Energy Poverty and Poverty Alleviation in Indonesia: Evidence from East Nusa Tenggara PREPARE BY MAXENSIUS TRI SAMBODO RESEARCH TEAM: SIWAGE DHARMA NEGARA (COORDINATOR), AHMAD HELMY FUADY, INNE DWIASTUTI, FELIX WISNU HANDOYO, ERLA MYCHELISDA JAKARTA, 24 SEPTEMBER 2014 1
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Energy Poverty and Poverty Alleviation in Indonesia: Evidence from East Nusa TenggaraP R E PA R E BY M A X E N S I U S T R I S A M B O D O
R E S E A R C H T E A M : S I WA G E D H A R M A N E G A R A ( C O O R D I N ATO R ) , A H M A D H E L M Y F U A D Y, I N N ED W I A S T U T I , F E L I X W I S N U H A N D OYO, E R L A M YC H E L I S D A
J A K A R TA , 2 4 S E P T E M B E R 2 0 1 4
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Outline 1. Energy Poverty and Global Agenda
2. Global multidimensional poverty index
3. Promoting electricity infrastructure
4. Electricity access and poverty reduction: case study
5. Development agendas
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Energy PovertyThe International Energy Agency (IEA) defines energy poverty as a lack of access to modern energy services, i.e., access to electricity and clean cooking facilities.
Reddy and Reddy (1994) as cited in Masud and others (2007), said that energy poverty could be defined as “the absence of sufficient choice in assessing adequate, affordable, reliable, high-quality, safe and environmentally benign energy services to support economic and human development”.
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Why is it important?The World Summit on Sustainable Development, Johannesburg, South Africa, 2002, highlights the energy for sustainable development. The summit mention that:
…access to energy facilitates the eradication of poverty…improve access to reliable, affordable, economically viable, socially acceptable, and environmentally sound energy services and resources…
UN Resolution 65/151, decides to declare 2012 as the International Year of Sustainable Energy for All. There are three objectives that are going to be pursued up to 2030, namely: (1) ensuring universal energy access; (2) doubling the share of renewable energy; and (3) doubling the rate of improvement in energy efficiency.
UN Resolution 67/215, in 61st plenary meeting, 21 December 2012, decides to declare year 2014 – 2024, as the “UN Decade of Sustainable Energy for All”.
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Access to modern energy services in ASEAN, 2011
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World Energy Outlook 2012 – Energy Development Index 2010
Country Rank EDI
Household level energy access Community level energy access
Total 80 countries. Energy Development Index (EDI), which is devised as a composite measure of a country’s progress in transitioning to modern fuels and modern energy services, as a means to help better understand the role that energy plays in human development
Global Multidimensional Poverty Index (MPI)
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Percentage contribution of deprivations of each dimension to overall poverty
1 Kalimantan Timur 3,2932 Maluku dan Maluku Utara 2493 Papua dan Papua Barat 12,0694 NTT 115,434
131,045TOTAL
Unit NameNONumber of
SEHEN's customers
Interrelated pathway on electricity access (Khandker, S.R., Barnes, D.F., & Samad, H.A., 2013, Welfare Impacts of Rural Electrification: A Panel Data Analysis from Vietnam, Economic Development and Cultural Change, 61(3):659-692
Number of sample 537R-square/interclass variations 0.2067 0.549 0.197
Dependent variable: household spending
Note: *significant at 1%; ** significant at 5%; the Hausmann test suggested the FE model; the LM test suggested for RE model
Model 2We applied difference in difference (DID) estimation to calculate net benefit from having access on electricity. We selected three outcomes (outcome_vari) to measure the impact of electricity access as follows:
1. Share of kerosene spending to food spending
2. Share of kerosene spending to non-food spending
control variables (xk,i) such as total area of floor, beneficiary of cash transfer or not, beneficiaries of rice for the poor or not, and number of family member.
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Immediate ImpactsIndicator Tantong village
(treatment group)Damu village
(control group)Lungar village
(control group)
2013 2014 2013 2014 2013 2014Share of kerosene spending to energy spending
0.28 0.13 0.24 0.14 0.22 0.28
Share of kerosene spending to food spending
0.21 0.17 0.18 0.18 0.14 0.09
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Net Impact on Rural Electrification ProgramNo Output Net impact
without control variables
(observation 564)
with control variables(observation 521)
1 Share of kerosene spending to food spending -0.178* -0.176*
2 Share of kerosene spending to non-food spending -0.507* -0.551*
3 Share of kerosene spending to total spending -0.086* -0.092*
4 Share of food spending to non-food spending -1.420* -1.510*
Note: *significant at 5%
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We calculate how much CO2 emission can be reduced by replacing kerosene lamp with electricity from geothermal (we assume that geothermal consume small amount of fossil fuel). Between 2013 and 2014, the average kerosene spending decrease by IDR 15,100/family/month. The price of kerosene is IDR 4,000/litter. Thus one household can save kerosene by 3.8 liter per month (IDR 15,100 / IDR 4,000). In Tantong village there are 52 number of households, thus in a year Tantong village can reduce kerosene consumption by 2,371 litter (3.8 litter/month/household x 12 month x 52 households). If we convert 2,371 litter kerosene to CO2 emissions is about 5.4 ton CO2 (1 litter petrol = 2.3 kg CO2). The market price of kerosene is about IDR 11,000 per litter, then gap between economic price and subsidy price is about IDR 7,000 (IDR 11,000 –IDR 4,000). Thus total amount of subsidy that can be save is about IDR 16.6 million (USD 1,421 ; we assume IDR 11,600/USD). (Picture of Village Tantong, May 2013). (If we include carbon tax at 30USD/tonne, the net benefit is about IDR 18.5 million/year)
Externalities
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Development Agendas1. Reach electrification ratio 100% in 2019 2. Energy conversion program from kerosene to electricity3. Easing the installation cost (in the 1980s and 1990s, Rural Electrification Credit/Kredit Listrik
Perdesaan / KLP) 4. Village Fund5. Special Allocation Fund 6. One door policy (PLN and MEMR)7. Reallocate fuel and electricity subsidy for energy infrastructure8. Unit on rural electrification program in PLN
◦ The Rural Areas Electric Power Section, as stated in Decree No.058/DDPLN/59◦ Minister of Public Works and Electric Power Decree No.016/PRT/1976 dated 20 October 1976 formed a
Sub directorate of Rural electrification within PLN Directorate of Operation