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Abstract
Africa has been experiencing higher rates of urbanization than any other continent, and today about one-third of the continent‘s population live in urban areas. But studies of energy services for urban residents, especially the poor, are still rare. The supply of electricity to poor city dwellers has not kept pace with urbanisation: in 1970 some 40 million had no access to electricity; by the year 2000 there were over 100 million. The urban poor continue to rely on wood fuel, charcoal, kerosene and dung cakes for energy, with all their environmental drawbacks.
This book examines the affordability of modern energy sources for the poor; the relevance of energy subsidies; the impact of subsidies on public finances; and how electricity tariffs affect the operations of small and medium enterprises, the main source of livelihood for the majority of the urban poor outside the formal economic sector.
Bereket Kebede is a senior lecturer at the School of International Development, University of East Anglia.
Ikhupuleng Dube is an expert on the energy sector working in Zimbabwe.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Cover\r | Cover | ||
| Contents | v | ||
| List of Tables | ix | ||
| List of Figures | xiv | ||
| List of Abbreviations and Glossary | xvi | ||
| Acknowledgements | xix | ||
| Notes on Contributors | xx | ||
| PART 1 Introduction\r | 1 | ||
| Study objectives | 2 | ||
| Major findings and policy implications | 4 | ||
| Notes | 11 | ||
| References | 11 | ||
| PART 2 Regional Report\r | 13 | ||
| Regional Profile: Sub-Saharan Africa\r | 14 | ||
| 1 Impact of Urbanization on Energy Consumption Patterns | 15 | ||
| 2 Energy Use among the Urban Poor | 22 | ||
| Consumption patterns and the cost of household energy | 22 | ||
| Energy use in the informal sector – small and \rmicro-enterprises (SMEs) | 26 | ||
| 3 Key trends | 33 | ||
| Note | 35 | ||
| References | 35 | ||
| PART 3 Research Methodology and Approach\r | 41 | ||
| 4 Research Methodology and Approach | 43 | ||
| Subsidies and access of the urban poor to modern energy | 43 | ||
| Subsidies and leakages to the non-poor | 45 | ||
| Energy subsidies and public finance | 45 | ||
| Energy subsidies and small and micro-enterprises (SMEs) | 46 | ||
| Notes | 47 | ||
| References | 47 | ||
| PART 4 Zambia | 49 | ||
| Country Profile: Zambia | 50 | ||
| 5 Introduction | 51 | ||
| Overview of economic developments and indicators | 52 | ||
| Poverty in urban households | 53 | ||
| Energy consumption patterns among urban households | 54 | ||
| Organization of the energy sector in Zambia | 55 | ||
| Subsidies in the energy sector | 57 | ||
| rUrban household expenditure | 59 | ||
| 6 Impact of Energy Pricing on Affordability of Modern Forms by the Urban Poor | 60 | ||
| Methodology | 60 | ||
| Findings | 61 | ||
| rConclusions | 69 | ||
| 7 Energy Subsidies Captured by Different Household Categories | 71 | ||
| Methodology | 71 | ||
| Findings | 71 | ||
| Conclusions\r | 75 | ||
| 8 Impact of Energy Subsidies on Public Finances | 76 | ||
| Methodology | 76 | ||
| Findings | 76 | ||
| Conclusions | 79 | ||
| 9 Policy Options and Recommendations | 80 | ||
| Issues to be addressed by policy | 80 | ||
| Policy options | 83 | ||
| Policy implementation | 84 | ||
| References | 87 | ||
| Appendices\r | 89 | ||
| PART 5 Zimbabwe\r | 103 | ||
| Country Profile: Zimbabwe\r | 104 | ||
| 10 Introduction | 105 | ||
| Rationale of the study | 105 | ||
| 11 Do the Urban Poor Need Subsidies to Access Modern Energy? | 108 | ||
| Research approach | 108 | ||
| Findings\r | 108 | ||
| 12 Are Subsidies for Upfront Costs a Better Option? | 113 | ||
| Research approach | 113 | ||
| Findings\r | 113 | ||
| 13 \rWho Captures the Subsidies? | 121 | ||
| 14 What Is the Impact of Subsidies on Utilities and Public Finance? | 125 | ||
| Research approach | 125 | ||
| Findings\r | 126 | ||
| 15 What are the Implications of Subsidies on the Informal Sector? | 131 | ||
| 16 Policy Options and Recommendations | 135 | ||
| Impact of subsidies on affordability of modern forms of energy by the poor | 135 | ||
| Distribution of subsidies amongst different income groups and their impact on public finances | 142 | ||
| Pricing of electricity to small and micro-enterprises\r | 144 | ||
| rReferences | 146 | ||
| Appendices\r | 149 | ||
| PART 6 Ethiopia\r | 157 | ||
| Country Profile | 158 | ||
| 17 Introduction | 159 | ||
| Rationale of the study | 159 | ||
| The pattern of urban energy demand in Ethiopia | 160 | ||
| 18 Expenditures of the Urban Poor and Costs of Energy | 164 | ||
| 19 Who Captures Energy Subsidies? | 175 | ||
| Methodology | 175 | ||
| Empirical results\r | 175 | ||
| 20 Energy Subsidies and Public Finance | 182 | ||
| 21 Electricity Tariffs and Informal Sector Enterprises | 188 | ||
| 22 Policy Options | 193 | ||
| Notes | 197 | ||
| References | 197 | ||
| Appendices\r | 199 | ||
| PART 7 Tanzania\r | 209 | ||
| Country Profile\r | 210 | ||
| 23 Background to the Study | 211 | ||
| 24 What is the Impact of Subsidies on Utilities and Public Finance? | 212 | ||
| 25 Who Captures the Subsidies? | 219 | ||
| 26 Subsidies and the Informal Sector | 221 | ||
| 27 Policy Options | 224 | ||
| Notes | 226 | ||
| References | 226 | ||
| Appendices | 228 | ||
| PART 8 Uganda\r | 231 | ||
| Country Profile | 232 | ||
| 28 Introduction | 233 | ||
| Rationale of the study | 233 | ||
| 29 Do the Urban Poor Need Subsidies to Access Modern Energy? | 235 | ||
| Affordability of energy by the urban poor – with subsidies | 235 | ||
| Affordability of energy by the urban poor – without subsidies\r | 237 | ||
| 30 Are Subsidies for Upfront Costs \ra Better Option? | 240 | ||
| 31 Who Captures the Subsidies? | 246 | ||
| 32 What is the Impact of Subsidies on Utilities and Public Finance? | 249 | ||
| Subsidies from setting the tariff below the LRMC | 249 | ||
| The subsidy on electricity consumption bills | 252 | ||
| The subsidy on capital cost contribution (upfront costs) | 255 | ||
| Effect of capital cost contribution subsidy on GDP | 256 | ||
| Effect of capital cost contribution subsidy on budget deficit | 256 | ||
| Effect of subsidies on the long-term debt of the UEB\r | 258 | ||
| 33 What Are the Implications of Subsidies for the Informal Sector? | 260 | ||
| Research approach | 260 | ||
| Findings\r | 260 | ||
| 34 Policy Options and Recommendations | 267 | ||
| 1: Initiate and promote appropriate demand-side management (DSM) and energy efficiency mechanisms | 267 | ||
| 2: Increase the lifeline tariff to at least 40 kWh to satisfy the basic minimum energy required by poor households | 268 | ||
| 3: Amortize upfront costs of electricity with monthly bills | 269 | ||
| 4: Increase support to the Sustainable Energy Use in Households and Industries (SEUHI) programme for the promotion of improved charcoal stoves | 270 | ||
| 5: Review wiring standards and other service connections by promoting Single Wire Earth Return (SWER) | 271 | ||
| 6: Reform the metering system and enable consumers to purchase the power they can pay for at full cost recovery | 272 | ||
| 7: Design tariffs to ensure equitable tariff rates for SMEs\r | 273 | ||
| Notes | 275 | ||
| References | 275 | ||
| Appendices\r | 278 | ||
| Index | 291 |