Analysis by Teodora Peneva, Senior Expert at WWF “Climate and Energy Programme”
Who is considered energy-poor in our country?
Bulgaria is expected to adopt a definition of energy poverty soon. It will define as energy poor any household that, after energy expenditure per person, falls below the official poverty line, or below 504 BGN per person in 2023. This means that if a person has a gross income of 780 BGN monthly, or a net income of 605 BGN, lives alone and their energy expenditure is over 100 BGN per month, they will be defined as energy poor.
The experts who made this suggestion recommend using a typical energy consumption to calculate a household’s energy consumption, rather than an actual invoiced consumption. The reasons for this are two – the large percentage of households heating with wood, pellets or coals, and the limitation of consumption because of low incomes, so that adequate energy needs cannot be accounted for.
The formula proposed to calculate the typical consumption of a household provides several steps:
- First, a specific annual energy consumption per unit area is determined according to the building’s housing characteristics;
- It is then multiplied by a typical household area according to the number of persons;
- It is multiplied by the electricity price in a ratio of 60% day and 40% night tariff;
- And if the household has an elderly person, children or persons with disabilities, the resulting consumption is multiplied by 1.3.
The determination of the energy consumption per unit area is:
- by building kind (house or multifamily building);
- according to the year of construction (before 2010 or after 2010);
- and according to the presence of comprehensive energy renovation of the building under national programmes.
So, it is possible to reduce the energy needs per square meter from 480 kWh/year for a house and 400 kWh/year for an unsanitized apartment block built before 2010 to 220 kWh/year for an apartment block built after 2010, which is calculated based on several housing and social criteria.
Under the formula set out in this way, depending on the housing characteristics, a single living person would receive a typical energy bill of between 126 BGN and 337 BGN per month for 2022. If the person is over 65 or under 18 years old, or has a type and degree of disability of over 50%, a household vulnerability factor should be applied to these bills.
After obtaining the household’s energy expenditure, it is subtracted from the household’s net disposable income, after taxes and social insurances, and divided by the number of household members before being compared to the official poverty line of 504 BGN.
How will we officially identify who is energy poor and who is not?
The creation of specialized energy regeneration units within municipalities is planned. In addition to providing information on possible energy efficiency measures and programmes, they will also be ready to assess energy poverty. For this purpose, individuals must declare their household composition and residential address. The optimal option is for the State to verify administratively the household income data, the age and health status of the household members and the housing characteristics of the building. On this base, an automatic estimate of the disposable income of the person/household after energy costs should be made.
There is a suggestion to publish an electronic calculator on the webpages of ministries, municipalities and energy providers for households to use before applying for programmes to know whether they fall into the category of “energy poor” and whether they would be eligible for reduced access to financing.
It is not yet clear if the definition of energy poverty will be used in the same form for the provision of energy compensation under market liberalization, and if the proposal for municipalities to administrate the process of verifying applicants’ information will remain. In many places in Western Europe, the energy supplier has access to a data register according to which it provides the relevant service to the person/household with facilitated access or with energy compensation directly, without the need to apply. We will see soon if this method is also suitable in our country.
How will we combat energy poverty?
The public consensus around the concept of ”energy poverty” is important for two reasons:
- to be able to provide energy efficiency services, which are a long-term measure to move out of energy poverty;
- to be able to provide energy compensations, which is a short-term solution to crises and energy resource price increases.
Energy efficiency services do not only concern complete renovation, but also the replacement of heating systems with more efficient and environmentally friendly ones (such as heat pumps, photovoltaic panels, efficient pellet heating systems), and the replacement of electrical appliances – air conditioners and other household appliances. Of course, there are also many other solutions such as solar collectors for household hot water, green roofs, partial insulation or replacement of only window frames, smart metering and control of appliances at home, energy-saving lighting, etc.
Supporting energy poor households with this type of measures is a long-term investment that reduces their energy needs. The combination of deep renovation and the installation of a renewable energy source is likely to root out energy poverty. In practice, when the investment also covers the current energy costs, it is a question of long-term eradication of energy poverty.
There is still limited talk about measures for rural households that heat primarily with solid fuel. There are also many opportunities for support there, as mentioned by the Ministry of Agriculture. These include setting up local social funds to purchase wood from licensed suppliers, respecting sustainability criteria, drying the wood one season before use and making it available to the most vulnerable consumers at the lowest non-market prices. At the same time, it would be good to work actively to replace heating systems with efficient, environmentally friendly ones.
Energy compensations are a method to support current energy consumption. This is direct funding that may be needed when the electricity market in the country is liberalised, as a large proportion of the population is heated by air conditioners and electrical appliances, and will fall below the poverty line if prices rise. The most appropriate way to provide energy compensation is directly from the energy suppliers – by applying a differentiated scale of support, suggesting higher compensation to the lowest income groups, and defining a minimum of three support groups of different sizes.
An important solution for these measures is the good development of special segments for households in the incoming Decarbonisation Fund and Social Climate Fund, which would have separate components only for energy-poor households. Ensuring that sufficient financial resources are strategically allocated to the lowest income groups is a fundamental solution for reducing energy poverty in Bulgaria.
Where is the connection between energy poverty and climate change?
When we talk about climate change, we are considering both higher temperatures in summer, which increase household cooling needs, and extremely warm or cold winters, leading to different types of cataclysms.
This necessitates measures of different types requiring investment costs. Unfortunately, it is not available when a country has high levels of inequality, poverty and limited budgetary possibilities. On average, Bulgarian households spend over 75% of their expenditure on food and energy. This percentage is under 45% on average in the European Union. This predetermines low investment capacity and lack of flexibility in replacing heating and cooling systems in the home with more energy and financially-efficient ones.
A 2022 International Monetary Fund study of 159 countries between 1995 and 2019 shows that countries with high poverty rates are more vulnerable to climate change. This is due to their weaker capacity to adapt and mitigate the impacts of climate change. The climate vulnerability coefficient is seven times higher in developing countries. At the same time, every 1 percentage point increase in climate vulnerability leads to a 1.5 percentage point increase in inequality and poverty.
It is therefore critical to have focused engagement with the most vulnerable groups, and climate finance tools offer such an opportunity. This supposes strategic targeting and the development of permanent programmes and measures that aim to lift the most vulnerable groups in society out of energy poverty. Unfortunately, the availability of limited financial resources does not allow to target 100% of the population.
Original source of the publication: https://www.wwf.bg/?8712441/wwf-energiynata-bednost-v-bulgariya-i-kak-da-se-spravim-s-neya
