Energy Poverty

Approaches for Defining Energy Poverty

The existence of energy poverty today is quite well accepted around the world. In fact alleviating energy poverty is a goal of many development organizations that deal with energy issues for developing countries. However, when it comes to defining energy poverty these organizations assume the position that many take in appreciating good art--"they know it when they see it." There is much talk about energy poverty but not much action in terms of measuring it. There is a good reason the people avoid defining energy poverty. It just is very thorny to define. There even was a time not too long ago that development specialists refrained from using the term. One can ask several different questions concerning the definition of energy poverty. Is energy poverty the same as income poverty? Is energy poverty based on access to energy services such as cooking, communications or lighting? Or is it based on quantities of energy that people use? These questions have generated several different approaches to measuring energy poverty.

There are several different approaches to define energy poverty and they can be classified as follows and are explained below.

1. Minimum amount of physical energy necessary for basic needs such as cooking and lighting;
2. Type and amount of energy that is used for those at the poverty line;
3. Households that spend more than a certain percent of their expenditure on energy;
4. The income point below which energy use and or expenditures remains the same, implying this is the bare minimum energy needs.

Each one of these approaches has strengths and weaknesses.

1. The first way of defining energy poverty has its roots in defining poverty as a minimum amount of food intake necessary to sustain a health life. This is a very common approach often used by international food agencies. Translating this method to energy, there also must be a minimum amount of energy necessary to cook, light and heat someone’s home. Although this might be true, pinning down the exact minimum level of energy necessary based on basis needs is very difficult due to the significant country and regional differences in cooking practices and heating requirements. We know the caloric levels that are necessary to sustain a healthy life, but pinning down the minimum energy needs is much more difficult to accomplish.
2. The second approach of defining the energy poverty line as the energy being used by households below the known expenditure or income poverty line is much easier to grasp. The expenditure based poverty line is well defined in most countries, so based on a household energy survey you assess the average fuel use below this level. This is fairly attractive because it is not necessary to actually measure how much energy people are using. However, this method also has the drawback that you are defining energy poverty based on more general critera as opposed on an energy basket of goods and services. This means that such a poverty line would not be based on the energy policies in the country, but rather would reflect general economic and social policies. Tracking energy poverty with this method would be no more than tracking general poverty trends. This method is not so useful for those that might want to tack the impact of energy sector reform.
3. The third line of thought is that the energy poverty should be based on the percentage of income spent on energy. It is well established that households that are poor spend a higher percentage of their income on energy than households that are wealthier. Empirical studies including ones I have done indicate that such percentages can range from about 5% or less to close to 20% of cash income or expenditure. It seems that when energy is above 10% of income, then conceivably it will begin to have an impact on general household welfare. The idea is that when households are forced to spend as much as 10% of cash income on energy they are being deprived of other basic goods and services necessary to sustain life. The drawback to this approach is that 10% is a rather arbitrary figure. So it suffers to a certain extent from the same problems as the methods based on physical measures of energy.
4. The last method is based on the level of energy demand as it relates to household income. The sweet spot for poverty specialists is the level of income at which the use of energy or the level of energy expenditures does not vary significantly with income. The converse of this is that after a certain level of income people begin to consume more and more energy. For poor people this means that even if their income increases, their use of energy does not because they are at the bare minimum amount necessary to sustain daily life as illustrated in the figure. Unfortunately, this approach is quite data intensive and requires the analysis of household surveys that have good energy questions. The attractiveness is that this definition of energy poverty is based on how people actually consume energy based on local resource conditions, energy prices and policies.

Exemplary Definitions of Energy Poverty

Definition from Practical Action

Un hogar es definido como energéticamente pobre si no tiene acceso a por lo menos un equivalente de 35kg de LPG por persona por año de combustible liquido o gas, o no cuentan con un sistema mejorado de cocina con biomasa; y accede a por lo menos 120kWh de electricidad por persona por año para alumbrado y para actividades sociales y productivas.

Un sistema mejorado de cocina debe cumplir con las siguientes características

i) Los usuarios emplean menos de 4 horas por semana para recolectarlo,

ii) Cumple con las recomendaciones de OMS (Organismo Mundial de la Salud) sobre calidad de aire, esto es una concentración de CO de 30mg/M3 para periodos de 1 hora o menos y menos que 10mg/m3 para periodos de exposición de máximo 8 horas

iii) tiene una eficiencia total mayor o igual que 25%.

Development of an Energy Poverty Line

Document URL: Energy access, efficiency, and poverty : how many households are energy poor in Bangladesh ?

By: Barnes, Douglas F.

      Khandker, Shahidur R.

      Samad, Hussain A.

Abstract:
Access to energy, especially modern sources, is a key to any development initiative. Based on cross-section data from a 2004 survey of some 2,300 households in rural Bangladesh, this paper studies the welfare impacts of household energy use, including that of modern energy, and estimates the household minimum energy requirement that could be used as a basis for an energy poverty line. The paper finds that although the use of both traditional (biomass energy burned in conventional stoves) and modern(electricity and kerosene) sources improves household consumption and income, the return on modern sources is 20 to 25 times higher than that on traditional sources. In addition, after comparing alternate measures of the energy poverty line, the paper finds that some 58 percent of rural households in Bangladesh are energy poor, compared with 45 percent that are income poor. The findings suggest that growth in electrification and adoption of efficient cooking stoves for biomass use can lower energy poverty in a climate-friendly way by reducing carbon dioxide emissions. Reducing energy poverty helps reduce income poverty as well.

Discuss this Paper