higher than 60 EUR, the subsidy is 24 EUR. Beneficiaries receiving disability support are eligible for a subsidy covering 30% of their bills up to 60 EUR, whereas bills higher than 60 EUR means that the subsidy is 18 EUR.

Measures for protecting energy vulnerable consumers in Montenegro are currently limited to direct financial support and prohibiting the halting of electricity supplies to vulnerable customers. Though these measures do offer some financial relief to the most vulnerable groups, they are exceptionally limited in alleviating the main effects of energy poverty. Such measures do not contribute to improving the quality of energy services, and do not contribute to reducing CO2 emissions and protecting the environment. The eligibility criteria currently set up offer a good starting point in alleviating energy poverty; however, such criteria are narrow and limited only to the most vulnerable groups. Current eligibility criteria do not take into consideration gender factors.

A preliminary assessment of households in energy poverty

Given that the number of energy-poor households is not exact but depends on the indicators and applied thresholds, the study proposes using an upper and lower bound for the number of energy-poor households. The lower bound used is the share of households that stated as unable to keep their homes adequately warm. The study determined the upper bound as the share of households that spend twice the national median on energy (2M) and the share of households that spend half the national median on energy (M/2). By combining the 2M and M/2 indicators, it is possible to capture both types of households -  those that overspend (due to energy inefficient homes) and those who underspend due to lack of sufficient financial resources.

According to available data, the share of energy-poor households ranges between 8% and 15% in Montenegro. This percentage implies that there are between 16 000 and 30 000 energy-poor households in Montenegro.

Vulnerable consumers definition and schemes in place

Current definitions of vulnerable consumers given in several legislative acts rely primarily on factors such as health and income level. Although this approach targets the most vulnerable consumers, it still fails to capture other aspects of energy poverty, meaning that some households are not covered by the current definitions. The study proposes that the authorities adopt a definition of energy poverty and accompanying indicators that quantify energy poverty and enable measures resulting in long-term alleviation of energy poverty.

There are two direct financial support measures on the national level for socially vulnerable households in terms of energy expenses (electricity and gas) and two local measures, and in the form of direct financial support, implemented in Belgrade and Novi Sad.

Eligibility criteria for coverage by national measures are based on total household income, medical conditions of household members, and situations where a household member’s life or health is at risk due to possibly halting electricity supplies. Measures at the national level provide a deduction for certain quantities of consumed energy depending on the number of household members (consumed 120 to 250 kWh of electricity and 35 to 75 cubic meters of gas). A limit has been set for the maximum subsidized quantity of both electricity and gas.

Eligibility criteria for local measures in Belgrade include the number of children in a family, the territory where a person is registered, regularly paying utility bill, pensioners receiving the lowest tier of pension payments, low-income households depending on the number of family members, war veterans including those with war disabilities and families of deceased, beneficiaries receiving secured material support and home care meals, as well as households with severe disability and severely ill members. In Novi Sad, the local measure is available to families with three or more children until completion of regular education. The local level measure stipulates bill subsidies of up to 30% of utility bills up to a maximum of RSD 2,400 in Belgrade, and up to 50% of monthly utility bills in Novi Sad.

These measures provide relief to financial burdens incurred by households for their energy needs, but the measures do not contribute to improving energy efficiency. Current measures represent short-term aid to energy-poor households and are not considered a definite solution to alleviating energy poverty, rather they provide a solid first step in alleviating energy poverty and recognizing energy vulnerability as a problem.

A preliminary assessment of households in energy poverty

Given that the number of energy-poor households is not exact but depends on the indicators and applied thresholds, the study proposes using an upper and lower bound for the number of energy-poor households. The lower bound used is the share of households that stated as unable to keep their homes adequately warm. The study determined the upper bound as the share of households that spend twice the national median on energy (2M) and the share of households that spend half the national median on energy (M/2). By combining the 2M and M/2 indicators, it is possible to capture both types of households -  those that overspend (due to energy inefficient homes) and those who underspend due to lack of sufficient financial resources.

The share of energy-poor households in Serbia ranges from 7% to 22% of all households. This percentage implies that there are between 176,000 and 529,000 energy-poor households in Serbia. 

Vulnerable consumers definition and schemes in place

Current definitions of vulnerability are very general, and unlike in other Contracting Parties, specific criteria are lacking. The study proposes that the authorities adopt a definition of energy poverty and accompanying indicators that quantify energy poverty and enable measures resulting in long-term alleviation of energy poverty.

Three identified measures for energy expenses are offered to socially vulnerable households. The measures covering housing subsidies, various subsidies during the COVID-19 crisis, and abatements are subject to the following criteria: income census, previous subsidies, unemployment, war veterans, labor veterans, citizens affected by the Chernobyl disaster, military service veterans, law enforcement agency veterans, children of war, disabled people, and rehabilitated persons.

The measures provide financial aid or discounts for the above-mentioned categories of people, reimbursement of housing costs and costs of utility services. Such measures are not expected to tackle behavioral change or small investments from beneficiaries, which would otherwise increase energy efficiency and decrease energy consumption, and subsequently greenhouse emissions from energy sources. Current measures represent short-term aid to energy-poor households and are not considered a possible solution to alleviating energy poverty.

A preliminary assessment of households in energy poverty

Given that the number of energy-poor households is not exact but depends on the indicators used and thresholds applied, the study uses an upper and lower bound for the number of energy-poor households. The lower bound equals the share of households that declared themselves as unable to keep their homes adequately warm. The upper bound was determined by the share of households that spend twice the national median on energy (2M), including the share of households that spend half the national median on energy (M/2). By combining the 2M and M/2 indicators, the study captures both types of households: those that overspend (due to energy inefficiency of their homes) and those who underspend due to the lack of sufficient financial resources.

According to the available data, the share of energy-poor households in Ukraine ranges between 13% and 18% of all households. This percentage implies that there are between 1.9 and 2.6 million energy-poor households in Ukraine.