Energy Access & Affordability: Residential households of

ARMENIA

“energy tariffs and prices; social safety net measures/programs; poverty characteristics, energy use and housing; poverty risks of increased energy bills.”

Astghine PasoyanProgram Manager

Armenia – Municipal Network for Energy Efficiency

Summary Slide Housing: policy, status, social issues, cross cutting Heat and Electricity: Costs and Tariffs ASE Work in this Sector: Energy Efficiency Primary Barriers: Residential Energy Efficiency Addressing Barriers:- Technical-Economic, Institutional, Information,

Financing Considerations & - Policy and Legal Reform

Ongoing Research: Energy Efficiency & Urban Utility Affordability Study

Armenia: Housing PolicyLegislation:

2002 National Assembly of Armenia adopted the Law on Management of Multi-apartment Buildings and new Law on Condominiums;

The Civil Code; Government Decision N1625, 2002 on Mandatory Norms

on Maintenance and Conservation of the Common Shared Property in Multi-apartment Buildings.

Building Management Bodies (condominiums) Registered:

In 2005, total of ~830 registered, 40-45% active

Status of Armenia’s Housing Sector

Common Problems & Issues:

Poor condition of common spaces (roofs, staircases, entrances and basements)

Absence of centralized heating Low awareness and consciousness by residents of building

conservation needs and opportunities

Empty apartments

Aging building stock

Radically different levels of affluence among households

Social Features of Population: Poverty Reduction Strategy Program (PRSP)

YearYear Poverty LevelPoverty Level Extreme PovertyExtreme Poverty

1999 56.0 % no data

2001 50.9 % 16.0 %

Projected by PRSP

2005 41.0 % 14.2 %

2010 29.1 % 10.6 %

2015 19.7 % 4.1 %

Social Features of Population: Alliance Survey Findings

Out of 363 respondents - social condition of the residents surveyed in multi-apartment buildings in 4 cities of Armenia (Yerevan, Hrazdan, Charentsavan and Sevan):

49% of those surveyed were identified as poor based on their expenditure levels, presence of pensioners, and other indicators;

83% of the respondent families spent about 50% of their family income on food;

37% of respondents spent 50% or more on utility services; 45% of respondents have financial debts, and 98% have borrowed for

basic survival needs; 20% of the respondents have family poverty benefit as a sole source of

income; and 18.7% of the surveyed families were receiving some kind of social

benefits, and only two of those families had employed members.

Cross Cutting Issues - HealthIllnessDuring the winter of 2004-2005, about 71% of urban multi-apartment households experienced illnesses due to under heated dwellings- over 14 % of population had colds of various origins; - over 60 % had influenza, etc.

Indicators2002 survey found that fuel combustion smoke exposure related health problems, such as upper respiratory diseases, headaches, sore eyes, swelling of extremities and blood circulation problems, are especially pronounced among poor households.- 3,467 annual life years are lost per 100,000 children under five- 120 life years lost per 100,000 women, due to indoor urban smoke exposure.

Other Cross Cutting Issues Safety: Deaths, injuries and damage to buildings caused by gas and

CO poisonings, fires and explosions (in 2003-4 heating season at least 50 fatal cases registered).

Education: Due to the lack of appropriate heating, many schools either do not function during the winter months (idle time in urban schools in 2004 was 1 month) or classes are held in cold (8oC) or polluted classrooms.

Environmental: The extensive use of wood for heating purposes contributes significantly to deforestation and has detrimental health implications particularly for the young and the old.

Social: During the winter months, up to 50% of family expenditures are used for heating purposes.

Correlation Between Illness & Heat Availability

30.2 25.5 28.344.1

34.225 25.7

69.8 74.5 71.755.9

65.875 74.3

There are nochildren

There arechildren

Bathroom isnot heated

Bathroom isheated

Apartment isheated fully

Apartment isheated

partially

Apartment isnot heated

There are sick people There are no sick people

Source: WB household survey 2005

NCategory of Benefit in Recipient Households

Average annual income (USD)*

1 Family 329

2 Child 413

3 Disability 459

4 Orphans 177

5 War victims 324

6 War veterans 527

7 Unemployed -

8 Religious groups 169

9 Public groups -

Average Income of Families Receiving Social Benefits

Heating expenditures in a multi-apartment building (AMD)

Number of rooms in

apartment

Without centralized heating

Withcentralized

heating

Potential monthly

savings from weatheri-zation*

Electric heating

Wood

1-room 16,000 - 10,000 3,500

2-room 22,000 18,000 15,000 4,000

3-room 26,500 24,000 20,000 4,500

4-room 28,500 - 25,000 5,000* Based on experience from demonstration projects

Anticipated Price Changes On April 10, 2006, the gas price will be raised:

- from 59,000AMD to 90,000AMD for under 1,000 m3 consumers (from $56 to $110)

- from $79.1 to $146.51 for consumers of over 10,000 m3

The rise in gas price in Armenia will cause at least 3 AMD increase in the price for electric power (Current day-time el. tariff is 25AMD, night-time –15AMD)- Armenia’s TPPs generate only 25% of energy generated in the

country, - Hrazdan thermal-power plant (TPP) has applied to the

Commission for revising the current prices for electric power,- The current day-time price for electric energy for Armenia’s

population is AMD 25, and the night-time price is AMD 15, - Hrazdan TPP already applied for a tariff raise from 11.37 AMD

to 21.36 AMD per 1 KW/h, Yerevan TPP and Electric Networks to follow

Other Factors Affecting Price

Growing demand for energy carriers- Armenia’s demand for electric power increases by

4-5%, annually

- Industrial gas demand is increasing 10% annually

- Armenia may consume up to 2.5-2.7bln cubic meters of gas yearly in the future

ASE Work in this Sector: Energy Efficiency is Key

Improve utility efficiency for residential and municipal consumers Promote building energy efficiency in low-income housing Conduct a household surveys on household (HH) heating needs and

low-income household assistance preferences for heating rehabilitation investments

Hold a workshops and focus group discussions with stakeholders to reveal preferences on low-income household assistance schemes for heating rehabilitation investments

Propose a mechanism for providing grants to low-income Build consumer capacity for improved efficiency of energy use Leverage municipal funding for EE investments in vulnerable HHs Consequently, bring down investment and operating costs and loan

burden on all households

Primary Barriers for Residential Energy Efficiency

Financial barriers: Existing loan terms are not applicable for EE projects due to high

commercial interests rates and short repayment periods Commercial financing is not available for EE projects Low bill collection/payment rate affects the cost-effectiveness of

EE projects.Legal, regulatory, institutional, and political barriers: Absence of targeted heating social assistance schemes for low-

income Fragmented/chaotic municipal efforts to subsidize or co-finance

heating projects Lack of appropriate price formation policies for the communal

services e.g. electricity, drinking water and sewage service, garbage removal, etc.

Monopoly of energy suppliers.

Barriers (continued)Consumer barriers: Insufficient metering which leads to lack of

awareness of energy cost and usage Lack of control over energy usage for some

consumers.Information barriers: Lack of trust in mass media Information on EE options is unavailable Lack of information on “success” stories available to

public.

Technical-Economic Considerations

Techno-economic benefits of energy efficiency are obvious: both on supply and demand-side- Need to define the product, the benefit, the recipient

and the responsible party A variety of experiences and diverse models

available throughout the region Need to be accumulated and shared through

networks of experts/organizations - a lot to be shared!- no single model fits all!

Institutional Issues Enforce market mechanisms to provide

opportunity to housing owners/renters to choose utility service providers

Eliminate subsidies and calibrate utility tariffs so as not to worsen payment discipline. Combine with targeted social assistance

Utilize the power of partnerships: Municipalities and public groups (NGOs), public/private, ESCOs, etc.

Strengthen the role of the home OWNERS and RECIPIENTS of utility services

Information Barriers & Recommendations

Low awareness of the population on:- low cost energy efficiency measures - available financing mechanisms for EE measures and housing

renovation projects

Recommendation: - Organize support, training and information flow and advisory

services assisting the residents on (1) legal, (2) economic, (3) financial, and (4) technical issues, and (5) best practices of project design, investment and business planning, fund-raising, energy- and project management, operation and repayment.

- Strengthen the capacity of the housing sector parties to participate in the housing market

- Encourage adequate media coverage of above issues

Financing Mechanisms Grants (phase out to allow for market acceleration, and use just to trigger the

market forces) Housing renovation/modernization loans

- ASE works on micro building energy efficiency loan mechanism in Armenia Municipal funds (linked to municipal official awareness of benefits of such

investments Energy efficiency revolving funds Social/subsidy funds State Housing Development, Repair and Maintenance funds Mortgage lending Credits from commercial banks Leasing Vendor credits Guarantee funds Carbon finance Funds of construction companies, etc.

While targeting EE Assistance to Vulnerable Households

Policy Recommendations to Address Legal Gaps

Fill legal gaps in ownership, management and assignment of responsibilities in multi-apartment housing, utility services and building maintenance entities

Legislative, technical-normative developments needed to:Updated technical building codesBuilding energy passportizationAppliance standards and labelling to affect property marketEnergy auditing procedures and licensingEnergy services

Legal framework allowing borrowing by housing associations and housing maintenance companies

Legal framework enforcing liabilities and minimizing risks for loan residential EE and housing renovation loan repayment

Innovative Policy Design and Reform

Law on Energy Saving and Renewable Energy Design State Energy Efficiency and Renewable

Energy Fund Development of EE Ordinances Elaboration of National Energy Efficiency

Program

Energy Efficiency & Urban Utility Affordability Study

Seeking to answer similar questions in the region Assess impact that reforms and restructuring in essential utility

services will have on the affordability of heat, electricity, water & wastewater.

Present the policy case for energy efficiency vs. traditional approaches

Identify policy, legal, institutional, commercial, and other impediments to using energy efficiency to provide an energy social safety net among vulnerable households.

Link the Energy Community for Southeast Europe and energy efficiency

Reach a broad audience: Governments, NGOs, development banks and financiers

Document utility affordability problems and residential efficiency experiences

For More Information

Astghine PasoyanAlliance to Save Energy

apasoyan@ase.org www.ase.org

www.munee.org