Poverty and Social Impact Assessment: Energy Sector in Tajikistan

PSIA Energy Tajikistan 2011
Authors: Lilit V. Melikyan, Hasmik Ghukassyan Editor: Ben Slay
PSIA Energy Tajikistan

Poverty and Social Impact Assessment: Energy Sector in Tajikistan
Draft Final Report May 20, 2011
This report does not constitute an official statement of UNDP, the United Nations, or its member states.

Acknowledgements The authors would like to thank the personnel of Tajikistans various Ministries and companies for their warm reception, their time, made available for the meetings, and explanations and information during the data collection mission in November 2010 and beyond. In particular, the team thanks: Vaisidding Tilloev (Head of Mini Hydro Power Plants department, the Ministry of Energy and Industry); Mr. Sharofiddinov Saidmahmad (director of TajikTransGaz); Mrs. Sabohat Azimova (Senior Economist of the Open Stock Holding Power Company Barqi Tojik); Mr. Rashid Gulov (Deputy Chief Engineer, OJSC Barqi Tojik), Mr. Kiemeddin Noroev (Head of the Household Surveys Department, State Statistics Committee); Mr. Saidahror Safarov (Ministry of Economic Development and Trade); Mr. Umarali NIiazov (Director of Dushanbe Heating Service Enterprise); Mr. Davron Valiev (Head of the Social Assistance Department of the Ministry of Labor and Social Assistance), Mr. Cheles Yunusov and Mr. Saidahror Safarov (Ministry of Economy); Mr. Firuz Saidov (Head of Department of Strategic Research Center under the President of the Republic of Tajikistan); Mrs. Rafika Musaeva (Chairwoman of the Association of Energy Sector Specialists of Tajikistan); Mr. Eshboev (Head of the Department of Ministry of Economy and Trade); the representatives from the Antimonopoly Commission and the Ministry for Nature Protection of the Republic of Tajikistan. The authors would like to thank staff of the UNDP country office in Tajikistan, and the staff and experts of the UNDP Tajikistan Energy and Environment Program for their invaluable assistance during the preparation of the report with information and advice. In particular we would like to thank Mr. Khosrov Khoshmukhamedov (Assistant Resident representative, UNDP Tajikistan), Mrs. Nargizakhon Usmanova (Program Associate), Mrs. Zulfira Pulatova (National Project Manager, PEI), Mr. Mubin Rustamov (Program analyst), Mr. Yusuf Kurbonkhojaev (senior Local Governance Officer), Mr. Mirzohaydar Isoyev (Programme Analyst, Energy and Environment Programme), Mr. Ahad Mahmoudov (Programme Manager, UNDP Energy and Environment Programme), Mrs. Madina Dehoti (UNDP Energy and Environment Programme), Mr. Dilshod Saidov (Program Assistant, UNDP Energy and Environment Programme) and Mr. Zoran Morvaj (Adviser, UNDP Energy and Environment Programme). Our special thanks go to Mr. Farrukh Shoimardonov (Governance advisor) and Mrs. Violetta Strizhakova (Renewable energy engineer) from UNDP Tajikistan Energy and Environment Program and Mr. Rozik Chorshambiev (Special Projects Manager, Pamir Energy): this report would not have been possible without their continued assistance with information collection and comments during the field visit and after, for their time and dedication, as well as warm reception in Tajikistan. The team thanks UNDP donor partners: Ms. Takhmina Mukhamedova (Operations Analyst, WB office in Tajikistan), Mr. Ruslan Sadykov (National Programme Officer, SECO Tajikistan); Dr. Joachim Kirchhoff (Senior Advisor (GTZ Forestry Program in Tajikistan), Mr. Robert van Leeuwen (Team leader) and Mrs. Nadezda Timoshenko (Counsel) from EU/Mott MacDonolald Advisory project on the Reform of Social Assistance), and Mrs. Zarrina Abdulalieva (Asian Development Bank). We would like to thank the staff and experts of UNDP RBEC Senior Economists office for their assistance with arrangements of the field mission, and comments on the draft report. Our special thanks go to Dr. Ben Slay, Senior Economist, for the comments and guidance during the preparation of the report, and editorial work.
Page 2
Contents
Acknowledgements ................................................................................................................................. 2 List of Figures ......................................................................................................................................... 4 List of Tables .......................................................................................................................................... 6 ABBREVIATIONS ................................................................................................................................ 7 EXECUTIVE SUMMARY .................................................................................................................... 9
INTRODUCTION ...................................................................................................................................... 13
1. 2.
COUNTRY BRIEF ............................................................................................................................ 16 ENERGY SECTOR ........................................................................................................................... 19
Electricity sector ............................................................................................................................... 22 Oil and gas ........................................................................................................................................ 42 Decentralized renewables ................................................................................................................. 49 Energy efficiency .............................................................................................................................. 57 Summary ........................................................................................................................................... 58 3.
ENERGY AND POVERTY NEXUS ..................................................................................................... 60
Poverty trends ................................................................................................................................... 60 Energy poverty ................................................................................................................................. 62 Household access to and use of electricity ................................................................................... 62 Energy affordability ..................................................................................................................... 70 4. 5. 6.
POVERTY ALLEVIATION AND ENERGY SECTOR DEVELOPMENT .................................................... 77 SOCIAL ASSISTANCE TO MITIGATE THE IMPACT OF RISING ENERGY PRICES ................................. 83 CONCLUSIONS AND RECOMMENDATIONS ................................................................................... 103
ANNEX 1: Armenia Case Study ........................................................................................................ 108 ANNEX 2: Major Development partners/projects.............................................................................. 111 ANNEX 3Energy sector investment projects: Budgets and funding gaps ...................................... 112 7. REFERENCES ............................................................................................................................... 114
Page 3

List of Figures
Figure 1: Annual increase in household tariffs in Tajikistan ................................................................ 13 Figure 2: Map of Tajikistan .................................................................................................................. 16 Figure 3: GDP growth rate, % .............................................................................................................. 17 Figure 4: Remittances and GDP Growth in Tajikistan ......................................................................... 17 Figure 5: Tajikistans public debt in % to GDP .................................................................................... 18 Figure 6: Total primary energy supply ................................................................................................. 20 Figure 7: Investments in the energy sector, million US$ ...................................................................... 25 Figure 8: Peak load in Tajikistan .......................................................................................................... 25 Figure 9: Central Asian Regional Electricity Grid................................................................................ 26 Figure 10: Tajikistans monthly electricity imports and exports .......................................................... 26 Figure 11: Electricity consumption, million KWh ................................................................................ 27 Figure 12: Shares of main consumption categories of electricity, % .................................................... 27 Figure 13: Pamir Energy Generation and Sales, MWh ......................................................................... 32 Figure 14: Energy supply (hours) and Losses (%) ................................................................................ 33 Figure 15: Committed and actual investments in large Barqi Tojik energy projects (million US$) .... 36 Figure 16: Central Asias electricity transmission network in 2020 (under CASA 1000).................... 41 Figure 17: Gas consumption by sectors, million m3 ............................................................................. 42 Figure 18: Retail prices for natural gas, US$ for 1000 m3 .................................................................... 43 Figure 19: Comparison of prices for natural gas and LPG (US$ for 1000 m3)..................................... 44 Figure 20: Oil balance in Tajikistan (2007-2009, tons) ........................................................................ 45 Figure 21: Retail prices for hard coal in Tajikistan compared to the EU ($/ton)................................ 46 Figure 22: Communal service tariffs and wholesale gas price trend, % (2007 = 100) ......................... 48 Figure 23: Household heating tariffs (Somoni per gCal) ...................................................................... 48 Figure 24 Change in poverty and extreme poverty rates, % ................................................................. 60 Figure 25 Extreme poverty rates, %...................................................................................................... 60 Figure 26: Poverty rates by the number of children in the households, % ........................................... 60 Figure 27: Distribution of the poor in Tajikistan, % ............................................................................. 61 Figure 28: Poverty rates by Oblast, % .................................................................................................. 61 Figure 29 Poverty and growth; urban vs. rural .................................................................................... 61 Figure 31 Share of households reporting power cuts: winter 2007, % ................................................. 62 Figure 30 Share of households reporting power cuts: summer 2007, %............................................... 62 Figure 32 Use of electricity (in kWh brackets) in 2007, % of households ........................................... 62 Figure 33: Average monthly consumption of electricity per household urban/rural, kWh .................. 63 Figure 34: Share of households using electricity, urban vs. rural, %.................................................... 63 Figure 35: Average monthly consumption of electricity per household, by location, kWh ................. 63 Figure 36: Share of households using electricity, by location % .......................................................... 63 Figure 37: Average monthly household electricity consumption, poor/non-poor, kWh....................... 64 Figure 38: Share of households using electricity, poor vs. non-poor% ................................................ 64 Figure 39: Average monthly consumption of electricity per household, by quintile, kWh .................. 65 Figure 40: Share of households using electricity, by quintile, %.......................................................... 65 Figure 42: Average monthly electricity consumption, by gender of the head of household, kWh ....... 65 Figure 41: Share of households using electricity, by gender of the head of household, % .................. 65 Figure 43: Average monthly consumption of electricity per household, by household size, kWh....... 66 Figure 44: Share households using electricity, by household size, % .................................................. 66 Figure 45: share households using electricity by nationality, % ........................................................... 66 Figure 46: Average monthly consumption of electricity per household by nationality, kWh .............. 66 Figure 48: Gas pipeline users by location, %........................................................................................ 67 Figure 47: Gas pipeline users: poor/ non poor, %................................................................................. 67 Figure 49: Share of LPG users: poor/non-poor, % ............................................................................... 67 Figure 50: Share of LPG users by location, % ...................................................................................... 67
Page 4

Figure 51: Household heating sources (%) ........................................................................................... 68 Figure 52: Share of households having and using district (central) heating: poor/non poor, %. ......... 68 Figure 53: Share of households having and using district (central) heating by location, % ................. 68 Figure 54: Share of households using LPG for heating, poor/non poor, % .......................................... 69 Figure 55: Share of households using LPG for heating by location, % ................................................ 69 Figure 56: Sources of heating: by location, % ...................................................................................... 69 Figure 57: Share of households purchasing firewood in the winter by location, % ............................. 70 Figure 58: Sources of heating among poor/non-poor, % ...................................................................... 70 Figure 59: Share of electricity payments in total monthly household expenditure, average, % ........... 72 Figure 60: Shares of household expenditures on various energy services/sources, 2009, %................ 73 Figure 61: Average annual energy consumption in total household consumption, by location, 2009, % average annual ...................................................................................................................................... 74 Figure 62: Average annual energy consumption in total household consumption for the poorest quintile by location, 2009, %, ............................................................................................................... 74 Figure 63: Average annual energy consumption in total household consumption, poor/ non poor, 2009, % ................................................................................................................................................. 74 Figure 64: Average energy affordability for households using simultaneously electricity, wood and coal ( share of household expenditures, 2009, %) .......................................................................... 75 Figure 65: Share of household expenditures on food (2009, %)........................................................... 75 Figure 66: New debts incurred in past three months, 2008-2010 ......................................................... 76 Figure 67: Enterprise perception ranking: Top 10 constraints on business investments in Tajikistan . 77 Figure 68: Potential impact of increased electricity tariffs on affordability (% of household expenditure) .......................................................................................................................................... 80 Figure 69: Potential impact of increased electricity tariffs on average household energy affordability .............................................................................................................................................................. 81 Figure 70: Social, economic, and environmental impact of energy subsidies (UNEP) ........................ 82 Figure 71: Current system of electricity and gas compensation ........................................................... 89 Figure 72: Distribution of payments of social assistance across quintiles of consumption expenditure in 2009 (%) ........................................................................................................................................... 90 Figure 73: Typology of subsidies.......................................................................................................... 99
Page 5

List of Tables
Table 1: Energy System Production Capacity, in megawatts ............................................................................... 21 Table 2: Barqi Tojiks hydropower plants (HPPs) ............................................................................................... 24 Table 3: Tajikistans thermal power plants (TPPs)............................................................................................... 25 Table 4: Capacity of electricity transmission system............................................................................................ 25 Table 5 Total losses in electricity transmission and distribution % ...................................................................... 26 Table 6: Electricity balance, Million KWh ........................................................................................................... 27 Table 7: Total customer payments of Barqi Tojik ................................................................................................ 28 Table 8: Electricity Tariff (US without VAT, unless otherwise noted) .............................................................. 29 Table 9: Average Tariff for Electricity (without VAT) ........................................................................................ 29 Table 11: Factors in electricity tariffs ................................................................................................................... 30 Table 10: Planned tariff increase for households, with VAT................................................................................ 30 Table 12: Pamir Energy Summary Statistics, 2010 .............................................................................................. 32 Table 13: Tariffs in Pamir Energy (US) ............................................................................................................. 33 Table 14: Comparative tariffs, Barqi Tojik and Pamir Energy ............................................................................. 34 Table 15: Subsidy Usage Estimates at Pamir Energy ........................................................................................... 35 Table 16: Tajikistan gas balance........................................................................................................................... 42 Table 17: Gas transit losses .................................................................................................................................. 43 Table 18: Purchase price of natural gas from Uzbekistan, US$ ........................................................................... 43 Table 19: Production of coal in Tajikistan (thousand tons) .................................................................................. 46 Table 20: Performance of the Dushanbe Combined Heat and Power Plant.......................................................... 47 Table 21: Work of the boiler houses (2009, gigacalories) .................................................................................... 48 Table 22: Ministry of Energy and Industrys small hydro (HPP) classification scheme ...................................... 53 Table 23: Small hydropower plants in Tajikistan (1991- 2010) ........................................................................... 53 Table 25: Wind PPPs under construction ............................................................................................................. 56 Table 26: Household electricity consumption during 2006-2008 ........................................................................ 64 Table 27: Benchmarks used in measuring affordability (as % of total household income/expenditure) .............. 71 Table 28: Benefits and shortcomings of social assistance mechanisms................................................................ 84 Table 29: State budget allocations for the electricity and gas assistance programme........................................... 85 Table 30: Electricity and gas assistance programme recipient households by region .......................................... 85 Table 31 Allowances under the social assistance program for electricity and gas ............................................... 86 Table 32: Income threshold to quality for compensation ..................................................................................... 87 Table 33: Budget expenditures on social assistance in 2009 ................................................................................ 88 Table 34: Indicator composition of Tajikistans proxy means testing pilot .......................................................... 92 Table 35: Share of electricity expenditures in total household expenditures, by poverty level, under different tariff scenarios ...................................................................................................................................................... 95 Table 36: Impact on poverty under different tariff increases ................................................................................ 96 Table 37: Subsidies under different scenarios ...................................................................................................... 96 Table 38: Tariffs at Pamir Energy and Barqi Tojik net of subsidy, for residential consumers ........................... 100
Page 6

ABBREVIATIONS
ADB AKFED APEC AC BARQI TOJIK CAREC CAPS CASA CASAREM CGE CHP DHSE DC ECA EGI ESMAP EU FDI FAO GBAO GTZ GoT GDP HPP HVDC IEA IEG IMF IDB JV kWh LPG LSS MOEI MOF MLSP MDG MOU MW MTEF OBA OJSC PSP PPP PPCR Asian Development Bank Aga Khan Foundation for Economic Development Asia Pacific Economic Cooperation Alternating current Barqi Tojik Central Asia Regional Economic Cooperation Central Asia Power System Central Asia South Asia Central Asia South Asia Regional Electricity Market Computerized General Equilibrium (Model) Combined Heat and Power (Plant) Dushanbe Heat Service Enterprise Direct current Europe and Central Asia Electricity Governance Initiative Energy Sector Management Assistance Program European Union Foreign Direct Investment Food and Agriculture Organization (of the United Nations) Gorno Badakshan Autonomous Oblast Deutsche Gesellschaft fuer Technische Zusammenarbeit Government of Tajikistan Gross Domestic Product Hydro Power Plant A high-voltage, direct current International Energy Association Independent Evaluation Group International Monetary Fund Islamic Development Bank Joint Venture Kilowatt hour Liquefied petroleum gas Living Standards Survey Ministry of Energy and Industry (Tajikistan) Ministry of Finance (Tajikistan) Ministry of Labor and Social Protection (Tajikistan) Millennium Development Goals Memorandum of Understanding Megawatt Medium Term Expenditure Framework Output Based Aid Open joint stock company Private Sector Participation Public Private Partnership Pilot Program for Climate Resilience (part of the Strategic Climate Fund (SCF), a multi-donor Trust Fund within the Climate Investment Funds)
Page 7

PMT PAMS PRSP PSIA RES RAO UES SHPP SCBA TPP TPES TALCO TJS TWh UNICEF UNESCO USTDA USD UNDP UNEP VOLL WB WHO Proxy Means Targeting Project Analysis Macroeconomic Simulator Poverty Reduction Strategy Paper Poverty and Social Impact Assessment Renewable energy sources Unified Energy System (Russian Joint stock company) Small hydro power plant Social cost benefit analysis Thermal power plant Total Primary Energy Supply Tajik Aluminum Company Tajik Somoni (national currency, TJS) Terawatt-hour (1 terawatt is 10^12 watts) United Nations Childrens Education Fund United Nations Educational, Scientific and Cultural Organization United States Trade and Development Agency United States Dollar United Nations Development Program United Nations Environmental Programme Value of Lost Load World Bank World Health Organization
Page 8

EXECUTIVE SUMMARY
The combined impact of population growth, the decapitalization of the energy infrastructure, interruptions in gas imports from Uzbekistan, and the dissolution of the regional electricity transmission network has had a dramatic impact on the energy sector of Tajikistan. This was particularly apparent during the winter of 2007-2008, when unusually cold weather brought the energy sector to the brink of collapse. The international financial crisis and rising food prices completed the picture (which some experts call a compound crisis), the most pronounced adverse effects of which were felt by the poor and vulnerable. The poor, who in 2007 constituted more than half of the population, suffered most from the power cuts, lack of heating, reductions in remittances, and increasing food prices. Official data indicate that electricity consumption dropped some 8 percent during 2007-2009, before growing slightly in 2010. Meanwhile, the annual increases in household electricity tariffs during 2007-2010 averaged 57 percent; energy price inflation averaged 42 percent annually. The situation has improved somewhat since then: the income poverty rate dropped to 47 percent in 2009, while growth in remittances and GDP accelerated in 2010. The Sangtuda-1 hydropower plant was brought into operation; the construction of Sangtuda-2 is progressing; the electricity transmission infrastructure has been extended; and significant numbers of small hydropower plants are coming on line. The energy sector is still in crisis however, with winter power cuts (up to 10-12 hours a day) continuing in much of the country. The dissolution of the Central Asian electricity transmission network, limited and increasingly expensive gas supplies from Uzbekistan, and an underdeveloped coal sector have left Tajikistan almost solely reliant on hydropower generation, which remains insufficient in the winter. An estimated one million people spend much of the winter (six weeks more) without access to reliable electricity supplies. Despite accounting for nearly three quarters of the total population, households in rural areas during 2008-2010 only accounted for 811 percent of the countrys electricity consumption.1 Improving national and household energy security requires the investment of billions of dollars in electricity generation (including in small-scale hydropower plants), transmission, and distribution, in the gas supply network, and in the coal sector. Unless significant foreign capital inflows are attracted, Tajikistans energy investment needs are unlikely to be met. The public debt is approaching levels regarded by the IMF as inadvisable, due in part to the construction of the Roghun hydropower plant. While some reforms have taken place in Tajikistans energy sector, overall progress has been slow. The main electricity company (Barqi Tojik) is a vertically integrated state owned monopoly, which suffers from high losses, low tariff collection rates, and high arrears; the main debtors are the TALCO aluminum company, the irrigation sector, and households. While electricity tariffs have been increasing during the last few years (as per agreement with the international financial institutions), they remain below cost recovery levels.
Intermediate Strategy for Renewable Energy Sources, p. 8.
Page 9

Tariffs have been increasing also for natural gas. Household consumption of electricity and natural gas has declined in the recent years, due to a combined effect of increasing tariffs and supply cuts. Households have responded to consuming more liquefied petroleum gas (the prices of which were subsidized until recently), coal and firewoodwith the attendant adverse implications for the environment (due to extensive deforestation) and health (due to poor air quality). However in 2010 the consumption of the liquefied petroleum gas, as well as coal declined due to increasing tariffs and prices. The average combined energy basket takes around 10% of the average household budget: 16% for the poorest quintile. For selected groups of the poorest households, using combinations of heating sources, the share of energy expenses in the household spending budget during the winter time reaches up to 55 percent. The burden of energy expenditures on households budgets will become even heavier in years to come due to increasing tariffs and prices for almost all the items unless Tajikistans social protection becomes much more effective than is the case at present. While the current social assistance scheme features compensation for electricity and gas useup to certain limits, for around 240,000 households (1.5 million people) who are identified by the local authoritiesthese benefits are not well targeted. And at $2 per month, they are not large enough to have a perceptible impact on household incomes. With help from the World Bank and the European Commission, the government has introduced a pilot cash transfer scheme based on proxy means testing. The results of the pilot are to be assessed after its December 2012 completion, potentially to be followed by a national roll out. While experience from similar countries suggests that this is likely the best option for Tajikistan, the full scale implementation of this reform seems likely to run at least 4-5 years. As tariff increases are set to continue during this time, hardships for poor households seem likely to increase. We suggest the possible reintroduction of lifeline electricity tariff regime at Barqi Tojik (one was in place until 2007), as a transitional measure during this period. Simulations based on Tajikistans living standards survey database indicate that, if underwritten by relatively small subsidies (around $3.5 million annually, which hopefully could be grant financed by donors), lifeline tariffs could reduce the severity of income poverty by 5 percent, compared to current levels. The effectiveness of this transitional lifeline scheme could be further enhanced if it were coupled with additional categorical targetingif tariffs were further reduced for large households with children, since this is a good predictor of poverty in Tajikistan. The experience of Pamir EnergyCentral Asias first public-private partnership in the energy sector, which manages Tajikistans electricity infrastructure in remote, sparsely populated Gorno Badakhshan on a 25-year concessionsupports this argument. Pamir Energy operates a lifeline tariff regime, and has performed well in terms of generation, sales, losses and collections.
Page 10

International experience suggests that subsidies for household purchases of liquefied petroleum gas (which were in place before 2009), and to offset households one-off costs of installing or upgrading meters and connecting to electricity and gas grids, can boost access to clean energy and reduce household energy insecurity. Expanded government and donor support for sustainable forestry and firewood harvesting practices may also be worthy of consideration. The experience of Pamir Energy shows also that improvements in Tajikistans energy regulatory framework can yield large benefits in terms of increased household energy security. In particular, the pursuit of similar improvements in the regulatory environment for small scale hydropower (and other decentralized renewables) will accelerate implementation of the national small hydropower programme, which will be important in improving access to affordable electricity, as well as providing new income- and employment generation opportunities for much of the rural population. The expansion of small hydropower plants (and, where appropriate, other decentralized renewable technologies) seems to offer the best short-term prospects for bringing reliable year-round electricity services to the estimated 1 million people who do not currently have them. Experience from UNDP pilot projects suggests that the construction of 1000 small hydropower plants with average capacity of 100 kilowatts (in the 30-500 kilowatt range) could provide these households with one kilowatt of electricitysufficient for year-round access to indoor lighting. The dozens of communities that have developed their own small hydropower installations (often with donor assistance) were until recently unable to sell surplus power back to Barqi Tojiks grid; many do not have access to the grid. While now there is a purchase obligation for the electricity they produce, in reality at the moment of writing this report only one small HPP is connected to the grid. In December 2010 the Ministry of Energy and Industry approved a model contact for small hydropower plants that wish to connect to the grid, as well as a methodology for tariff calculation. While tariffs still have to be agreed between small hydropower generators and Barqi Tojik, this has brought Tajikistan a step closer to the introduction of feed-in tariffs, as well as increased commercial financing of power generation using decentralized renewable energy technologies. While the numbers of small hydropower plants in Tajikistan are growing, many of these operate only partially, and a sustainable model for their operation is yet to emerge: the improved regulatory framework is one of the factors which will need to be place for such a model to develop, along with developed managerial capacity for small hydropower plants and availability of resources to ensure sustainable operation and management for the latter. Other important strategic policy decisions facing Tajikistans energy sector include the design and implementation of: o A national heating strategy, to guide investment decisions in the electricity, gas, coal, and district heating sectors. The design and implementation of such a strategy would also help develop more effective assistance programmes for energy poor households;
Page 11

o An effective national energy efficiency/energy saving programme. Potential energy savings are estimated at 30 percent of current power consumption by the Ministry of Energy and Industry; other estimates place these savings at 60 percent for rural areas. While some basic laws are in place, these are not sufficient to induce the energy conservation investments that Tajikistan needs. The creation of the proposed by UNDP National Renewable Energy and Energy Efficiency Trust Fund could be an important step in this respect;2 and o The financing and regulatory dimensions of the national programme on small hydro power and placing the decentralized renewable energy solutions at the heart of rural development efforts; and so on.
2 See National Programme for Renewable Energy Sources Based Integrated Rural Development: National Scaling Up, UNDP-Tajikistan, October 2010.
Page 12

INTRODUCTION
Household ousehold energy tariffs and prices are increasing sharply in Tajikistan (see Figure 1 below). These increases are occurring against a background of significant winter winte energy shortages, and attendant hardships ips for the half of the population living below the national poverty line (17.5 percent of which is classified as living in extreme poverty). poverty Inadequate household access to energy services and their affordability are significant barrier barriers to attaining the Millennium Development Goals, and Figure 1: Annual increase in household tariffs in sustainable human development, in Tajikistan Tajikistan. These se problems reflect the combined impact of population growth, the 78% 69% decapitalization of Tajikistan thermal and 59% electric power infrastructure, interruptions in i gas imports from Uzbekistan, the dissolution 39% 38% 35% of the regional electricity transmission network, and slow progress in modernizing 11% the energy sector. . Tajikistans main energy service provider, Barqi Tojik Tojik, faces significant challenges in improving its 2007 2008 2009 2010 service, raising collection rates, , and reducing high technical and commercial losses. While Source: UNDP calculations, based on National Statistical Agency consumer price data. foreign investment and grant financing has been attracted into power generation (e.g., ( in the Sangtuda-1 and -2 2 hydropower plants plants, Pamir Energy, and in dozens of small, minimini and micro-hydro hydro power plants), and while the electricity supply has improved since the winter of 2007-2008, Tajikistans energy sector remains in crisis. Much of the country remains without electricity supply for significant portions of the day during the winter months. This report analyzes the poverty and social impact of higher tariffs and prices for energy services, and of other policy reforms now being introduced (or considered) in the energy sector, on vulnerable households in Tajikistan. Following a short country ountry overview (chapter 1), the report reviews Tajikistan energy sector (chapter 2), focusing on electricity, gas, oil and oil products, district heating heating, and decentralized renewables. . Each subse subsector is analyzed in terms of its: basic structural characteristics characteristics; performance and challenges; legal framework; recent (since 2007-2008) 2008) tariff/pricing policies (particularly the extent xtent to which ene energy prices/tariffs have reached, or are likely to reach, cost-recovery levels); possibilities for extending meter coverage coverage, to allow energy suppliers to directly charge households for their energy use;
97% Electricity Gas

anticipated short- and medium-term policy trends/reforms, with a particular emphasis on unbundling, privatization/foreign investment, transparency/anti-corruption initiatives; and prospects for attaining cost recovery tariffs, and sub-sectoral development goals.
Chapter 2 also reviews the potential for energy savings and regulations/programmes to promote them. Chapter 3 links income poverty trends in Tajikistan during the last four years with trends in energy poverty during the same period, using the data from the 2007 and 2009 Living Standard Surveys conducted by the National Statistical Agency and other sources. The analysis focuses on: energy consumption; service quality; the extent to which current/anticipated tariff/pricing trends: o constitute a serious burden for vulnerable households, and/or o can reasonably be expected to improve the quality/reliability of energy services; household coping mechanisms and consequences; and number of households reliant on off-grid energy (particularly in the winter).
The chapter concludes with an assessment of the impact of observed trends in energy poverty on environment, health, food security, and migration. Chapter 4 explores the potential impacts of energy sector developments on income and non-income poverty in Tajikistan, with a particular focus on investment projects in electricity generation and transmission, and on improved governance in the sector. Chapter 5 analyzes Tajikistans social assistance system in terms of its overall effectiveness and its ability to protect the poor from increasing energy costs while the energy sector is undergoing reform. The chapter describes the: countrys key social policy instruments, institutions, and programmes, including those linked to the energy sector; effectiveness of these instruments, in terms of shares of GDP devoted to social protection and the coverage of poor households; and current plans for reform, particularly the planned introduction of a conditional cash transfer programme based on proxy means testing, which is currently being piloted in the country.
The chapter also discusses the effectiveness and feasibility of reintroduction of a lifeline tariff regime in the electricity sector. Chapter 6 concludes by: summarizing the results obtained from the analysis regarding the extent to which vulnerable households:
Page 14

o do not have access to reliable energy services or experience significant power cuts; o are being or would be seriously disadvantaged by rising energy tariffs/prices; and o could benefit from these rising energy tariffs/prices, if improvements in access to reliable energy services could reasonably be expected to result within the next 2-5 years.
offering recommendations for:
o energy sector and social policy reform; o further research on Tajikistans energy sector, with regards to household surveys and social policy; and o programming in these sectors, both for the government and for international organizations.
Page 15

1. COUNTRY BRIEF
Geopolitical context. A small landlocked country, with a territory of 143,100km2, and a population of 7.6 million (72 percent of which live in the rural areas), Tajikistan borders with Uzbekistan, Kyrgyzstan, China and Afghanistan. Half of its territory is located above 3,000 meters; mountains cover about 93 percent of its area. Tajikistan has vast hydrological resources, with rivers whose headwaters lie in its territory providing 55 percent of the water flow in the Aral Sea basin.
Figure 2: Map of Tajikistan
Source: www.geology.com
Economy. Along with the 1991 dissolution of the Soviet Union, Tajikistan went through a period of civil war which ended in 1997. Official statistics indicate GDP declined by some two thirds during this time. While political stability and foreign aid have since

helped the economy to recover, GDP in 2010 was still some 14 percent below 1991 levels (about 30 in per-capita capita terms). Tajikistan has the lowest reported per-capita per capita GDP in the former Soviet Union ($667 in Figure 3: GDP growth rate, % 2009).3 Russia and China are the countrys main trading partners, followed by Kazakhstan for 20 imports and Turkey for exports. 10 Despite being listed among the 0 worlds top 10 reformers in the -10 World Banks 2010 Doing -20 Business Indicators,4 overall progress with reforms has been -30 slow, particularly in terms of -40 governance concerns regarding accountability and transparency.
Source: National Bank of Tajikistan
The economy averaged 810 10 percent annual GDP growth through 2008. This growth slowed in 2009: the financial crisis negatively affected the country, since the economy is largely dependent on remittances. A 30 percent decline was registered in inward remittances, coupled with substantial reductions in exports and FDI.
Figure 4: Remittances and GDP Growth in Tajikistan
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Inflation nflation peaked in 2008 at 20.4 percent. . Since then global disinflationary processes helped Tajikistan to keep consumer inflation rates in single digits. A relatively benign external environment, nvironment, coupled with an upswing in remittances and more favorable climatic conditions (leading to an increase in hydroelectricity production) helped Tajikistan recover from the slowdown of 2009.5
While the GDP growth rate dropped to 3.4 percent in 2009, consumer price inflation also fell, to 7.5 percent. . GDP growth rate is projected to have risen to 5.5 percent in 2010; the IMF projects growth at this level through 2015.6
3 4
Source: Recent Developments and Outlook 2010-13, 2010 Chiara Bronchi (World Bank) and Ari Aisen (IMF), Development Forum, Dushanbe, 3-4 December 2010.
ADB (2010): Development Effectiveness Brief Tajikistan: Rising Path to Progress, Manila, Philippines.
http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:22301788~pagePK:64257043~piPK:4 37376~theSitePK:4607,00.html.
5 6
IMF (2010): Tajikistan Country Report No. 10/374, Washington DC. Ibid.

Figure 5: Tajikistans public debt in % to GDP
Source: Recent Developments and Outlook 2010-13, 2010 Chiara Bronchi (World Bank) and Ari Aisen (IMF), Development Devel Forum, Dushanbe, 3-4 4 December 2010.
With an economy based on hydropower, power, cotton, and aluminum (around 80 percent of export revenues come from aluminum and cotton), Tajikistan is highly vulnerable to fluctuations in world market prices. In addition, the cotton sector is heavily indebted and continues to make losses. The economy is subject to additional external shocks in the form of changes in remittances and global food prices.
Currently the economic situation remains fragile also due to: Uneven implementation mentation of structural reforms and weak governance; Widespread unemployment: although the official unemployment rate is only 2 percent, , unemployment and underemployment together are are believed to be as high as 7 40 percent; Seasonal power shortagesas shortages of March 2010, power supply was restricted to 10 hours per day in many regions regions, including Dushanbe; High level of debt distress under the IMF-World IMF World Bank debt sustainability framework. The overall level of public debt is approaching the limit advisable for for low income countries with limited borrowing capacity. Future budgets will have to absorb the costs of past decisions (e.g., the cotton debt and recapitalization of Barqi Tojik and commercial banks);8 and High poverty levels: although the average poverty rate fell from 53.1 to 47.2 percent during 2007-2009, 2009, the severe poverty rate increased from 17.4 to 17.5 percent during this period.
7 8
ADB: Country Partnership Strategy: Tajikistan, 20102014: 2010 2014: Poverty Analysis Summary, Manila. IMF (2010): Tajikistan Country Report No. 10/374; Washington DC.

2. ENERGY SECTOR
Overview
Legal framework. The government of Tajikistan has embarked on a two-track approach to energy reform. The first track focuses on reforming the domestic energy sector, energy pricing, financial discipline, and institutional setup. The adoption of a number of laws and programmes in the recent period reflects this effort. The second focuses on creating an export strategy for electricity.
A 2007 energy sector risk assessment carried out under the regional governance and capacity development initiative of the Asian Development Bank (ADB)9 noted that the legal framework is incomplete. The existing legislation does not efficiently enough stimulate competition in the energy sector. However, with the restructuring of Barqi Tojik underway (see below), there is a reasonable chance that the legal framework in the energy sector will further improve. While there is some private interest and participation in gas, coal, and power generation, the rules for market entry remain vague. There is an urgent need to improve the regulatory and legal framework in the energy sector to stimulate private investment, which is essential for meeting the countrys own growing demand in energy services and for realizing the export potential of the electricity sector.10
Institutional framework. Most of Tajikistans energy companies are publicly owned vertically integrated monopolies. Ownership functions for these are formally exercised by the Committee on State Property. The Fuel and Energy Department in the Office of the President has considerable influence over these companies. Also important are the Ministry of Energy and Industry (which is responsible for energy policy); the Antimonopoly Commission, under the Prime Ministers office (which sets electricity, natural gas, and district heat tariffs, in consultation with relevant ministries); and the Ministry of Environmental Protection (responsible for environmental regulation).
The Asian Development Banks energy sector risk assessment also noted that: the management of public funds and procurement is unpredictable, not linked to market needs, and only partially transparent; while the process for energy tariff setting has become more formal and transparent, significant improvements are still needed; there is no comprehensive overall sector planning; sectoral corruption risks are significant, including:
projects are selected on the basis of political priorities, regional considerations, and preferences of external investors, rather than economic criteria;
ADB (2007): Technical Assistance for Governance and Capacity Development Initiative; Manila.
10
Ibid.
Page 19

funding has focused mainly on new projects, rather than upgrading existing investments and improving regulation; staffing decisions are sometimes based on patronage considerations; and failure to optimize the use of resources over the longer term, in order to promote short-term gains. Some progress has been made in reforming energy sector governance, particularly:11 Barqi Tojiks separation from the Ministry of Energy and Industry in 2006; The establishment and working of Pamir Energy (a private company owned by the Aga Khan Development Foundation and financed by the International Finance Corporation and the Swiss Development Cooperation) for electricity generation and distribution in the Gorno Badakhshan region, under a 25-year concession; The construction of the Sangtuda-1 hydropower station, as a joint venture between the government (with a 25 percent ownership stake) and the Russian RAO-UES utility (with a 75 percent ownership stake); and the Sangtuda-2 hydropower station as a standalone build-operate-transfer project with a 12.5 year concession (co-financed by the government of Iran); and The design and implementation of a national programme for small hydropower production, under which some progress has been made in creating a framework for independent power production and non-discriminatory access to Barqi Tojiks transmission grid.
Figure 6: Total primary energy supply
2005, % 1
2008, % oil 4 22 gas hydro 56 18 coal

Source: IEA
42
43
14
Energy system capacity. During the Soviet period, 60 percent of Tajikistans energy needs were met with diesel fuel produced in other Soviet republics. By 2005, this share had dropped to 43 percent. The latest available data for Tajikistans total primary energy supply (TPES) are from 2008. During 2005-2008 the share of hydropower rose from 42 to 56 percent, at the expense of oil (see Figure 6). This diminishing role of oil and gas imports accelerated in 2009-2010 due to rising prices of gas imported from Uzbekistan, as well as the
11
ADB: Country Partnership Strategy: Tajikistan, 20102014, Manila.

further growth in the role of hydropower. (Tajikistans economically feasible hydropower potential is estimated to be 264 billion kWh per year,12 of which only about 6 percent has been harnessed so far.)
Table 1: Energy System Production Capacity, in megawatts
Name of the power plant Installed Available Average annual working
Hydropower (HPPs) and thermal power plants (TPPs) 1 2 3 4 5 5.1 5.2 5.3 6 6.1 6.2 6.3 7 8 Nurek HPP Sangtuda-1 HPP Baipaza HPP Kairakum HPP Vakhsh Cascade, including Golovnaia HPP Perepadnaia HPP Central HPP Varzob cascade, including HPP-1 HPP_2 HPP_3 Pamir and Khorog HPPs Small scale HPPs 3000 670 600 126 285 240 30 15 25 7 15 3.5 37 60 3000 670 600 126 235 200 24 15 14 4 6 3.5 37 56 2715 670 600 85 122 120 16 11 8.5 4 4 0 37 56
Thermal and diesel power plants 9 10 11 11.1 Dushanbe TPP Yavansk TPP Diesel PPs, including Mobile Total 198 120 60 9 5090 198 120 56 7.5 5070 100 60 56 7.5 4470
Source: Adapted from the Electricity Governance Initiative in Tajikistan: Institutional and Practical Analysis, Final report, July 2010
12
World Energy Council (2007): Survey of Energy Resources: Tajikistan.
Page 21

Tajikistans energy production consists mainly of hydropower plants (4900 megawatts of installed capacity94 percent of the national total), and of the Dushanbe and Yavan combined heat and electricity power plants (318 megawatts, 6 percent of the national total), which contribute electricity during seasonal peaks and shortages. Electricity sector In addition to directly accounting for 5 percent of Tajikistans GDP, electricity generation is a key input for the production of the countrys two largest exportsaluminum and cotton, and is essential for the electric pumps that are mainstays of Tajikistans irrigated agriculture. Barqi Tojik is responsible for generation, transmission, and distribution in the whole of Tajikistan, except in the Gorno Badakhshan Autonomous Oblast (where privately owned Pamir Energy operates most power facilities) and the small hydro facilities.
Barqi Tojik is a vertically integrated utility. It is an open joint stock company in which all shares belong to the state, managed by a chairman who is appointed by, and reports to, the President of Tajikistan. While there is no board of directors, there is a supervisory board comprising senior government ministers and chaired by the prime minister. Four deputy chairmen are responsible for specific portfolios (i.e., generation, distribution, transmission, sales, finance, etc.). According to the Asian Development Bank, Barqi Tojik is effectively managed according to geographic (rather than thematic or functional) criteria, which reduces accountability and complicates the management of commercial activities.13 Barqi Tojikstructural evolution. According the Asian Development Bank report, Barqi Tojiks financial and operational performance suffers from a number of long-running, fundamental problems.14 These include:
an organizational structure inconsistent with the scale of operations; inadequate control over financial, business, and branch operations; and the absence of a development strategy, a long term plan, treasury, and risk management functions.
The report recommends strengthening corporate governance arrangements, in order to address these weaknesses, raise investor confidence, and prepare the electricity sector for future liberalization. Barqi Tojiks first restructuring plan was developed in May 2006, within the framework of the Asian Development Banks technical assistance programme.15 It recommended Barqi Tojiks unbundling in three phases, in order to improve the companys financial performance and attract private investment. According to the ADB report, this first
13
Asian Development Bank, Republic of Tajikistan: Strengthening Corporate Management of Barqi Tojik, Harrison E., Corporate Solutions, under a contract with ADB for the Ministry of Energy and Industry, Republic of Tajikistan, September 2009. Based on an analysis provided by the BDO Unicon accountancy firm, Management Letter, OSHPC Barqi Tojik, issued in June 2008 for the year ending 2007 accounting period. ADB (2006): TA 1817-TAJ Power Sector Restructuring Plan; Manila.
14
15
Page 22

restructuring plan received ministerial approval in May 2006 but did not receive full governmental approval until September 2008. In a letter written to the ADB at this time, Tajikistans then deputy prime minister expressed renewed support for this restructuring plan, and requested the revision of the timetable for implementing the three phases. According to the plan submitted by the government in 2009, Barqi Tojiks three-phase restructuring is to proceed as follows:16
Phase 1 (2009-2012) focuses on improving corporate governance and financial management. Key emphases include the creation of an organizational structure based on its three main divisions (i.e., electricity generation, transmission, and distribution), with each division to have separate accounting; improving financial reporting and transparency; and designing and implementing a financial and operational performance improvement programme. Tariff, legal, and regulatory reforms are to be designed, and a detailed implementation plan developed, for government approval. This phase also foresees the establishment of an independent sectoral regulatory body, to create an appropriate enabling environment for attracting private investment during the second and third phases. Phase 2 (2013-2015) envisionsif deemed appropriateBarqi Tojiks dissolution into (or divestiture of) separate, legally independent state-owned enterprises for generation, transmission, and distribution. The links between these enterprises are to be commercial and regulatory in nature. In this phase large-scale independent power generation companies are to be allowed to enter the market and given access to the state-owned transmission network, subject to clearly defined agreements. A detailed implementation plan is to be developed for subsequent government approval. Phase 3 (2016-2018): the government will evaluate the results of the first two phases and consider privatizing generation and distribution assets. The transmission network will remain under state ownership; equal access to the grid will be offered to all players. A detailed implementation plan is to be developed, for government approval.
In line with the action plan for the first phase, a March 2010 government decree (no. 187 from 30.03.2010) instructs various agencies to start the implementation of the Strategic programme of privatization of medium and large enterprises and restructuring of natural monopolies and large companies for 2009-2012 (this is a revision of two older decrees from 2003 and 2008), inter alia by restructuring natural monopolies and large enterprises, so as to accommodate potential concession arrangements and management contracts, reorganizations, and/or privatizations. The list includes 27 energy and gas companies, including Barqi Tojik and the Dushanbe and Yavan combined heat and power plants.
16
ADB (2009): Republic of Tajikistan: Strengthening Corporate Management of Barqi Tojik, Harrison E., Corporate Solutions, under a contract with ADB for the Ministry of Energy and Industry, Republic of Tajikistan, September 2009
Page 23

The next step is to design a detailed implementation plan for restructuring these companies, under the guidance of the State Property Committee, the Ministry of Energy and Industry, and Barqi Tojik.17 Opinions about Barqi Tojiks unbundling, concerning overall desirability as well as details, timing, and modalities, vary among policy makers and experts. International experience shows that unbundling vertically integrated electricity utilities can improve sectoral performance by increasing transparency, promoting competition (via lower barriers to entry for independent power generators) and attracting investment. However, experience from Central Asia suggests that such measures need to be adapted to suit the specific conditions of each country.18 For small economies, horizontal unbundling into small entities may not be desirableparticularly if economies of scale or scope are lost, or if the government bodies responsible for energy sector development are unable to effectively coordinate investment projects that cut across generation, transmission, and distribution activities.
Barqi Tojiks hydropower assets are described in Table 2; Table 3 describes the Dushanbe and Yavan combined heat and power plants, which are now being converted from gas to coal.
Table 2: Barqi Tojiks hydropower plants (HPPs)
Name of HPP Type Installed capacity (megawatts) 3200 600 670 240 30 30 25 125 4921 Annual production (gigawatts/hour) 11850 2525 2970 840 250 125 205 755 19520
Nurek* Baipaza Sangtuda 1 Golovnaia** Perepad** Central** Varzob Kairakum TOTAL
Water reservoir Run-of-river Run-of-river Run-of-river Run-of-river Run-of-river Run-of-river Run-of-river
* Includes expansion of Nureks capacity from 3000 to 3200 megawatts.; ** Includes expansion of capacity from 255 to 280 megawatts. Source: Barqi Tojik
17
ADB, Republic of Tajikistan: Strengthening Corporate Management of Barqi Tojik, Harrison E., Corporate Solutions, under a contract with ADB for the Ministry of Energy and Industry, Republic of Tajikistan, September 2009. World Bank (2010b): Lights Out? The Outlook for Energy in Eastern Europe and the Former Soviet Union, Washington DC.
18
Page 24

Table 3: Tajikistans thermal power plants (TPPs) (
Name Dushanbe Yavan TOTAL Installed capacity (megawatts) (megawatts 198 120 318 Annual production (gigawatts/hour (gigawatts/hour) 1300 790 2090
Source: The Electricity Governance Initiative in Tajikistan: Institutional and Practical Analysis, Final report, July 2010
With the exception of Sangtuda-1, Sangtuda 1, Tajikistans power plants are old, with an average age of over 30 years, and considerably undervalued. Barqi Tajik transmission assets: Tajikistan effectively has two separate electrical networks: a northern grid in the Sughd region and a southern grid, both linked to Uzbekistan Uzbekistan; with the northern grid also linked to Kyrgyzstan; Kyrgyzstan and a separate network in G Gorno Badakhshan (which has only select connections to the national grid). The northern and southern grids were connected only in December of 2009. Table 4 describes the capacity of the electricity transmission network in Tajikistan.
Table 4: Capacity of electricity e transmission system
Length of electricity transmission lines (high voltage and cable lines) route, kilometers total 59,248 500kW 226 220kW 1206 110kW 2905 <35kW 54911
Switchyards units/ thousand kWh
11,213/13,546
Source: Electricity Governance Initiative in Tajikistan: Institutional and Practical Analysis, Final report, July 2010. 2010
Tajikistans transmission network was mostly built during the 1960s and 1970s. Due to the lack of investment in maintenance and shortage of spare parts, this aging transmission infrastructure has undergone ndergone significant physical deterioration, leaving the system extremely vulnerable to weather-related related or other shocks.
Figure 8: Peak load in Tajikistan Figure 7: Investments in the energy sector, million US$
180 160 140 120 100 80 60 40 20 0
167.4 125.9 121.1
24.3 1.5 1.6 6.8 8.9 11.3 7.6 0.9 0.5 0.0 0.0
12.3
9.9
26.9 10.3
2002 2003 2004 2005 2006 2007 2008 2009 2010
from own resources (BT), million USD

from external sources, million USD
Source: Central Asia Power System Study, Mercados, July 2010
Source: Barqi Tojik Investment Programme 2010

Adding to these problems, the load levels increased and load pattern shifted from industrial to residential consumers (due to population and economic growth, , growing use of air conditioning, increased usage of electricity for heating). heating). The dramatic change in the load pattern is shown in Figure 7. As shown in Figure 7. internal investments were at very low levels until 2006, and are re still low now. now 19 While the total losses decreased in the recent years (see Table 5), they are still high by international standards around 6-8 percent.
Table 5: Total losses in electricity transmission and distribution % 2004 Total losses
Source: Barqi Tojik
2009 13.7
18.7
Tajikistans electricity transmission system was constructed during the Soviet period as an integral part of the Central Asian regional electricity transmission system system. The trunk transmission and 110-500 kilovolt volt power lines under this system were re managed by Barqi Tojiks central dispatching unit nit. The Energy Central Co-ordination Centre (located in Tashkent) served as the nerve centre of this integrated regional electricity system system, which was also interconnected with Russias Unified Electric Systems grid.
Figure 9: Central Asian Regional Electricity Grid
Source: Mercados, 2010
September 2010 Figure 10: Tajikistans monthly electricity imports imp and exports
In n the late 2009 Uzbekistan decided to withdraw from the Central Asian integrated power transmission smission network. As a result, Tajikistan is no longer able to automatically import electricity from U Uzbekistan (or electricity from Turkmenistan that is transshipped shipped through Uzbekistan). In addition to reflecting tensions between the two countries, these developments reflect different degrees of interest in regional electricity sector cooperation cooperation, as well as significant differences in domestic electricity tariffs in the Central Asian countries.
Source: UNDP, based on data from National Statistical Agency

19
These
developments
For a comparison, O&M costs alone should be at the level of 10-20% 10 20% of the total levelized generation cost [source: IEA]

did not change the regions transmission infrastructure; nor did they preclude continued electricity ricity exports and imports. Instead, they signified the ascension of bilateral (as opposed to multilateral) electricity trade (see Figure 9), , and a greater emphasis on the construction of national transmission infrastructure, to ensure domestic electricity supplies. However, reliance on more costly national generation and transmission transmission infrastructure drives up power costs; one study estimated this cost differential at 5 percent, , due to higher dispatch and fuel costs alone.20 It can also reduce electricity supply security, particularly during winter season peak demand. Longer term, t the he cessation of common management of the regions transmission infrastructure seems likely to lead to the construction of by-pass by pass national infrastructure, further boosting costs in the sector. Tajikistan since late 2009 has seen a precipitate drop in electricity exports and imports (see Error! Reference source not found.). Since (in contrast to the other Central Asi Asian countries) Tajikistan is a net electricity importer, these declines have weakened the countrys recovery from the 2007-2008 2008 winter crisis. Matters would have been worse if Tajikistan has not borrowed $340 million from Chinas ExImBank, in order to complete complete the south-north south transmission line that reduces Tajikistans reliance on imports from Uzbekistan. Tajikistans electricity balance is described in Table 6. The data demonstrate the decline in electricity production and consumption starting from 2007.
Table 6: Electricity balance, Million KWh
2003 2004 2005 2006 2007 2008 2009
Production Import Export Consumption
16509 4605 4596 16518
16401 4810 4466 16835
17090 4637 4402 17325
16935 5022 4429 17528
17494 4552 4464 17582
16147 6404 5539 17012
16117 6003 5960 16160
Source: Statistics Yearbook, Tajikistan 2010
Figure 12: Shares of main consumption categories of electricity, %

120 100 80 60 40 20 0
Figure 11: Electricity consumption, million KWh

10000 8000 6000 4000 2000 0
8080 3908 3359
8060 3612 3044.3
16 16 22 46
17 16 20 47
18 18 18 47
13 20 22 45
7802 7007 3144 2906 3722 3680
losses others irrigation Industry
2006 2007 2008 2009
2006
Population
2007
2008
industry
2009
Irrigation
Source: Statistical Yearbook Tajikistan, 2010 and Barqi Tojik
20
Central Asia Power System Study, Mercados, 2010.

Figure 11 describes electricity consumption in 2006-2009, by the main consumption groups. Figure 12 shows changes in the user shares of electricity consumption during 2006-
2009. The figures indicate that the shares to total energy product going to losses, and to the industrial sector, decreased during this time. By contrast, the share of electricity going to irrigated agriculture increased. These data also indicate that electricity supply to households dropped sharply during 2007-2008, but recovered in 2009. TALCO, the giant aluminum company and Tajikistans largest exporter, accounts for around 35 percent of total electricity consumption. While collections have improved compared to 2004 (see Table 7), they are still low by international and even regional norms.
Table 7: Total customer payments of Barqi Tojik 2004 Customer payments (percent of billings) 54% 2009 72%
Source: Barqi Tajik.
With tariffs rising towards cost recovery levels, accounts receivable have grown for both electricity and gas in the recent few years. However, for certain sectors, collections are still very low. Particularly low are the collection rates from TALCO, irrigation, communal service providers, and public sector institutions. As of 6 March 2011, TALCOs arrears stood at 151 million Somoni ($34 million). According to Asian Development Bank research, the arrears related to residential sector result from the failure to collect bills in time, and poor financial management. (Electrical bills are collected door-to-door, thus leaving bill collectors open to bribes to overlook non-payment.)21 Coupled with non-transparent tariff setting policies, these billing and financial management issues produce a vicious cycle, in which part of the increases in tariffs is necessitated by these debtsa burden shared by the residential sector as a whole and the poor in particular. Electricity tariff trends are described in Despite these increase, current tariffs are still below cost recovery levels. According to ADB (2006) the marginal cost of supply (loss adjusted) was $0.028/kWh in the summer and $0.045/kWh in winter[NB: during 2006-2010 producer prices doubled]. Electricity tariffs are also increasing in line with agreements reached between the government and the World Bank (the initial 2003 agreement was with the Asian Development Bank, when it was incorporated into ADBs Power Rehabilitation Project as a loan condition). According to these agreements, tariffs are to increase twice a year until they reach 9.67 dirham ($0.025/kWh in constant price terms), which is taken to be the lowest level for cost recovery. Table 9 describes the plan for average tariff increases; Table 10 shows increases that were planned for households.
Table 8. Several years ago tariff categories were reduced to five customer groups; favorable tariffs for low-usage customers and special summer and winter tariffs for TALCO
21
ADB (2009): Republic of Tajikistan: Strengthening Corporate Management of Barqi Tojik, Harrison E., Corporate Solutions, under a contract with ADB for the Ministry of Energy and Industry, Republic of Tajikistan, September 2009.
Page 28

were eliminated. Over the last several years tariffs have increased sharply, with the latest (20 percent) increase taking place on 1 January 2010.22 Despite these increase, current tariffs are still below cost recovery levels. According to ADB (2006) the marginal cost of supply (loss adjusted) was $0.028/kWh in the summer and $0.045/kWh in winter23[NB: during 2006-2010 producer prices doubled]. Electricity tariffs are also increasing in line with agreements reached between the government and the World Bank24 (the initial 2003 agreement was with the Asian Development Bank, when it was incorporated into ADBs Power Rehabilitation Project as a loan condition). According to these agreements, tariffs are to increase twice a year until they reach 9.67 dirham ($0.025/kWh in constant price terms), which is taken to be the lowest level for cost recovery. Table 9 describes the plan for average tariff increases; Table 10 shows increases that were planned for households.
Table 8: Electricity Tariff (US/kWh without VAT, unless otherwise noted)
01/ 2006 02/ 2007 07/ 2007 01/ 2008 05/ 2008 01/ 2009 08/ 2009 01/ 2010
Industry TALCO
0.81
1.05
1.28
1.54
3.19 1.25
3.39 1.25
4.24 1.27
4.87 8.3 VAT 14.9 with
Nonindustry
Special Budget
0.52 0.52 0.15 0.31 0.15 0.41
0.58 0.58 0.23 0.38 0.19 0.65
0.70 0.70 0.29 0.47 0.23 0.75
0.85 0.85 0.35 0.57 0.28 0.78
1.27 1.27 1.27 0.87
1.35 1.35 0.90 0.75
1.69 1.68 1.12 0.96
1.94 1.94 1.30 1.30 VAT with
Communal providers
service
Electric transport Irrigation pumps

Oct-May May-Oct
Households, average
1.40
1.24
1.58
2.06 VAT
with
Below 250 KW/h Over 250 KW/h Average increase Source: Barqi Tojik25
0.58 0.99 0.49 0.48
0.70 1.10 0.67 0.87 1.26 1.30 1.56
22 23
Tariffs were not raised in July 2010 and in January 2011.
ADB (2006): Tajikistan: Power Rehabilitation Phase II, TA Consultant Report; Project Number: 34515: Prepared by Hydro Electric Corporation. Development Financing Agreement (Energy Loss Reduction Project) between the Republic of Tajikistan and International Development Association, September 08, 2005. US$ to Somoni exchange rates (based on the information from the National Bank of Tajikistan): 2005 2006 2007 2008 2009 2010
24
25
Page 29

Table 9: Average Tariff for Electricity (without VAT)
Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Dirham/KWh US/KWh
1.62 0.52
1.67 0.51
2.23 0.65
3.96 1.15
5.73 1.42
7.77 1.78
8.45
9.08
9.67 2.5
9.67 2.5
9.67 2.5
9.67 2.526
2.01
2.25
Source: Barqi Tojik
Tariffs were/are to be increased twice a year, according to the agreement with the World Bank. In the summer of 2010, in the aftermath of the financial crisis, the government decided to skip the increase planned for July 2010. According to press reports, the Antimonopoly Commission had initially decided on a 10 percent increase for January 2011 (i.e., lower than what had been Table 10: Planned tariff increase for households, with VAT promised),27 but this round of tariff increases has been Year 2011 2012 2013 skipped as well.
Tariff, dirham per kWh Tariff, US$ per kWh
10.8
11.9
13.8
Tariffs setting is based on an Overall methodology of $0.026 $0.029 $0.036* calculating the costs of Source: Forecast parameters of social and economic development of production in Tajikistan Tajikistan 2009-2013, * Estimates based on the assumed exchange rates (Government decree from 12 for 2011, 2012 and 2013 by UNDP May 1999, No.10). Barqi Tojik subsequently introduced its own regulation covering tariff setting principles. These documents stipulate that tariffs need to cover general establishment and administrative expenses, repair and maintenance costs, and depreciation, as well as allow for a profit margin: the basis of the latter, is however, unclear. The costs are determined by Barqi Tojiks Planning Department and, and together with the proposed tariffs are submitted to the Antimonopoly Commission for approval. Table 11 describes the format and justifications for tariff increase requests by Barqi Tojik, as submitted to the Antimonopoly Commission (the January 2010 tariff increase is used as an example). The table demonstrates the effects of the indebtedness on the tariff structure, discussed earlier. In particular, it shows how: a. tariffs are set to allow for a profitin this case, 339 million Somoni ($77 million) in net terms. Thus generation, transmission, and distribution costs are fully covered; and b. large amount of debts owed by Barqi Tajik (in particular to Orien Bank) are included in tariff calculations.
Table 11: Factors in electricity tariffs
Line Item 2010
3.096
26 27
3.2733
3.4412
3.4335
4.0361
4.3748
Estimates based on the assumed exchange rates for 2011 and 2012 by UNDP www.asiaplus.tj
Page 30

Line Item
Production of electricity (Million KWh) Import (Million KWh) Effective sales (Million KWh) Gross expenses (million Somoni) Cost (dirham, 1 KWh) Average tariff (dirham per kWh) Sales (million Somoni) Profit (million Somoni) 15% profit tax (million Somoni) Net profit Shares Debt related to shares Payments against working capital Project debt, related to investments, million Somoni Sovereign debt, million Somoni Payments against the debt to Orienbank, million Somoni
2010
14,650 1542 14,508
864
5.9 8.7
1263 398
60
339
14 86 144 9 8 51
Sum of all debt Deficit, million Somoni

Financial resources needed, taking into account expenses, million Somoni Average tariff to guarantee the repayment of debt, dirham Average tariff to guarantee the repayment of debt, US cents Source: Anti-Monopoly Committee (2010)
312 60 1332 9.2

2
According to Asian Development Bank research, the Ministry of Economic Development and Trade and Barqi Tojik have agreed on an approach to tariff rationalization,28 but no further details are available. It is important that further tariff rationalization substantially reduce or eliminate cross-subsidies. Pamir Energy. Gorno Badakhshan Autonomous Oblast is Tajikistans poorest region, sparsely populated and cut off during the winter from the rest of the country. Providing electricity services in this region is a daunting challenge. Pamir Energy represents an
28
Republic of Tajikistan: Strengthening Corporate Management of Barqi Tojik, prepared by Eric Harrison, Corporate Solutions, under a contract with ADB for the Ministry of Energy and Industry, Republic of Tajikistan, September 2009.
Page 31

innovative partnership between the government and the international community, helping Tajikistan respond to this challenge.29 Established in December 2002, Pamir Energy took control of most of Barqi Tojiks assets in Gorno Badakhshan on the basis of a 25-year concession agreement. The Aga Khan Development Foundation and the International Finance Corporation are Pamir Energys private shareholders. The original financing was a 45 percent equity and 55 percent debt mix, on a total project cost of $26.4 million.30 The Swiss Economic Cooperation Office provided $5 million in grants for consulting and subsidies. The Aga Khan Foundation subsequently invested around $4 million between 2003 and 2007 in project support, bringing the funding levels to around $31 million.31
Table 12: Pamir Energy Summary Statistics, 2010 Indicator Service Area Population (estimated) Number of households in Gorno Badakhshan Number of consumers serviced by Pamir Energy ** Residential (96%) ** Government organizations (3%) ** Commercial organizations (1%) Number of consumers on main grid Number of consumers on Pamir Energy independent mini-hydro grids Number of consumers connected to non- Pamir Energy mini hydro plant run by communities without other power supplies Number of mini-hydro plants/total capacity Number of larger hydro plants/total capacity Installed generation capacity Distribution Network ** 35 kilovolt lines ** 10 kilovolt lines ** 0.4 kilovolt lines ** 35/10 kilovolt substations ** Smaller sub-stations
Source: Pamir Energy Information note prepared for this report
Value 64,000 km2 213,000 32,500 29,623 28,347 866 410 19,870 9,753 2,877 9/5.2 MW 2/37 MW 42 MW 513 km 1,123 km 2,026 km 16 782
The concession agreement, which initiated Central Asias first public-private partnership implemented in the energy sector, sets out the legal, regulatory, technical, operational, environmental, and financial framework, as well as the tariff schedule. Pamir Energys transmission and distribution networks stretch over 3,600 kilometers (see Table 12), and work in the face of floods, freezes, high winds, avalanches and landslides. Pamir Energy
See Tajikistan: Poverty through Private Infrastructure Services. The Pamir Private Power Project, Figure 13: Pamir Reducing Energy Generation and Sales, MWh A case study from Reducing Poverty, Sustaining Growth, What Works, What Doesnt, and Why, A Global Exchange for Scaling Up Success. Scaling Up Poverty Reduction: A Global Learning Process and Conference, Shanghai, May 2527, 2004.
30 29
The Aga Khan Foundations equity contribution was $8.2 million, while the International Finance Corporation provided $3.5 million in equity and $4.5 million in debt. The International Development Association provided a $10 million loan through the government of Tajikistan. Pamir Energy Information note prepared for the current report.
31
Page 32

provides electricity and winter heat to areas that otherwise would rely on chopped brush, dried dung and coal. Much of the population in Gorno Badakhshan lives in remote settlements. Despite this, more than 90 percent of Gorno Badakhshans 29,000 households receive electricity from Pamir Energy. Around 1513 households do not have power supply at all.
200,000 150,000 100,000 50,000 -
168,396 151,475 114,413 111,561
178,141 140,671
174,397 163,215 145,780144,026
During 2002-2005, 2005, Pamir Energy focused on the construction of new Generation, MWh Power sold, MWh and the reconstruction of additional generation capacity. Pamir Energy has invested some $30 million in reconstructing old or building new hydro plants, substations, transmission, and distribution linesinvestments lines investments which have increased installed generation capacity capacity in Gorno Badakhshan by 30 percent (to 42 megawatts).
2006 Source: Pamir 2007 Energy 2008 2009 2010
Whilst many challenges were faced, the original rehabilitation project was substantially completed on time and on budget. The company has since continued to perform well operationallythanks, hanks, in part to subsidies provided by the ventures venture s international partners.
Figure 14: 14 Energy supply (hours) and Losses (%) 24 20 16 12 8 4 0 23.5 % 60 40 20 0 2006 2007 2008 2009 2010 39 30 26 24 20 2006 2007 2008 2009 2010
17 12
19
23
hours
Source: Pamir Energy Information In note prepared for this report.
A 2007 USAID study32 found that relations with Pamir Energys 30,000 customers were difficult at the start. Some consumers sued to try to obtain power at no cost; cost there were metering disputes and very large non-payment non problems. . The authors conclude that the Aga Khan Foundations patient, long long-term approach, and the unique public and private nature of the financing, helped sustain the project where other, purely private investors may have given up. After a decline in electricity generation and sales in 2007 the company grew strong strongly in 2008 and 2009. Table 13: Tariffs in Pamir Energy (US/kWh) (US Some dec decline was registered in 2009 2009Residential tariffs 2004 2005 2006 2007 2008 2010, but revenues stayed strong,
Summer 0.68 0.84 1.03 1.12 1.74
32
USAID (2007); Regional Energy Markets Assistance Program (REMAP) for Central Asia, The United Winter 0.95 1.18 1.45 1.57 2.43 States Energy Association.
Source: Pamir Energy

partly due to improved collections and reduced losses (see Figure 13 and Figure 13). To ensure that power billing is accurate, the company has installed some 12,000 meters, so that 84 percent of all consumption is now metered. Another 3,500 meters are to be installed in 2011, raising this level to 90 percent. Tariffs at Pamir Energy have risen more rapidly than at Barqi Tojik: the original concession agreement stipulated that until 2010 tariffs should be increased twice a year by 15 percent. In January 2010, Pamir Energy (and Barqi Tojik) raised electricity tariffs by 12 percent, so that Gorno Badakhshan residents pay 0.12 Somoni ($0.02) per kWh of electricity. Administrative and commercial customers pay 0.22 Somoni ($0.05) per kWh. From 2009, Pamir Energy removed the winter and summer tariff structure and implemented one tariff based on different user categories. Table 14 compares Pamir Energys tariffs with the tariffs of Barqi Tojik during 2009-2010. For residential consumers, Pamir Energys tariffs were higher. Subsidies have played an important role in financing Pamir Energys operations since the companys inception.33 The regions low household incomes, the time needed for households to adjust to energy being supplied on commercial principles, and the investments needed to maintain and expand service coverage meant that electricity consumption subsidies would be required for a number of years. Consequently, funds for social protection costs were mobilized at the same time as the funds for capital expenditures. The funds mostly came from donors: partly from the spread between the interest rate at which the International Development Association lent to the government and the rate at which the government lent to the private investor, as well as from $5 million in grant funding provided by the Swiss Economic Cooperation Organization. Pamir Energys tariff structure therefore incorporated early year and lifeline subsidies. The early year subsidy was designed to help households make the transition to commercial tariffs and to compensate Pamir Energy for subcommercial tariffs in its early years of operation: some $1.6 million in early year subsidies were disbursed before full tariffs were applied in 2008.
Table 14: Comparative tariffs, Barqi Tojik and Pamir Energy
Pamir Energy tariffs (US/KWh) 2009 Residential Non residential Average 2.47 4.55 2.89 2010 Residential Non residential Average 2.75 5.16 3.25 2010 2.75 5.16 3.25 2011 2.75 5.16 0 0 0 11% 13% 12% 2011* 2.47 7.18 11% -28% Annual % change Barqi Tojik tariffs (US/KWh) 2010 2.06 5.74 25% -11% Difference (Pamir Energy 2010 tariffs compared to Barqi Tojik 2010 tariffs)
Source: Pamir Energy. * Based on the assumption that Barqi Tojik tariffs will rise 20% for residential and 25% for non residential customers.
33
This section relies heavily on information provided by Pamir Energy in January 2011.
Page 34

The lifeline subsidy was designed to address affordability constraints for poor residential customers, who comprise more than 90 percent of total customers in Gorno Badakhshan. However as an adequate mechanism to target this subsidy towards the poorest customers was not available, it has been provided to all residential customers. The lifeline subsidy threshold was determined by Electrowatt (now Poyry consulting company) which assessed minimal electricity needs at 200 kWh per month in winter and 50 kWh per month in summer. For consumption within these limits, the customer pays 0.25US/kWh. For consumption beyond this threshold, customers pay the full rate. Hence, for most residential customers, the proportion of total consumption that is subsidized through the lifeline component depends on consumption volumes, which vary across the regions due to affordability and availability factors. Customers with high levels of consumption (such as in Khorog, where average annual consumption is some 700 kWhsignificantly in excess of the lifeline threshold) have a lower proportion of their consumption subsidised. Pamir Energy has nine small HPPs. All areas served by these small hydropower plants (except for Darvaz, which receives energy from Barqi Tojik and from the Shirg hydropower plant) have limited power supply, i.e. they do not fully meet demand in the areas they serve. More than 4,000 customers, generally those off the main grid in areas like Murghab and Vanj (constituting around 15 percent of the Gorno Badakhshan customer base) have limited access to power, with average winter consumption well below the threshold level. These customers have all of their consumption subsidized, and pay only the lifeline rate. The maximum total annual payment for customers under the lifeline threshold is $3.38 per annum, although this amount in Somoni terms increased during 2009-2010, with the Somonis depreciation. With the expiry of the early year subsidy in 2007 and Pamir Energys increasing energy delivery (due to better winter performance and lower losses), subsidy funds were contributed only by the Swiss Economic Cooperation Organization. As Table 15 shows, under current projections, Swiss funding is to expire in 2011implying financial self-sufficiency for Pamir Energy. This projection assumes further tariff increases, and substantial growth in demand in off-main grid regions due to better performance of Pamir Energys small power plants. However, the $27,015 projected year-end deficit for 2011 suggests that Pamir Energy may still need some operating subsidies from donors. If no additional subsidies are forthcoming, some 30-40 percent of customers may be unable to finance their current electricity consumption levels.
Table 15: Subsidy Usage Estimates at Pamir Energy Year 2009 2010 2011 Opening Balance $2,401,544 $1,672,985.00 $822,985.00 Swiss Fund Use $728,559 $850,000 $850,000 Closing Balance $1,672,985 $822,985 ($27,015)
Electricity sector investment needs and funding. The energy crisis that took hold in the winter of 2007-2008 led the government to intensify efforts to finance major investments in its power sector, and to better use its own resources to improve national energy security and increase Tajikistans electricity export potential. Since then, investments from foreign
Page 35

governments have been attracted into the electricity electricity sector from the governments of Russia, Iran, and China. The investments were channelled into the construction of the Sangtuda-1 (Russia) and Sangtuda-2 2 (Iran) hydropower plants, and of the south-north north electricity transmission line (China). Figure 15 describes the committed and realized investme investments from internal and external sources. Annex 2 describes the main funding sources, funders and projects, and project budgets.
Figure 15: Committed and actual investments in large Barqi Tojik energy projects (million US$)
OPEC Government of WB (IBRD) Islamic Sangob (Iran)
4.7 8.5 12.3 13 10.1 15.5 19.3 21.9 11.3 27.9 0 36.9 20.837.7 6.1 39.2 36 53 42.5 91.2 59.7 121.5 109.3 180 100 Actual amount 200 Comitted amount 300
China EximBank 0
356.8 373.4 400
Barqi Tojik Investment Program 2010
The largest projects already funded and functioning are described below. Works are completed on:
Rehabilitation of Centralnaya hydropower plant (30 megawatts), with a credit from the Asian Development Bank; Development evelopment of feasibility study for modernization of Kairakum hydropower plant (126 megawatts), Varzob hydropower plants cascade (25 megawatts), via a USTDA grant; and Nurek hydropower plant upgrade and rehabilitation (taking the installed capacity from 3000 to 3200 megawatts). megawatts)
The Sangtuda-1 hydropower hydrop plant is located on the Vakhsh river iver in the Khatlon region, 160 kilometers south of Dushanbe. It consists of four units with total capacity of 670 megawatts and producing 2.7 TWh electricity per year. year Sangtuda-1, 1, which is one of Tajikistans three largest hydropower plants, plants along with Nurek and Baipaza (which are also located along the Vakhsh cascade) cascade), was officially commissioned in July 2009 2009. Some $720 million were invested in its construction during the t 2005-2009 period. The Sangtudinskaya HPP-1 1 company that owns Sangtuda Sangtuda-1 is a Russian-Tajikistani joint venture: ture: 75 percent of

the shares initially belonged to Russian government and commercial partners,34 while the government of Tajikistan held 25 percent plus one of the shares. As of February 2010, the Russian stake increased to 84.03 percent, while Tajikistans share had dropped to 15.97 percent. However, since virtually all the electricity generated at Sangtuda-1 is sold to Barqi Tojik, this monopsonistic position affords the Tajikistani side considerable power in this relationship. The launching of Sangtuda-1 increased Tajikistans generation capacity by some 1215 percent, and the utilization of the countrys hydropower resources by 3 percent. According to some estimates, Sangtuda-1 could add 1 billion kWh to Tajikistans annual electricity export potential. However, Statistical Agency data indicate that Tajikistans electricity exports collapsed in 2010, with the dissolution of the Central Asian integrated transmission network. Likewise, despite the increases reported in 2009 and 2010, power generation in 2010 year remained some 6 percent below the 17.1 billion kWh peak recorded in 2005-2006. The tariffs at which Sangtuda-1 electricity is sold to Barqi Tojik are set at $0.0169/kWh (without VAT) for 20 years, according to a July 2009 agreement. These tariffs (for domestic sales) are to rise by no less than by 4 percent annually, starting January 2010; at this time, the tariff was $0.0176.35 Its inability to remain current on payments for electricity has caused Barqi Tojik to amass considerable arrears to Sangtuda-1, the magnitude of which has fluctuated over time. While these arrears were declining recently, they are still quite significant: on 6 March 2011, they were some 151 million Somoni ($34 million).36 The South-North transmission line. Whereas most of Tajikistans electricity is generated from in hydropower plants along the Vakhsh river cascade in the south, the countrys northern regions (especially Khudjand and Penjikent) have not traditionally been connected to the rest of the national transmission grid. These regions instead relied on locally generated power (chiefly hydro) and imports from Uzbekistan (and sometimes Turkmenistan, trans-shipped through Uzbekistan). The vulnerability of these arrangements was underscored by the winter crisis of 2007-2008, and subsequently by the dissolution of the regional integrated electricity grid and by growing tensions with Uzbekistan (linked in part to Tajikistans construction of the Roghun hydropower stationsee below). The government of Tajikistan responded by accelerating the construction of new hightension power lines to these northern regions from the Vakhsh river cascade. Thanks to a loan from Chinas ExImBank, the first stage in this construction was completed in 2010. The 1600 megawatts of transmission capacity added to Barqi Tojiks transmission infrastructure helped to ease energy tensions this past winter. Longer term, the construction of additional northsouth transmission infrastructure could boost Tajikistans electricity exports to Kyrgyzstan, as well as the possible transit of summer electricity from Kazakhstan and Kyrgyzstan to Afghanistan and Pakistan, within the framework of the Central Asia-South Asia Regional Electricity Market (CASAREM) project. The completion of this workthe total costs of which are reported to be in the range of $280-$340 millionis expected in June 2011.
34
In addition to the RAO UES electricity utility, these included Power Machines, the Chekhov Gidrostal Plant, ChirkeyGESstroy, Zarubezhvodstroy, Zagranenergostroymontazh, and Trust Gidromontazh. www.sangtuda.com.
35 36
Ibid.
Page 37

Construction of the Sangtuda-2 hydropower plant (with 220 megawatts of installed capacity) commenced during the Soviet period in the 1980s, but halted in the beginning of the 1990s due to lack of funding. With financing provided by a joint venture with the government of Iran, construction recommenced in February 2006, on a build-operate-transfer basis with Irans Sangob company serving as the general contractor. Most of the financing for this $256 million project is coming from the government of Iran (which is providing a $180 million loan); Sangob is contributing another $36 million. Barqi Tojik is providing $21 million in financing, while the state budget is to provide the remaining $19 million. During the first 12.5 years of Sangtuda-2s operation all profits are to accrue to the Iranian partners; after this time ownership would revert entirely to the government of Tajikistan. Whereas Sangtuda-2 was planned to become operational by the end of 2012, recent reports indicate that the construction is running ahead of schedule and could be finished in 2011. The anticipated 1 billion kWh of additional electricity generated from Sangtuda-2 could significantly reduce Tajikistans autumn-winter electricity shortages. The Roghun hydropower station. Like the Sangtuda stations, the Roghun hydropower station is an attempt by the government of Tajikistan to complete a Vakhsh cascade construction project begun during the Soviet period. However, because of its large size (3600 megawatts of installed capacity as planned) and financing needs (variously estimated at $2-3 billion by the government of Tajikistan37), and because it would be a multiyear storage facilitywith greater potential to alter water flow in the Vakhsh and then AmuDarya rivers (the latter of which flows into Uzbekistan and Turkmenistan, as well as forming part of Tajikistans border with Afghanistan)Roghuns construction has evoked both domestic and international controversy. Following an estimated $800 million invested during the Soviet period, construction at Roghun recommenced in 2006. Tajikistans 2010 budget allocated 650 million Somoni ($148 million) for Roghun constructiona sum roughly equal to three quarters of Tajikistans 2010 social protection expenditures. This robust support from the state budget reflects Roghuns national priority status, with which Tajikistans president has identified himself. Through mid-2010 some $68 million (perhaps 2-3 percent of the total funds needed) had been disbursed for Roghun construction.38 Roghuns construction is to be completed in two phases. Phase I, which involves construction of the dam to two thirds of its full height, includes the reconstruction of two existing tunnels, the building of a third tunnel, the creation of the regulating reservoir, and the installation of two generation units. The electricity output of this Phase I would be about 4,300 GWh, and it would also enable the generation of an additional 400 GWh at the Nurek hydropower station (currently Tajikistans largest). Phase II would extend the dam to its full planned height (335 meters) and install 2400 megawatts of additional generating capacity. After the completion of Phase II, Roghun would generate roughly 13,000 GWh, while also boosting generating capacity downstream at the Nurek hydropower station.
37
According to the IMFs December 2010 country report for Tajikistan, the full costs of Roghuns construction have not yet been determined. IMF (2010): Tajikistan Country Report No. 10/374, Washington DC.
38
Page 38

Roghuns construction faces two sets of challenges. The first are financial, reflecting the gap between the projects estimated $2-3 billion price tag and the more modest capacities of Tajikistans state budget. To mobilize additional resources, the Ministry of Finance in early 2010 issued shares in the Roghun Open Joint Stock Company (the state-owned corporation discharging some of Roghuns ownership functions), for purchase by legal entities and citizens of Tajikistan. A national marketing campaign helped sell some 1.7 million unregistered shares, yielding 820 million Somoni ($166 million) in revenues.39 However, this campaign met with significant criticism from the international community, in part because of concerns about quasi-obligatory share purchases. The World Food Programmes April 2010 food security monitoring report40 estimated that 10-15 percent of expenditures of rural households (including those suffering from food insecurity) went to the purchase of Roghun shares; many households seemed to be spending more on these shares than on health or education. To this were added governance concerns: due in part to the lack of a unified database of registered shareholders, the first shareholder meeting did not take place for at least a year after the equity sales commenced. In sum, the IMF found that the campaign to finance this project through equity sales has curtailed disposable incomes and is estimated to weigh on the growth prospects. As such, the phasing out of the equity campaign is welcome.41 The second and related set of challenges are political. The gap between Tajikistans financial capacity and Roghuns construction costs suggests that foreign investment may be the only possible way to finance the project. However, Roghuns construction faces adamant opposition from the government of Uzbekistan, which claims that Roghuns operation could have significant environmental and economic costs for downstream countries. Uzbekistan since 2009 had been conducting a high-profile diplomatic campaign against Roghuns construction, in effect presenting prospective investors with a political Tajikistan or Uzbekistan question. The government of Uzbekistan also undertook measures to limit the trans-shipment of goods and servicesincluding electricity imports from Turkmenistan destined for Tajikistan across its borders. These political controversies, combined with the large construction costs, have thus far limited prospective investor interest in Roghun. Two new combined heat and power plants (in Dushanbe270 megawatts; in the north300 megawatts) are under construction. The plant in Dushanbe is being constructed under an agreement with China (2009) with a price tag of $400 million.42 The Kayrakkum hydropower station along the Syr-Darya river in northern Tajikistan was put into operation in 1957. While not being particularly large (total installed capacity is 126 megawatts), Kayrakkum has traditionally played an important role in the electricity balance of Tajikistans Sughd oblast. Management of the water in Kayrakkums reservoir is sometimes a matter of controversy with Uzbekistan, whose eastern regions rely on the SyrDarya for drinking, irrigation, and other uses. Like many other parts of Tajikistans electricity infrastructure, Kayrakkum has undergone considerable depreciation since its construction; losses are currently around 310 million kWh annually. The US Government (USTDA) in
39 40 41
Ibid.
WFP and UK Aid (2010): Tajikistan Food Security Monitoring System,
IMF (2010a): IMF completes Reviews Under Extended Credit Facility Arrangement with Tajikistan, and Approves Request for Augmentation and Waivers. http://www.highbeam.com/doc/1G1-194947609.html
42
Page 39

2005 provided grant funding for a feasibility study of Kayrakkums reconstruction; the total amount needed was estimated at $172 million. The EBRD and EIB are now working on this. The Nurabad-1 hydroelectric power station. In 2009, the government concluded an investment package with China that included $650 million for the construction of Nurabad-1 350 megawatt hydroelectric power station on the Khingob River in eastern Tajikistan. It is being constructed by China Theban Electric Apparatus Stock Co LTD (CTEAS). The Zarafshan hydropower plant (150 megawatts) on the Zarafshan river. An engineering, procurement, and construction contract has been concluded with the Sinohydro Corporation (China). Credit financing from China is expected. Estimated cost is around 258 million USD43. Tajikistan and regional electricity projects. If the lions share of its hydropower potential could be tapped, and the appropriate regional transmission infrastructure put in place, Tajikistan could export significant amounts of electricity to Central and South Asian countries, as well as to China. The creation of a Central Asian and South Asian regional electricity market (CASAREM) has therefore been a major objective of the government, as well as development banks, key bilateral donors, international financial institutions. This vision, much of which is realized within the framework of the Central Asian Regional Economic Cooperation (CAREC) energy programme, rests on two pillars: Generation: The construction of large hydropower plants in Tajikistan (e.g., Roghun) and Kyrgyzstan (e.g., Kambarata-1), boosting in this way development prospects in Central Asias low-income upstream countries by significantly expanding their electricity production and exports (supplemented by increased use of coal-fired power plants); and Transmission: The construction and rehabilitation of transmission infrastructure in Tajikistan (and possibly also Uzbekistan and Turkmenistan), to allow for the transmission of increased electricity exports to Afghanistan and Pakistan, and potentially India.
Specific projects falling under this heading include, inter alia, the ones described below. CASA 1000: The first phase of this transmission project would wheel some 1300 megawatts of electricity from Kyrgyzstan and Tajikistan to South Asia. Cost estimates run from $500 million to $1 billion, of which $300 million would come from the participating countries and $700 million from the World Bank, the Asian Development Bank, the Islamic Development Bank, and private investors. Afghanistan-Tajikistan transmission project: Under a twenty-year power purchase agreement signed in September 2008 between the governments of Tajikistan and Afghanistan, Tajikistan is to export annually up to 500 gigawatt hours of electricity to Afghanistan (initially during the summer monthly only). These exports are to be made possible by the completion of the Sangtuda hydropower stations, and by the Afghanistan-Tajikistan 220kV transmission project, which would upgrade and extend Barqi Tojiks transmission infrastructure 274 kilometers south from the
43
Barqi Tojik Investment Program 2010.
Page 40

Vakhsh cascade to the border with Afghanistan. This extension of the transmission grid, which is being financed by the Asian Development Bank, was to have been completed in 2010. However, rail traffic disputes with Uzbekistan (linked to the Roghun controversy) delayed the necessary construction work; in the meanwhile, Uzbekistan completed the southern extension of its own national transmission grid to the border with Afghanistan. The realization of this regional energy market vision could handsomely benefit Tajikistan, as both a producer and trans-shipper of electricity exports (from Kyrgyzstan). However, its prospects face three non-commercial obstacles: Uncertainties associated with the military and political situation in Afghanistan and Pakistan; The incongruities of planning to significantly increase electricity exports while millions of Tajikistani citizens go without electricity in the winter; and The government of Uzbekistan has yet to fully sign on to the pillars under-pinning this visionparticularly the generation pillar, which assumes the expansion of Tajikistans hydropower generation capacity at Roghun. As long as the viability of this vision remains in doubt, Tajikistan may face serious difficulties in attracting the billions of dollars in foreign investment needed to develop its electrical energy sector.
Annex 3.1 describes recent projects, those in progress, and projects planned in the near future as described in Tajikistans 2010-2012 Poverty Reduction Strategy Paper. The total funding gap for the near future is estimated at some $2.2 billion. This table does not include the prospective hydropower plants planned by government in the medium to long run (e.g., Roghun).
Page 41

Figure 16: Central Asias electricity transmission network in 2020 (under CASA 1000)
Source: Global Energy Network Institute
Oil and gas Gas. While Tajikistans proven gas reserves are estimated at 5.7 billion m3,44 the extractive sector is not well developed, so that the industry primarily revolves around the import, transmission, and distribution of gas from Uzbekistan. TajikTransGaz,45 a vertically integrated state-owned owned monopoly with 17 regional gas distribution enterprises, manages Tajikistans gas pipeline infrastructure, infrastructu which is divided into two parts. In the south, gas is received from Uzbekistan from the t Kelif-Dushanbe Dushanbe pipeline. In the north, the transmission line is part of the gas transmission system from the west to the east of Uzbekistan Uzbekistan. (Regulatory practices to o encourage third third-party party access to TajikTransGazs pipelines have not yet been developed). As Table 16 shows, gas imports import and consumption have dropped sharply since 2007, due to increased purchase prices for natural gas from Uzbekistan (see Table 18). (T Tajikistan has no gas exports.) Households account for about half of gas consumption (see Figure 17). About 30 percent of households in Tajikistan have access to the gas supply network network, with the
44 45
https://www.cia.gov/library/publications/the https://www.cia.gov/library/publications/the-world-factbook/fields/2179.html
TajikNefteGaz, another state-owned owned monopoly, is responsible for gas extraction, most of which occurs in fields in Khatlon province in southern Tajikistan.

greatest numbers of these (39 percent of the total) in Dushanbe.46 Prospects for increasing household hold gas supplies are constrained by the underdeveloped pipeline infrastructure (particularly in distribution).
Table 16: Tajikistan gas balance
Million m3 2004 2005 2006 2007 2008 2009
Production Imports Consumption
36 622 658
29 631 610
20 637 657
17 647 663
16 513 529
20 217 237 7
Source: Tajikistan Statistical Yearbook, 2010
Figure 17: : Gas consumption by sectors, sectors million m3 800

others
600 400 200 0 418.2 140.2 81.5 2007 261.6 162.5 85.6 2008
communal services population
158.2 31 39.6 2009
Source: Tajikistan Statistical Yearbook, 2010
Some 95 percent of Tajikistans gas needs are met by imports from Uzbekistan, the terms of which are specified in annual bilateral agreements, which set the price prices for imported gas, as well as stipulate the terms under which Uzbekistans gas is trans-shipped across northern Tajikistan, and Tajikistans access to Uzbekistans rail and gas transit systems.
Efforts to reduce losses in the gas system, primarily by improving distribution systems and metering, have been a major priority for TajikTransGaz. As the the data in Table 17 below indicate, these efforts seem to have met with some successlosses success losses were reduced from 24 percent of total consumption in 2005 to 12 percent during the first half of 2010 2010. However, these figures are still high by international standards. standards 47
Table 17: Gas transit losses
Type of Loss 2004 2005 2006 2007 2008 2009 2010*
Transmission (trunk pipeline) Distribution (technical losses) Commercial losses Total losses
7% 1% 13% 22%
14% 1% 9% 24%
13% 3% 4% 19%
11% 4% 2% 18%
13% 2% 2% 17%
n.a. n.a. n.a. 14%
n.a. n.a. n.a. 12%
* January July data., Source: TajikTransGaz.
46
Energy Charter Secretariat (2010): Tajikistan: In-depth In depth review of the Investment Climate and Market Structure in the Energy Sector.
47
The international standards for gas losses vary in different countries but 90 per cent of the developed countries have achieved less than one per cent system losses.

Table 18: Purchase price of natural gas from Uzbekistan, Uzbekistan US$ for 1000 m3
Price 2006 2007 2008 2009 2010
The tariff structure is based on the prices at which TajikTransGaz imports natural gas from UzTransGaz.
These prices have more than quadrupled in the last six Source: TajikTransGaz years as world and especially Figure 18: Retail prices for natural gas, US$ for 1000 m3 regional gas prices rose sharply. In 2010, the price was 1000 $231/000m3, bringing 269.73 800 243.55 domestic gas prices in 600 192.22 301.73 Tajikistan up to European 262.63 400 200.38 levels.48 TajikTransGaz bases 281.38 246.45 its national tariffs on the 200 195.72 import price: the retail tariffs 0 are then approved by the 2008 2009 2010 Antimonopoly Commission. for large companies for the population Tariffs ariffs for users have therefore country average increased accordingly (see Figure 18). . According to Source: Forecast parameters of social and economic development of Tajikistan TajikTransGaz, , households 2009-2013 now pay 1330 Somoni ($303) per 1000 m3 of gas, 166 Somoni ($38) more than previously. Due to the Somonis Somoni on-going depreciation, TajikTransGaz may review these rates again.49
42 55 145 240 254
Arrears and debts to Tajikistans gas distribution company run high, with the Dushanbe Heating and Power Plant, TALCO, and the Tajik Cement Company being key debtors. . As a result, TajikTransGaz often falls into arrears to Uzbekistans s UzTransGaz UzTransGaz, which sometimes responds by cutting gas supplies. supplies. For example in December 2009, imports were cut by 50 percent because arrears to UzTransGaz had reached $9 million, million while TajikTransGazs s accounts receivable at the time were some nearly $19 million.50 According to the Asian sian Development Bank website,51 the price for LPG had been subsidized. However, the data in Figure 19 indicates that, while LPG prices were lower than natural gas prices until the end of 2009, they have since been higher than the prices for natural gas. From this is information information, we tend to conclude ude that the subsidy was removed by 2010.
Source: Forecast parameters of social and economic development of Tajikistan 2009-2013 Source: xxxx 313.3 329.0 400 349.4 344.2 288.4 329.2 311.8 310.7 288.4 298.5 293.2 262.6 280.3 276.4 262.9 251.7 300 200.4 48 200.5 Country Brief: Tajikistan, eStandarddForum, Financial Standards Foundation, 9 March 2010 200
Figure 19: Comparison of prices for natural gas and LPG (US$ (US for 1000 m3)
49
NG
Tajikistan: In-depth depth review of the Investment Climate and Market Structure in the Energy Sector, Energy LPG Charter100 Secretariat, 2010
0 Uzbekistan cuts gas supply to Tajikistan, Nigina Sharipova, 2009-01-06, 2009 06, www.centralasiaonline.com 51 2008 Jan-09 Apr-09 09 Jul-09 Nov-09 Q12010 Q22010 Q32010 Q42010 http://www.adb.org/documents/caps/TAJ/0302.asp
50
Source: Antimonopoly Commission of the GoT
Developing domestic gas production in Tajikistan, through more extensive exploration and attracting foreign investment, is among the governments energy sector priorities. Russias Gazprom and Canadas Tethys Petroleum are currently developing gas fields in Tajikistan, but they will not become productive for some time. News reports from December 2010 concerning Gazproms development development of the Sarikamysh gas field are particularly optimistic:52 its seismic surveys have led Gazprom to estimate that field holds some 60 billion m3 of gasthe the equivalent of 100-150 100 150 years of annual gas consumption consumption. If quickly brought into production, a field of this size could certainly increase the supply of gas in Tajikistan. However, it is not clear that the owners of the gasGazprom, Gazprom, the government of Tajikistan, or bothwould would choose to sell the gas at a discount on the domestic market, relative to the prices that could be obtained if the gas were exported. This could limit the extent to which domestic gas prices would fall after the new gas would come on line. Finally, significant investments in the expansion of Tajikistans gas distribution infrastructure infrastructure would be needed in order to bring the benefits of the countrys prospective gas bounty to households outside of Dushanbe, Khudjand, and a few other cities.
Figure 20: Oil balance in Tajikistan (2007-2009, (2007 tons)
700000 600000 500000 400000 300000 200000 100000 0
649716 517931 505819 537658 523812
661979
185773 41709 12112 13846
216048 31987 12263
159396
20973
2007
Production Consumption Import stocks
2008
3009
distribution
Oil. While Tajikistans crude oil reserves are estimated at 117 million tons, most are located deep underground; their exploitation is not seen as commercially feasible. Tajikistans annual crude oil production levels have declined since 1992, when 1,311 barrel barrels/day were produced. The 1992-1997 1997 civil war, the countrys macroeconomic troubles, and a lack of investment in the oil infrastructure have contributed to this decline. In July 2001, Tajikistan brought its first small oil refinery online at Konibodom. The refinery has a capacity of 400 b/d, and produces
Source: Statistical Yearbook, 2010
52
Major Natural Gas Find in Tajikistan Set to Change Regional Dynamic, Written by Editorial Dept, Wednesday, 22 December 2010 16:33, by Iskander Aliev, Source: Sour RFE/RL.

gasoline, diesel fuel, kerosene, and fuel oil.53 However, as s with gas, almost all of Tajikistans oil and refined products are imported. Whereas most gas imports come me from Uzbekistan, most oil and refined product imports come from Russia. Tajikistans oil balance is described in Figure 20. [NB: Distribution equals import plus production, , as in the National Statistic Yearbooks]
Coal Competition ompetition and private ownership play more important roles in Tajikistans coal sector than they do in oil and gas. gas Some 14 commercial enterprises, including joint ventures with foreign companies, are engaged in coal production and distribution. In principle, t the states role is limited to enforcing environmental and safety regulations, promoting technological progress, , and sup supporting porting the development of the associated road and rail transport systems. Information from the Ministry of Energy and Industry suggests that Tajikistan has over 40 coalfields with confirmed reserves of 15.3 billion tons an estimated 41 percent of Central Asias total coal reserves.54 Retail prices have been liberalized and are now very close to international prices (see Figure 21). At the end of the Soviet period, period, Tajikistans annual demand for coal was some 1.5 million tons, of which over 1.0 million tons ton were supplied domestically. Coal production fell sharply after the e collapse of the Soviet Union; and while output has increased significant ignificantly in the last decade, it remains a fraction (20 percent) of pre-civil war levels (see Table 19). Currently coal is mined mainly at the Fan-Yagnob Fan Yagnob and the Shurab coal deposits.
Table 19: Production of coal in Tajikistan (thousand tons)
Thousand tons
2003 2004 2005 2006 2007 2008 2009
Production
47
93 3
99
105
181
199
176
Source: Statistical Yearbook of Tajikistan, 2010
Figure 21: Retail prices for hard coal in Tajikistan compared to the EU ($/ton) 160.00 140.00 120.00 100.00 80.00 60.00 40.00 20.00 0.00 2007 2008 2009 2010
average price Tajikistan

53 54
market price EU
The government is considering projects to boost electricity output by collocating coal-fired fired power plants with coal fields. (The Fon Yaghnob, Nazar Ailok, and Shurob mines are particularly important in this context.) In n 2007, the M Ministry of Energy and Industry signed an agreement to this effect with the Chinese Development Bank, Chinas ExImBank, ank, the National Development Bank of Kazakhstan, the Eurasian Development Bank, the World
http://www.globalsecurity.org/military/world/centralasia/tajik http://www.globalsecurity.org/military/world/centralasia/tajik-energy.htm
Source: MOEI for Tajikistan, BP Statistics for EU
Press release, Third International Tajikistan Exhibition, "Mountainous Equipment, Enrichment and Extraction of Ores and Minerals," Dushanbe, September 18-20, 18 2008

Bank and others. Increased coal production and sales could also offer households (with boilers or furnaces) better access to a decentralized heat source. For these reasons, the governments development programme for the coal sector called for annual production to rise to 445,000 tons in 2010, and to 815,000 tons by 2015. (While we do not as yet have data for 2010, production in 2009 was only 176,000 tons.) Despite these ambitious plans, Tajikistans coal industry remains in poor condition, mostly due to the decapitalization of the sectoral and associated transport infrastructure, inadequate financing and working capital, and managerial shortcomings. The decline in coal output in 2009when Tajikistan was suffering from an energy shortageis likewise a troubling sign. The attraction of Tajikistans coal fields to investors may be mostly based on the possibilities for strip mining, which substantially reduces risks and major financial expenditure. However, although many deposits are suitable for strip mining, they are found in mountainous regions, where the requisite transport and other infrastructure are not in place, and which are often subject to extreme weather conditions. Significant outlays from the state budget would seem to be necessary, in order to promote the coal sectors development (see Annex 3.2). Tajikistans 2010-2012 Poverty Reduction Strategy Paper estimates total investment needs for this sector at around $137 million; this financing has not yet been secured. District heating Tajikistans heat generation and distribution infrastructure, which was developed during the Soviet period, is largely concentrated in Dushanbe (which has a combined heat and power plant and several large district heating systems): several secondary cities have city district heating systems based on hot water supplied from heat-only-boiler (HOB) plants. Heat supply is only available during November-March.
Table 20: Performance of the Dushanbe Combined Heat and Power Plant Unit Electricity generation Own needs Total Thermal power station Heat production West boiler East boiler Total Use of gas TPS West boiler East boiler 000 KWh 000 KWh GCal 000 m3 2006-07 341687 42397 728147 578087 101686 48384 161167 143200 14295 3672 2008-09 251625 30741 376292 354793 0 21499 60146 56741 588 2817 2009-10 48646 43934 91748 73029 0 18719 67212 52555 14657 0
Page 47

Unit Use of mazut Total Thermal power station Source: Dushanbe power and heat station ton 2006-07 28200 28200 2008-09 56448 56448 2009 09-10 304445 304445
District heating system worked more or less satisfactorily until the 1990s, since Tajikistan received significant amounts of natural gas, fuel oil, and electricity from neighbouring Soviet republics (as well as domestically produced coal) at nominal prices. Since then, however, ever, the district heating infrastructure has undergone considerable decapitalization, as household tariffs have not kept pace with the market prices charged for gas, oil, and other fuels. High levels of leakages/losses due to outdated pipeline network design ign and inadequate insulation, as well as frequent outages, are the result (see Table 21).55 Current service quality of the centralised heating systems is non-existent non existent or very poor. The two main heat generatorsthe the combined heat and power plants at Dushanbe56 and Yavan are highly depreciated.57 In addition to these plants, there are 181 heat boilers in the country, but a majority of these are currently out of operation.58 A December 2010 report from the Ministry of Energy and Industry found that today only Dushanbe has district heatin heatingand only to a limited extent (in in the city centre). centre 59 The Dushanbe District Heating Enterprise produced only around round 92 gigacalories of heat in 2008-2009 (see Table 20), meeting some 20 percent of the citys needs.
Table 21: 21 Work of the boiler houses (2009, gCal)
Produced Supplied Households Losses
Country Dushanbe Sughd

Source: Statistical Yearbook 2010
885,338 469,687 232,411
841,368 426,661 231,467
148,022 148,022 0
43 43,970 43 43,026 944
Figure 22: Communal service tariffs and wholesale gas price trend, % (2007 = 100)
Communal service 460 436 tariffs 400 55 Energy Charter Secretariat (2010): In depth review Wholesale gas prices Tajikistan: In-depth 333 of the Investment Climate and Market 300 Structure in the Energy Sector. 264 265 200 56 173 The Dushanbe combined heating and power plant is 100 percent owned by Barqi Tojik. 100 100 57 The Government has recently provided ed financing for the reconstruction of the Dushanbe combined heat and 2007 2008 company 2009 2010 power plant; the TALCO aluminium has likewise provided funds to reconstruct the Yavan combined heat and power plant.
58
500
Energy Charter Secretariat (2010): Tajikistan: In-depth In review view of the Investment Climate and Market Structure in the Energy Sector.
59
Ministry of Energy and Industry of the Republic of Tajikistan (2010): Status of Regulation of District Heating and CHPs, M.M. Sharipov Head of the PTL sector, Power Department Kiev, 2-3 3 December 2010.

No heat or hot water metering exists in residential, commercial or public sector buildings. Consumers are therefore unable to regulate the heat supply, resulting in too low or too high room temperatures and furth further heat losses from the open windows that cool overheated apartments. The piping layout and the lack of control by the residents over the heat consumed make consumption-based consumption billing or cutting off non-paying paying consumers very difficult. Maintenance of equipment equipment inside buildings (residential and office) is the responsibility of the housing and utilities administration (ZHEK): the poor financial situation of these structures contributes to the poor condition of the district heating infrastructure.
Figure 23: Household ld heating tariffs (Somoni per gCal) g 4 3 2 1 0 2009 2010 2011 2012 2013 1.82 1.84 2.43 2.73 3.11
The sharp increases in gas pricesreflecting reflecting the higher prices of imports from Uzbekistan, which were not fully offset by increases in communal service tariffs (see Figure 22)is is an additional factor in the deterioration of the district heating system. Barqi Tojik sell sells heat to wholesale consumers/ s/re-sellers at the following rates (without VAT) VAT):
Source: Forecast parameters of social and economic development of Tajikistan 2009-2013
budgetary institutions: $6.8 6.8 (30 Somoni) per gigacalorie; households: $0.9 (4 Somoni) Somoni per gigacalorie; main consumers (industry, commercial structures, etc.): $26 (117 Somoni) per gigacalorie. Figure 23 shows current and prospective retail heating tariffs for the residents residents.
Household heating tariffs are cross-subsidized by Barqi Tojik. At t present, the combined heating and power plants are not ot profitable, and all expenses are covered by Barqi Tojik. Collection of payments and services are low: debts debts accumulated by consumers reached $1.5 million in 2010.60 With district heating companies increasingly unable to supply reliable heating services, many urban households turned to electricity for heating. The electricity system is not always able to cope with the additional winter demand, leading to frequent local power (and heating) outages. In sum, Tajikistans district heating system is near collapse. Supplying households with reliable winter heat has therefore become one of the most important challenges in the energy sector. In response, , the government intends to convert boilers from burning of gas and fuel oil to burning coal. Construction of the two new combined heating and power plant plants will help somewhat to improve the heat supply. [The construction of one of the CHPs (200 megawatt, with a price tag of $30 million) has started already and is expected to be completed within 18 to 20 months].
60
Ministry of Energy and Industry of the Republic of Tajikistan (2010): Status of Regulation of District Heating and CHPs, M.M. Sharipov Head of the PTL sector, Power Department, Kiev, 2-3 2 3 December 2010.

However, the bigger issue is developing and implementing a sustainable heating strategy which will seek to shift the space-heating load away from electricity. This would be further measure to manage the demand on the electricity system.61 The Government of Tajikistan has acknowledged the urgency for developing such a strategy (based on the use of gas, coal and biomass) but no documents, elaborations seem to be available at the moment. Decentralized renewables The absence of reliable electricity (and other energy) supplies in rural areas has become a major development issue for Tajikistan. Barqi Tojik data indicate that, despite comprising nearly three quarters of the countrys population, rural households during 20082010 accounted for only 8-11 percent of Tajikistans total electricity consumption.62 It is estimated that over 1 million residents (primarily in rural areas) have little or no access to adequate electricity/energy suppliesparticularly during the winter, when it is common to have spells of more than six weeks without any electricity. The absence of reliable electricity supplies means reduced access to health, education, and other public and social services in rural areas; it also constrains business formation and development. Perhaps most importantly, the absence of reliable electricity supplies in rural areas means the absence of income- and employment-generation opportunities for vulnerable householdsfor many of which, migration has become the dominant coping mechanism. Chronic energy shortages have generated a number of unfortunate side effects. Due to the extensive use of wood for fuel (as well as overgrazing and the increased cultivation of land for agricultural purposes), Tajikistans mountainous regions have lost up to 70 percent of their wood covering since the late 1990s.63 Recent research64 indicates that Tajikistans forests have more or less disappeared, and are limited to very small relicts in remote and sparsely populated areas. In addition to the loss of biodiversity, this deforestation has significant environmental, economic, and human costs in terms of flooding, landslides, and mudslides. According to an OSCE report, some 50,000 hectares of arable are lost every year to floods, mudslides and erosion.65 The negative impact of smoke inhalation and respiratory disorders on health,66 and of greenhouse gas emissions on climate change, may also be important. On the other hand, GTZ (2010) argues that, since for many rural households, the alternative to burning firewood is burning dung, the health effects of which can be even more serious, this argues for combining extensive reforestation efforts (which are needed in any
61
Energy Charter Secretariat (2010): Tajikistan: In-depth review of the Investment Climate and Market Structure in the Energy Sector. Intermediate Strategy for Renewable Energy Sources, p. 8.
62 63
This figure, which appears in a number of sources, is not reflected in the official statistics on forest cover which show no significant changes in the last two decades. For more on this, see GTZ (2010): Forest Sector Analysis of the Republic of Tajikistan. Ibid.
64
65
Central/South Asia: Deforestation Makes Mark On Region, Its People, Radio Free Europe/Radio Liberty citing OSCE environmental officer Saulius Smalys, August 29, 2006.
66
Bringing Power to the Poor in the Pamirs, World Bank, press release. Available here: http://lnweb90.worldbank.org/eca/eca.nsf/0/66201C6DC20F591785256C32006D471A?OpenDocument
Page 50

case) with the establishment of fuel wood (energy) plantations to meet rural energy needs (and provide income generation opportunities). According to a WHO report,67 the winter energy crisis of 2007-2008 had a negative effect on public health: access to basic health care declined significantly, as reduced access to heat and electricity (and therefore running water) forced many hospitals and health centers to close or worked restricted hoursin some cases discharging patients. Prolonged exposure to cold temperatures, the health and safety risks associated with unsafe use of alternative home heating equipment (e.g., gas, kerosene; stoves burning wood and charcoal), the lack of running water, isolation or over-crowdingall this adversely affected the general health status of the population. Higher incidence of acute respiratory diseases, waterborne diseases, and preventable maternal and infant deaths resulted; pregnant women, children, the elderly, and the mentally ill were particularly at risk.68 A 2008 UNESCO report found that no heating systems were operating in 26 percent of Tajikistans schools that winter; attendance rates dropped 40-50 percent. Schools, orphanages, support facilities for street children and homes for the elderly struggled to maintain minimum service levels69. The extent to which this slippage has been reversed since 2008 is not clear. Large investment projects in electricity sector are unlikely to come on line very soon, and hence for the small, isolated rural or mountainous settlements, the expansion of decentralized renewable energy technologieschiefly for electricity generation, but also for heat, hot water, and biogasmight be the only option for reducing energy insecurity likely to make a difference in the short run. Moreover, the construction and maintenance of decentralized renewable energy facilities can themselves create important income- and employment generation opportunitiesone study finds that the addition of one megawatt of installed capacity in a small hydropower plant can generate 40 green jobs.70 Such calculations underscore how the expansion of decentralized renewable energy technologies, rural development, and poverty reduction in Tajikistan are inextricably linked. The expansion of decentralized renewable energy technologies is therefore a priority for the government and many donors. Official data indicate that, since 1991, some 15 thousand megawatts of installed capacity have been added to the countrys electricity generation assets, via the construction or reconstruction of 253 small scale hydropower plants alone (see Table 23). In comparison to big hydro and hydro-carbons, decentralized renewable projects are relatively inexpensive, and can attract at least some of the financing needed for their construction and maintenance from donors, private entrepreneurs and the communities in which they are located.71
67 68 69
WHO and the Ministry of Health of Tajikistan (2008): Health Assessment for Tajikistan. Ibid.
Tajikistan country case study, Country profile prepared for the Education for All Global Monitoring Report 2008 : Education for All by 2015: will we make it?; by Vladimir Briller, UNESCO, 2007 According to the Concept of the development of small scale hydropower (2009)
70 71
In principle, decentralized renewables (and energy efficiency) projects can also attract carbon finance, under the Kyoto Protocols clean development mechanism (CDM). However, there are apparently no CDM projects under implementation in Tajikistan, due to the lateness (2009) of the countrys ratification of the Kyoto Protocol, and continuing legal and regulatory lacunae.
Page 51

Some of the basic legislation and strategic programming frameworks needed to promote the development of decentralized renewables in Tajikistan have been put in place. These include the: Law on power sources for small enterprises in mining and coal conversion (1992); Law on alternative energy sources (2010); Orders of the Presidium of the Supreme Council (No. 1350) on Redemption of tax payments for small hydro power plants and producers of alternative energy sources (1992), and (No. 267) on the development of small power engineering (1997); Concept for the Development of Small Scale Hydropower (2009); Complex Programme on Alternative Energy Sources such as small rivers, solar, wind, biomass, and geothermal energy for 20072015 (2007), which is divided into three phases:
o Phase 1 (20072009): Compiling a cadastre of alternative energy sources; assessing the potential effectiveness of various technologies, taking into account Tajikistans geo-climatic conditions; and developing new renewable energy technologies; o Phase 2 (20102012): Introducing pilot programmes to test the effectiveness of renewable energy technologies; establishing an industrial base for production; training and capacity building; and o Phase 3 (20132015): Production of equipment for alternative energy generation.
In December 2010, two important developments occurred that have the potential to accelerate the development of the appropriate regulatory environment for renewable energy sources. These include the approval by the Ministry of Energy and Industry of: a methodology for calculating tariffs for electricity generated by independent power producers (including those using small hydro and other renewable technologies) who are connected to Barqi Tojiks grid (Decree No.131); and a basic model contract for power purchase agreements between Barqi Tojik and independent power producers (Decree No.112).
Despite this progress, four aspects of the commercial and regulatory environment for decentralized renewablesremain problematic: As long as Barqi Tojik manages most of Tajikistans power generation assets and the countrys transmission grid, its incentives for providing rival power producers with access to the grid may be weak. (The same applies to Pamir Energy in Gorno Badakhshan). According to the changes in the Energy Law that was made in February 2009, Barqi Tojik is now obligated to buy electricity from (mostly small-scale) independent power producers. However, since the actual tariffs must be agreed between the RES company and Barqi Tojik (or Pamir Energy), developers of
Page 52

decentralized renewables projects continue to face considerable regulatory uncertainty about their viability.72 As long as tariffs for electricity generated from other sources remain relatively low (e.g., compared to other countries), Barqi Tojik has little reason to purchase expensive electricity from decentralized renewable producers. Such purchases must ultimately be subsidized, either from Barqi Tojiks retained earnings, from crosssubsidies implicitly paid by consumers of power generated from other sources, from the state budget, or by donors. In the meanwhile, according to information obtained from Barqi Tojik, out of some 340 small hydropower plants built in Tajikistanand at present, only one is connected to the grid. Neither private- or public-sector agencies in Tajikistan possess at present the technical expertise needed to construct and especially maintain decentralized renewable energy installations. Communities that construct small power plants (often with donor assistance) are too often unable to repair or maintain them. Likewise, the regulatory and technical requirementsand the capacity to enforce themneeded to ensure technological standardization and connection to centralized grids is not fully in place. The potential of decentralized renewable energy technologies to address Tajikistans national and household energy insecurities is now widely recognized. Likewise, funding from donors and government sources for decentralized renewables is increasingly available. However, mechanisms to attract and transparently manage these resources remain under-developed. UNDPs proposed National Trust Fund for Renewable Energy and Energy Efficiency could provide an important missing piece of the institutional development puzzle.
Small hydropower. For settlements located near to small rivers and streams, the construction of small-scale hydropower plants can improve access to reliable year-round electricity services. The programme to develop small hydropower stations, featuring the construction of 71 facilities with installed capacity of approximately 80 megawatts, was adopted by the government in 2009. It distinguishes three types of small hydropower plants (see Table 22).
Table 22: Ministry of Energy and Industrys small hydropower (HPP) classification scheme Definition Micro Mini Small Symbol HPP mHHP sHHPs Power range 100 kilowatts or less 101 1,000 kilowatts 1,001 30,000 kilowatts
Source: Ministry of Energy and Industry
72 For off-grid communities, matters are simpler: tariffs are defined by local governments, and can therefore be determined in advance.
Page 53

Since 1991, some 15 thousand megawatts of installed capacity has been added to the countrys electricity generation assets via the construction or reconstruction of 253 small hydropower plants (see Table 23). Another 29 small hydropower plants are currently under construction, and will in turn add another 11.6 thousand megawatts of installed capacity when they are built. (Annex 3.3 describes the main donor-funded small hydropower projects in Tajikistan)
Table 23: Small hydropower plants in Tajikistan (1991- 2010) Number of small scale HPPs 20 86 40 107 253 Capacity (megawatts) 905 3868 5619 5019 15,410 Funding sources State budget and grants 9 7 38 32 86 Local investment 11 79 2 75 167
District Khatlon Sughd Gorno Badakhshan Districts of Republican Subordination Total

Source: Ministry of Energy and Industry
On the basis of research covering 530 large and small rivers with a total length of 14,316 kilometers, Tajikistani specialists have concluded73 that the exploitation of only 10 percent of the hydroelectricity potential of small rivers in middle and high mountainous zones would allow for power supply for up to 70 percent of the settlements and agricultural entities. In particular, they estimate that in the Rasht area alone more than 100 small hydropower plants could be built.74 Some illustrative scenarios showing the possible impact of scaling up existing support for small hydro been developed by UNDP-Tajikistan (see Table 24).75 If the number of inhabitants without access to reliable electricity supplies is taken as 1 million, and the households in which they live are assumed to have 10 members each, then the construction of 1000 small hydropower plants each with 100 kW of installed capacity would provide each of these households with 1 kW of electricitysufficient for year-round access to indoor lighting. As the costs of constructing a hydropower facility with 100 kW of installed capacity are taken to be around $100,000, this scenario generates an average cost of $1/kW/household. Satisfying the unmet basic electricity needs of 1 million vulnerable people therefore carries a price tag of $1 million. Moreover, if the addition of one megawatt of installed capacity in a small hydropower plant can generate employment for 40 workers, then the construction of 1000 small hydropower plants with 100 kW of installed capacity would create 4000 green jobs. If resources could be found to double or triple the electricity
PREGA (Promotion of Renewable Energy, Energy Efficiency and Greenhouse Gas Abatement), Tajikistan Country Report: Country Energy Situation and Prospects, 2006 (for the Asian Development Bank). Original source Power resources of Tajik SSR, Bowels of Earth, Leningrad, 1965.
74 75 73
Ibid. UNDP Tajikistan: Intermediate Strategy for Renewable Energy Sources, pp. 49-50.
Page 54

delivered (i.e., provide two or three kW of installed power per household), the benefits of such investmentin terms of access to energy, job creation, and reductions in deforestation, greenhouse gas emissions (e.g., from burning coal, firewood, dung), and health benefits (in terms of fewer respiratory ailments associated with burning firewood, coal, peat, or dung) would likewise expand.
Table 24: Scaling-up small hydro for rural development
Population of Tajikistan Living in rural areas Living in poverty Average number of household members (in poor households) Number of most vulnerable population Number of households Average size of a small hydropower plant that could meet these households needs Estimated investment costs for constructing a 100 kW small hydropower plant* Local content related to facility construction* Jobs created per megawatt of hydropower capacity installed* On-grid time (hours per year) On-grid electricity price ($ per kWh) Incentive for on-grid production ($ per kWh) Share of electricity generated sold to grid
7.5 million 70% 50% 10 1 million 100,000 100 kW $100,000 50% 40 3500 $0.03 $0.01 50%
* Based on pilot projects.
However, small hydro projects in Tajikistan can face two important drawbacks. The first is seasonal: the small streams on which many of these facilities are located are more likely (than larger rivers) to freeze in the winter. These facilities can therefore be rendered inoperable during the season when power and heat are in greatest demand, and when central grids are unable to compensate. By contrast, many communities that are connected to Barqi Tojiks (or Pamir Energys) grids draw on them during the summer time (when power is relatively abundant), thereby reducing the demand for off-grid power and decreasing the commercial viability of small hydro (and other decentralized renewables) projects. The second is hydrological: these small streams are also more likely (than larger rivers) to undergo significant reductions in water flow during periods of drought, thereby reducing their de facto generation capacity.
Exclusive reliance on small scale hydropower plants is unlikely to be sufficient to provide the electricity needed for rural residents to consume electricity on par with the urban residents; nor can it by itself allow for significant developments of rural industry. Still, small hydro clearly represents a viable economic and technological option for many households in remote, isolated locations. Its utilization can be scaled up in a matter of few years with minimal up-front costs, provided certain policy and hydrological conditions are met. The recent introduction of regulations requiring Barqi Tojik to purchase power from small scale generators should help to start to improve the situation. Regulatory issues aside,
Page 55

important questions about the sustainability of constructing and operating small scale hydropower plantsdespite political will and donors effortsremain. Ongoing efforts by the Government of Tajikistan supported by the international community (including those of UNDP) will be important to in order to create a sustainable model for the operation of small hydropower plants. Apart from the regulatory improvements, other areas which will be important to address include:
Increasing the capacity/knowledge base of local companies in constructing and especially maintaining small hydropower stations; Improving the availability of spare parts for small hydropower stations; and Attracting finance for these projectsincluding, potentially, via the trust fund for decentralized renewables and energy efficiency proposed by UNDP (Box 1).
Solar power. The estimated potential for solar power is about 25 billion kWh/year in Tajikistan. It is also estimated that the utilization of available solar energy in Tajikistan could satisfy as much as 10-20 percent of national energy demand (note that the estimate was in the light of the tariffs prevailing in 2007).76 Local experts estimate that the climatic conditions of Tajikistan are favourable for using solar energy, especially in mountain territories, and in East Pamir, in particular, where hydropower potential is limited. The majority of this solar potential is not exploited; there is no industrial solar energy capacity in Tajikistan. There is some use of solar resource for water heating purposes; this could be developed further. Small-scale photovoltaic technologies (primarily for public building) could also be introduced, particularly in very remote areas with low population densities where grid reinforcements or new connections seem infeasible. Wind power. Wind power potential in Tajikistan remains largely uninvestigated. Local experts believe that wind energy can be commercially viable in certain regions, where the average annual wind speed is around 5-6 meters/second (such as Fedchenko and Anzob, territory around the Sarez Lake in Gorno Badakhshan).77 Four wind power plants (see ) were under construction by Barqi Tojik in 2010.
Table 25: Wind PPPs under construction
District Balluvon Farkhor Shurobod Chkalovsk
Oblast Khatlon Khatlon Khatlon Sughd
Quantity 1 1 1 1
Capacity 20 20 20 20
Investor Barqi Tojik Barqi Tojik Barqi Tojik Barqi Tojik
Started 2009 2009 2009 2009
76
Kabutov, K., Tajikistan: Priority Directions and Status of Research in the Field of Renewable Energy Sources, Published in Geliotekhnika, 2007, No. 4, pp. 91-96. Ibid.
77
Page 56

District Total
Source: MOEI
Oblast
Quantity 4
Capacity 80
Investor
Started
Biomass. It is estimated that Tajikistan has the potential to produce around 2 billion kWh/year of electricity from biomass sources (note that the estimate was in the light of the tariffs prevailing in 2007). Currently around three quarters of the population use biomass in their housekeeping.78 In the countryside, where there is no access to natural gas, biogas technologies could be very promising. According to experts, the wide introduction of biogas technologies using animal or agricultural and household wastes, could reduce annual methane emissions 5-8 thousand tons. The most promising option of biomass utilisation is biogas generation by means of anaerobic fermentation of manure. A few experimental biogas generators currently operate in Tajikistan. Opportunities to produce energy via thermochemical conversion of cotton residues may also be present. In 2008 some 253,000 hectares of cotton were planted. Each hectare generated around 100,000 cotton plants, the stalks of which are used for winter heating in rural areas. Geothermal. Tajikistans geothermal resources are small and poorly studied. Data about using thermal waters are generally absent, although the development of thermal water in vicinity of Khodja-Obi-Garm is anticipated. It is estimated that Tajikistan could produce 45 billion kWh annually using geothermal energy sources.79 Energy efficiency Energy intensity in Tajikistan is almost twice the world average, and three times higher than most developed countries, which means that Tajikistan needs three times more energy to produce one unit of GDP then highly developed countries.80 Energy efficiency potential in Tajikistan is assessed by the Ministry of Energy and Industry at 30 percent of current power consumption.81 Some estimates put potential savings much higher; recent UNDP research has found that houses in rural areas lose 50-60 percent of the heat generated.82 The draft Energy Efficiency Masterplan for Tajikistan supported by UNDP estimates that adoption of basic energy efficiency measures could reduce primary energy consumption for electricity and heat production from thermal power and heating stations by at least 10 percent; and electricity transmission and distribution losses by 10 percent.83
78
This section relies heavily on Kabutov, K., Tajikistan: Priority Directions and Status of Research in the Field of Renewable Energy Sources, Published in Geliotekhnika, 2007, No. 4, pp. 91-96.
79
Kabutov, K., Tajikistan: Priority Directions and Status of Research in the Field of Renewable Energy Sources, Published in Geliotekhnika, 2007, No. 4, pp. 91-96 UNDP , Energy Efficiency Master Plan for Tajikistan: Energy Efficiency for Economic Development and Poverty Reduction. Ministry of Energy and Industry, http://minenergoprom.tj/index.php?lng=en. UNDP, Analysis of the energy efficiency in rural Tajikistan, November 2020, Dushanbe.
80
81 82 83
UNDP: Energy Efficiency Master Plan for Tajikistan: Energy Efficiency for Economic Development and Poverty Reduction.
Page 57

National energy saving legislation, which was adopted in 2002, therefore recognizes energy efficiency as a national priority and defines a number of priority areas in general terms. The implementation of this legislation has been somewhat lacking, however; activities have largely been limited to an ongoing campaign to replace incandescent with compact fluorescent lamps. The 2002 legislation should therefore be strengthened via the adoption of energy efficiency regulations pertaining to building codes, minimal energy efficiency standards for appliances and equipment, energy efficiency labelling, energy audits, and on energy statistics and energy balance.84 The design and implementation of a national energy efficiency plan, to set national and sectoral energy efficiency targets and outline the resources and policy instruments to realize them, could also be undertaken. The draft Energy Efficiency Masterplan for Tajikistan supported by UNDP calls for the application of different energy efficiency measures to rural and urban areas, in light of the differences between them: for rural areas, an integrated rural development approach is recommended, to provide additional income- and employment-generation opportunities and reduce poverty while also saving energy; for urban areas, the introduction and enforcement of appropriate building codes, to regulate the level of energy consumption in buildings, is advocated with an estimate of the potential to reduce energy consumption by 20 percent. It is also estimated that public awareness campaigns could reduce energy consumption in public buildings by an estimated 10 percent; a national programme to improve the efficiency of public lighting systems could reduce losses in this sector by up to 20 percent. In sum, energy efficiency is one of the most cost-effective ways of reducing imbalances between energy demand and supply. Efforts to promote energy efficiency should become an integral part of national energy planning.
Box 1A national trust fund for decentralized renewables and energy efficiency85
UNDP has designed a national trust fund for decentralized renewables and energy efficiency. This trust fund would be a legal body with the following responsibilities:86
Collecting fees to finance the accelerated introduction of decentralized renewable energy technologies and energy efficiency measures; Underwriting contracts with Barqi Tojik for the purchase of electricity generated from decentralized renewable technologies; Supporting decentralized renewable and energy efficiency activities in rural areas, inter alia via: o Campaigns to promote decentralized renewables and energy efficiency; o Education and training programmes for professionals engaged in decentralized renewable energy technologies and energy efficiency activities; and o Financial support for the preparation of decentralized renewable energy and energy efficiency projects, including investment studies (up to 40 percent of total costs). Fund raising for decentralized renewables and energy efficiency projects in Tajikistan by accessing
84 85
Ibid.
UNDP (2011): Energy Efficiency Master Plan for Tajikistan: Energy Efficiency for Economic Development and Poverty Reduction. Ibid.
86
Page 58

funding provided by other states, international financial institutions and bodies, and domestic and foreign legal and physical persons; initiating and supporting international cooperation and microfinancing for decentralized renewables and energy efficiency programming;
Establishing and maintaining a database of decentralized renewables and energy efficiency projects; and Providing investment subsidies for other decentralized renewables and energy efficiency activities.
Summary The Asian Development Bank projects that Tajikistans electricity demand will grow at an annual rate of 1.9 percent during the 2010-2030 period.87 Tajikistans energy sector has the potential to meet this demandparticularly in hydro (big and small) and coal; possibly also in gas. The potential returns on energy savings and energy efficiency investments also seem significant. However, potential does not necessarily translate into development. Like many developing countries, Tajikistan does not possess the domestic capital, technology, or managerial capacity needed to fully realize its energy opportunities. Moreover, it is in competition for this capital and technology with many other countriesincluding its neighbours. A recent World Bank report88 finds that, without $3.3 trillion in new investments in primary energy development and power sector infrastructure over the next 20 years, the Europe and Central Asian region could be moving from being a large (at present) net energy exporter to becoming a net energy importer by 2030.89 Tajikistans prospects in this competition depend on a number of factors, including the extent of national commitment to the energy sector, the legal and regulatory environment, and domestic tariffs/prices. Its successes in attracting foreign investment in national energy projects like Sangtuda-1 and the South-North energy transmission network, and its strong support for the Roghun hydropower plan, underscore the strength of the governments commitment to developing Tajikistans energy sector. However, in other respects particularly when it comes to attracting private capital, as well as Tajikistans reliance on the development of trans-national electricity transmission infrastructurethe picture is not so rosy. The relative paucity of private capital and technology inflows suggests that the burden of developing Tajikistans energy sector will continue to be born largely by the state budget. In light of the other development challenges facing the countryin terms of income and nonincome poverty, and access to improved water and sanitation (just to name a few)the state budgets ability to bear this burdenand the opportunity costs associated with trying to do soseems likely to remain in question for the foreseeable future, especially given the large budget deficits and public debt. The alternativeimproving the energy sectors enabling environment via more ambitious reforms of legal and regulatory conditions, combined with higher tariffs and elimination of cross subsidies, as well as greater attention to the social
87 88 89
APEC/ADB Energy Outlook for Asia and Pacific, 2009. WB (2010b):Lights out?: the outlook for energy in Eastern Europe and the former Soviet Union
http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/ECAEXT/0,,contentMDK:21722062~menuPK: 258606~pagePK:146736~piPK:146830~theSitePK:258599,00.html
Page 59

protection of those households most vulnerable in the face of higher tariffsis worthy of more serious consideration.
Page 60

3. ENERGY AND POVERTY VERTY NEXUS
Poverty trends
Figure 24 Change in poverty and extreme xtreme poverty rates, %
60 40 20 0
2007 2009
53.1 17.4
47.2 17.5
poverty extreme poverty
Tajikistans Statistical Agency has been conducting l living standards surveys urveys (LSS) periodically since 2002, 2002 most recently in 2007 and 2009. As the same 1500 households were surveyed in 2007 and 2009, a living standards panel data set is now present, and is available on the World Bank website. website 90 Income poverty overty status in Tajikistan is defined in terms of per-capita capita consumption expenditures, , relative to the costs of purchasing foodstuffs for a diet of 2,250 250 calories per per-capita per day, plus an allowance for non nonfood consumption. The daily percapita poverty threshold is set at 4.56 Somoni (in 2007 prices) or $1.33 (at market exchange rates), of which 64 percent is devoted to food consumption. After adjusting for different price levels across the country, the poverty po line corresponded to monthly percapita expenditures of 139 Somoni in 2007 ($40) and 162 Somoni ($40) in 2009. Similarly, the extreme poverty linewhich line corresponds to the income needed to purchase the food basket mentioned above (i.e., 64 percent of the overall poverty line) was defined at 89 Somoni ($26) per month in 2007 and 10 104 Somoni ($26) per month in 2009.
Figure 25 Extreme poverty rates, % 20 19 18 17 16 15 18.9 17.4 17.5 17.5 16.9 17.5
Tajikistan
Urban 2007
2009
Rural
Figure 26: Poverty rates by the number of children in the households, % 80 60 40 20 0 56.6 54.6 39.2 29.6 61.6 71.5
None 2007
Two 2009
4 or more
Source: World Bank -Europe and Central Asia: Tajikistan Poverty Update 2007-2009. 2007
90
http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/EXTLSMS/0,,contentMDK:21878045~page TE/EXTERNAL/EXTDEC/EXTRESEARCH/EXTLSMS/0,,contentMDK:21878045~page PK:64168445~piPK:64168309~resourceurlname:LSMS_ISA_poster31.pdf~theSitePK:3358997~isCURL:Y,00.html#Docu mentation.

Thus defined, Tajikistans poverty p rate declined from 53 percent in 2007 to 47 percent of the population in 2009 (see Figure 24).91 The extreme poverty rate did not decline; it actually rose from 17.4 percent in 2007 to 17.5 percent in 2009.
Figure 27: : Distribution of the poor in Tajikistan, % 150 100 50 0 9 29 36 22 3
Share of population
8 29 44 15 5
Extreme poor
Dushanbe
7 30 41 18 4
Poverty
Sogd Khalton RRP GBAO
Figure 28: Poverty rates by Oblast, % 70 60 50 40 30 20 10 0 54 39 17 21 12 26 62
48 34 14
Dushanbe
Soghd
Khatlon
RRP
GBAO
In 2009, urban poverty rates continued to be lower than rural poverty rates. 42 percent of people in urban areas lived below the poverty level compared with 49 percent in rural areas. The decline in rural poverty from 2007 to 2009 was slower than the decline in urban poverty3.9 3.9 percentage points compared with 2.9 percentage points per year in the urban areas. areas Rural households saw an increase in extreme poverty rate (see Figure 25). Poverty rate increased for the households with four or more children (see Figure 26). The oblast with the highest poverty and extreme poverty rates in 2009 was Khatlon, followed by Sughd (Figure 27). Although 36 percent of all people in Tajikistan lived in Khatlon Khatlon, it contained a higher percentage of the extreme poor, 44 percent percent, and poor, 41 percent, , in Tajikistan. GBAO and Khatlon were the poorest oblasts in 2009. 62 percent of people in GBAO and 54 percent in Khatlon lived below the poverty line, compared with 48 percent in Sughd, 39 percent in RRP, and 34 percent in Dushanbe. Extreme poverty levels were
Extreme Poverty
Povert
Figure 29 Poverty and growth; urban vs. rural 20 rural 15

Growth rate
urban 9.9
18.2 10.5 8.8
10 5 2.3 0 -5 0 6.4
11.2 7.6 9.2 4.7
12.1 11.5
8.9 7.4
2.4 60 70 80
wealthy
-1.1 10 20 30 -1.5 40 50 -0.3 -1.6

Poor
90
100
Consumption Centile
Source: World Bank -Europe Europe and Central Asia: Tajikistan Poverty Update 2007-2009 2009.
91
This Section heavily borrows from World BankEurope Bank and Central Asia: Tajikistan kistan Poverty Update 2007 20072009.

similarly distributed across oblasts (see Figure 28) These data also underscore the importance of differential rural r and urban consumption and income growth rates (see Error! Reference source not found.). Between 2007 and 2009 there was no welfare increase for the poorest 40 percent of rural households households. Welfare, as measured by a basket of consumption, increased gradually from 1 percent growt growth from the middle to 18 percent growth for the richest rural people. Urban growth was more broad broadbased, but did not benefit the he very poorest. The poorest 10 percent did not experience any growth in consumption, while the somewhat better off people witnessed d increasing growth, up to 12 percent. . Surprisingly, the wealthiest 10 percent of urban residents experienced much smaller growth, which may reflect the impact of the global economic crisis. Energy poverty Household access to and use of electricity 98.4 percent in The LSS data indicate that electricity connection rates in Tajikistan are high98.4 2009, up from 96.1 percent in 2007.
Figure 31 Share of households reporting power cuts: summer 2007, % 100 90 80 70 60 50 40 30 20 10 0 93.4 74.1 75.1 67.9 Figure 30 Share of households reporting power cuts: winter 2007, % 100 90 80 70 60 50 40 30 20 10 0 90.1 77.2 49.1 29.7 14.3 11.3 9.1 6.9 2.4
Average Dushanbe
92.9
17.6 4.2 4.2
6 0.1 0.4
15 3.4 6.4
Other town
21.7 5.6 4.7

Village
7.8 1.4 2.5 3.2 1.1 1.1

Other town Village
Average Dushanbe
Never Every day Several times in a month Several times in a week
Never Every day Several times in a month Several times in a week
UNDP calculations, based on LSS 2007 data Figure 32 Use of electricity (in kWh brackets) in
2007, % of households 30 20 10 0
Up to 100 101-200 201-300 301-400 400 401-500 500>
26.2 15.9
21.8 10.1 5.2 4.0
, the 2009 Unfortunately, household hold questionnaire did not contain a question about power cuts, while there was one in 2007. Error! Reference source not found. and Figure 30 above describe the share of households reporting power cuts in 2007. The average duration for 2007 was 5.5. hours per day. As expected, cuts were mostly during the winter, and dramatically more common in
UNDP calculations, based on LSS 2007 data

other towns and villages than in Dushanbe. Dushanbe Unfortunately, the 2009 LSS data do not contain also information on the usage of electricity in kWh, Wh, while it is present in LSS 2007 (see Error! Reference source not found.). 26 percent of the population used 101-200 kWh per month. This would be enough to light a room for a couple of hours per day. The 2009 living standards survey database contains information on household electricity expenditures. Based on this, and on information about tariffs in 2009, we calculated usage in kWh (see Error! Reference source not found. and Error! Reference source not found.).
Figure 34: Share of households using electricity, urban vs. rural, % 100 99 98 97 96 95 94 93 98.9 97.4 96.1 95.4 98.1 Figure 33: Average monthly consumption of electricity per household urban/rural, kWh 435.7412.0 500.0 390.4 364.0 357.3 400.0 326.7 300.0 200.0 100.0 0.0 2007 2007 2009 2009 2007
2009
98.4
2007 2009 2007 2009 2007 2009 average Urban Rural
average
Urban
Rural
UNDP estimates, b based on LSS 2007and 2009 databases.
These data indicate that, while the share of households (both rural and urban) using electricity increased during 2007-2009, 2007 average household electricity consumption declined by some 8 percent during this time. time (These are consistent with national data on apparent electricity consumption,92 which also show an 8 percent decline during 2007-2009.) 2009.) Whereas a startling 14 percent increase was reported in Dushanbe, this growth was offset by declines in electricity consumption of 10 and 24 percent in rural and other urban areas, respectively.
Figure 36: Share hare of households using electricity, by location % 100 99 98 97 96 95 94 93
98.4 98.3 98.9 96.1 96.3 98.9 95.4
Figure 35: : Average monthly consumption of electricity per household, by location, kWh 600.0 477.3 458.3 418.9 500.0 390.4 364.0 357.3 346.3 326.7 400.0 300.0 200.0 100.0 0.0
2007 2009 2007 2009 2007 2009 2007 2009 average Dushabme Other towns Villages
98.1
2007 2009 2007 2009 2007 2009 2007 2009 average Dushanbe Other towns Villages
UNDP estimates, based on LSS 2007and 2009 databases
92
Defined as generation minus net exports.

It seems that whereas households in Dushanbe responded to reductions in district heating supplies and sharply higher gas prices by using more electricity for heat and cooking, households in rural areas and especially other cities simply had to make do with less electricity. Data from 2008 from Barqi Tojik also illustrate the low electricity consumption levels in rural areas (see Table 26): whereas 72 percent of the population lives in the rural areas, they consume less electricity (5.6 percent) than in the urban areas (13.9 percent percent).93
Table 26: Household electricity e consumption during 2006-2008
2006 Million kWh Households - Urban - Rural Total consumption Source: Barqi Tojik Sales Department 3,314 1,841 1,473 13,65 13,652 Share 25% 13% 11% Million kWh 3,044 1,786 1,258 13,967 2007 Share 22% 13% 9% 2008 million kWh 2,818 1,745 1,074 12,515
Share
23% 14% 9%
Figure 38: Share of households using electricity, poor vs. non-poor% 100 99 98 97 96 95 94 93 2007 2009 2007 2009 2007 2009 average Poor Not poor 96.1 95.6 98.4 97.5 96.5 98.9
Figure 37: Average monthly household electricity consumption, poor/non-poor, kWh

600.00 500.00 400.00 300.00 200.00 100.00 0.00
489.0 390.4 357.3 332.0 254.4 373.1
2007 20092007 20092007 2007 2009 average poor non poor
UNDP estimates, based b on LSS 2007and 2009 databases
The living standards survey data suggest that household income levels do not play a large role in determining access to electricity services. As for the monthly consumption, for the poor it increased and deceased for the non-poor, non poor, although still being higher than the consumption of the poor at 332 kWh in 2009. As Figure 39 shows, , electricity consumption by the poorest households (first quintile) increased slightly (2 percent) ) during 2007 2007-2009. By contrast, electricity consumption in the wealthiest households (fifth ifth quintile) dropped by
93
Promotion of Renewable and Sustainable Energy Use for Development of rural communities in Tajikistan, op cit.

some 47 percent. Some factor other than income would seem to be constraining household electricity consumption. These data also indicate that electricity consumption by the poorest (first quintile) households in 2009 was larger than th households in the second and third quintile, and only slightly below consumption by households in the fourth quintile.
Figure 40: Share of households using electricity, by quintile, %
99.3 100 99 98.3 99 97.7 97.3 98 97.2 96.6 96.3 97 95.7 96 94.8 95 94 93 92
2009 2007
Figure 39: Average monthly consumption of electricity per household, by quintile, kWh
800.00 700.00 600.00 500.00 400.00 300.00 221.5 200.00 100.00 0.00
2007 2007 2007 2007 2009 2009 2009 2009
2007 2009
747.8
356.9
417.3 333.1 361.3 398.5
324.0 286.0 260.5
2007
2007
2007
2007
2009
2009
2009
2009
Poorest Second Third Fourth Top quintile quintile quintile quintile quintile
Poorest Second Third Fourth Top quintile quintile quintile quintile quintile
UNDP calculations, based on the LSS 2007and 2009 data.
Genderspecified specified as femalefemale versus male-headed householdsis not correlated with differences in household access to electricity. Inter-household Inter differences ifferences are not large either in terms of shares of households using electricity, or in terms of average daily consumption levels (see Figure 41 and Figure 42)
Figure 42: Share of households using electricity, by gender of the head of household, % 99 98 97 96 95 94 2007 2009 2007 2009 2007 2009 average Female headed Male headed 96.1 96.3 95.5 98.4 98.1 98.5 Figure 41: Average monthly electricity consumption, by gender of the head of household, kWh Wh 500.0 438.4 450.0 390.4 357.3 350.7 378.7 358.7 400.0 350.0 300.0 250.0 200.0 150.0 100.0 50.0 0.0 2007 2009 2007 2009 2007 2009 average Female headed Male headed
UNDP calculations based on LSS 2007 and 2009 data.
Household size does not seem to be correlated with reductions in electricity use. The data in Figure 43 indicate that households with three or more children during 2007 2007-2009

reported a slight increase in electricity consumption, while households with at least six members reported a 4 percent decline in electricity consumption (half the national average).
By contrast, electricity consumption in households with at least one elderly member dropped by 18 percentmore more than double the national average.
Figure 44: Share households using electricity, by household size, % 100 99 98 97 96 95 94 93
98.4 96.1 96.6 99.1 96.5 95.5 99 97.2
Figure 43: Average monthly consumption of electricity per household, by household size, kWh 450.0 390.4357.3 387.1370.7364.0365.3405.7 400.0 333.2 350.0 300.0 250.0 200.0 150.0 100.0 50.0 0.0
2007200920072009200720092007 20072009 average Many With HH with member many elderly HHs 6+ children 3+
2007
2007
2007
2007
average
Many With HH with member many elderly HHs 6+ children 3+
UNDP calculations, based on LSS 2007and 2009 data.
Large differences between ethnic Tajik and Uzbek households, either in terms of access to electricity or consumption, consumption are not apparent. For households of other nationalities, nationalities however, the picture is rather strange. While the share of these households using electricity rose from 79 to 98 percent during 2007 2007-2009, their daily consumption dropped by a third (see Figure 45 and 46).
Figure 45: share households using electricity by nationality, % 120 100 80 60 40 20 0
96.1 98.4 97.1 98.8 94.9 97.3 78.8 97.5
2009
2009
2009
2009
Figure 46: Average monthly consumption of electricity y per household by nationality, k kWh
361.8 403.5 450.0 390.4 395.6 370.7 357.3 400.0 329.3 350.0 268.0 300.0 250.0 200.0 150.0 100.0 50.0 0.0 2009 2009 2009
2009
2009
2007
2007
2007
2007
2009
2009
2009
2007
2007
2007
average
Tajik
Uzbek
Other nations
average Tajik
Uzbek
Other nations
UNDP calculations based on LSS 2007and 2009 data.
2007

Household access to and use of gas. Household consumption of piped gas declined dramatically following the large price increase and interruptions in gas supply that began in 2007. These declines are most notable in Dushanbe, and in villages (see Figure 47 and Figure 48).
Figure 47: Gas pipeline users by location, %
100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 89.5 72.7
Figure 48: Gas pipeline users: poor/ non poor, % 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 72.7 76.0 70.7
80.5 45.5 44.6
20.9
13.3
20.9
25.0
11.1
19.3
2007 2009 2007 2009 2007 2009 2007 2009 Average Dushanbe Other towns Villages
2007 2009 2007 2009 2007 2009 Average Poor Not poor
UNDP calculations based on LSS 2007and 2009 data.
In contrast to natural gas, LPG use increased dramatically across the country (less in the rural areas), as until 2009 it was cheaper than natural gas. Small cylinders were the category mostly used both among the poor and non-poor non (see Figure 50 and 50).
Figure 49: Share of LPG users: poor/non-poor, poor/non %
60.0 50.0 40.0 30.0 20.0 10.0 0.0 2007 2009 2007 2009 2007 2009 % of hhs that use 10 kg cylinder % of hhs that use 15kg cylinder % of hhs that use 20 kg cylinder other
Figure 50: Share of LPG users sers by location, %

70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 2007 2009 2007 2009 2007 2009 2007 2009 Average Dushanbe Other towns Villages
Average
Poor
Not poor
UNDP calculations based on LSS 2007, 2009 data.
Household access to and use of different sources of heat. The living standard data indicate that a majority of the population relies on electricity and wood for heating (with the share of the latter increasing), followed by coal and dung (the share of bo both of which decreased eased in 2009 compared to 2007), as shown in Figure 51.
Figure 51: Household heating sources (%) 50.0 40.0 30.0 20.0 10.0 0.0 39.8 43.6 31.5 25.6 13.2 1.7 1.5
1. Electricity 2. Wood 3. Gas
0.40.4
4. Oil Petrol
12
16.7 10.2 1.6 0.3 0.60.1

8. No heating
0.5 0.3
9. Other
5. Coal
6. Dung
Average 2007
Average 2009
7. cotton stalks
UNDP calculations based on LSS 2007, 2009 data.
Access to and use of district heating. While the share of households who are connected to central heating systems actually increased (from 9 to 12 percent) ) during 20072009, they remain small in number (and are mainly in Dushanbe).
Figure 53: Share of households having and using district (central) heating by location, location %
120 100 80 62.6 60 40 20 0 2007 2009 2007 2009 2007 2009 2007 2009 8.5 12.2 3.7 3.7 0.6 0.5 38.8
Share of households that reported availability of central heating but dwelling was never heated by this source
Figure 52: Share of households having and using district (central) heating: poor/non poor, %. %
Share of households that reported having central heating %
120 100.0 100 80 60 40 20 0 2007200920072009 200920072009 Average Poor Not poor 12.2 10.3 16.9 90.6 91.8 91.7 90.1 90.5
95.1 92.3 90.6 91.8 75.0
100.0
60.0
23.5
8.5
6.0 4.5
UNDP calculations based on LSS 2007and LSS 2009 database
When asked if they have central heating, whether they actually are able to use is as a source of heating, over 90 percent of respondent households responded negatively negativelyboth poor and non-poor (see Figure 52 and 53). Use of gas for heating. The picture for using gas for heating is different. different The vast majority of households in Dushanbe and a other towns used gas (LPG) for heating in 2007 (compared to 45 percent in rural areas areas), and the pattern is the same across poor or and non-poor. non The situation was rather different in 2009: only o 45 percent used gas for heating in the small towns, 21 percent in Dushanbe, and only 11 percent in the rural areas. Across poor and non non-

poor households, usage levels dropped from over 70 percent in 2007 to 20-25 25 percent in 2009. These declines seem to reflect the rising prices for LPG that took hold towards the end of 2009. Interestingly, LPG consumption trends were quite similar across poor and non non-poor households in both 2007 and 2009, reflecting its availability and desirability (compared to natural gas) in 2007, , but decreasing affordability for both groups in 2009 (see see Figure 54 and Figure 55).
Figure 55: : Share of households using LPG for heating by location, %
100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 89.5 72.7 80.5 45.5 44.6 20.9 13.3 11.1
Figure 54: Share of households using LPG for heating, poor/non poor, %
80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 72.7 76.0 70.7
20.9
25.0
19.3
2007 2009 2007 2009 2007 2009 2007 2009
2007 2009 2007 2009 2007 2009 Average Poor Not poor
UNDP calculations based on LSS 2007and LSS 2009 database
Use of other fuels. Use of wood increased increase in towns (to 36 of households households, up by 5 percentage points) and in villages (at 57 percent, up 4 percentage points). . The use of oil and petrol increased substantially in other towns and stood at 19 percent, , at the expense of using dung and coal (the latter due to increased prices, most likely). In the villages, the use of electricity for heating increased from 5 to 1 15 percent, , at the expense of burning dung. The use
Figure 56: Sources of heating: by location, % 120.0 100.0 80.0 60.0 40.0 20.0 0.0
2007 2009 2007 2009 2007 2009 9. Other 8. No heating 7. cotton stalks 6. Dung 5. Coal 4. Oil Petrol 3. Gas 2. Wood Dushanbe Other towns Villages 1. Electricity
UNDP calculations, based on 2007, 2009 LSS data.
of coal slightly decreased in villages as well. In Dushanbe, the use of electricity city for heating rose from 88 to 97 percent. . The use of cotton stalks decreased and is not significant (see Figure 56).

Figure 57: Share of households purchasing firewood in the winter by location, % 100.0 80.0 60.0 40.0 20.0 0.0 77.8
48.7
63.8 45.0 10.6 14.9
59.3
68.0
2007 2009 2007 2009 2007 2009 2007 2009 Total Dushanbe Other towns Villages
UNDP calculations, based on LSS 2007and 2009 databases.
For poor households, the use of wood increased from 40 to 51 percent with decreasing shares of coal (from 15 to 11 percent) percent and dung (from 22 to 15 percent percent). The share of electricity remained roughly constant at 19 percent. For the non-poor, poor, the use of electricity increased (from 31 to 39 percent). ). Use of cotton stalks decreased by the poor, and stayed at same level for the non-poor, poor, but is insigni insignificant (see Figure 58).
Figure 58: Sources of heating among poor/non-poor, poor/non % 120.0 100.0 80.0 60.0 40.0 20.0 0.0 2007 Poor 2009 2007 Not poor 2009
9. Other 8. No heating 7. cotton stalks 6. Dung 5. Coal 4. Oil Petrol 3. Gas 2. Wood 1. Electricity
UNDP calculations, based on LSS 2007and 2009 databases
78 percent of rural households reported use of wood as a heating source in 2009, up from 68 percent in 2007. . The same sa is true for the small towns, where 68 percent of households were heating with wood in 2009, up from 45 percent in 2007. . Even in Dushanbe 15 percent of households reported heating with wood, up from 11 percent rcent in 2007 (see ( Figure
57).
Energy affordability Affordability pertains to the ability of certain consumers or consumer groups to pay for a minimum level of service. It should be distinguished from a number of relat related notions: affordable versus low-cost. low Services may be low-cost, cost, but not necessarily affordable. Ability to pay versus willingness to pay. While affordability can be studied via an analysis of income and expenditures, willingness to pay is best b assessed through dedicated willingness-to to-pay surveys, with contingent valuation being the most common method used.

Estache et al. (2002)94 distinguish between the affordability of access and the affordability of consumption. This is an important distinction in the context of Tajikistan, where in the high mountainous areas there are households not connected to the electricity and especially gas grids. Affordability of utility services can be used to measure non-income poverty,95 along with other measures, like coverage and reliability as in Foster et al. (2000)96.
Table 27: Benchmarks used in measuring affordability, % of total household income/expenditure Source World Bank (2002) WHO (2004)98 UN/ECE99 UK government100 US government101
97
Electricity 10-15 10
Heating
Water 3-5
15 10 6 3 2.5
Source: Can poor consumers pay for energy and water? An affordability analysis for transition countries, Fankhauser and Tepic, EBRD (2005)
Affordability is often discussed in the context of social support programmes102 or poverty assessments.103 It is usually measured as a ratio specifying the maximum share of
94
Estache, Q. Wodon and V. Foster (2002), Accounting for poverty in infrastructure reform: Learning from Latin America's experience, World Bank, Washington DC. Foster V. (2000):Measuring the impact of energy reform-practical options, in Chapter 4 of ESMAP (2000), Energy and development report 2000: Energy services for the worlds poor, Energy Sector Management Assistance Programme, World Bank, Washington DC.
95
96 Foster V., Tre J-P. and Wodon Q (2000): Energy prices, energy efficiency and fuel poverty, 2000, World Bank, Washington DC 97
World Bank (2002), Sourcebook for poverty reduction strategies, core techniques and cross cuttingissues, Washington DC
98
WHO (2004), Energy sustainable development and health, in Chapter 3 of Access to electricity and heating, WHO background papers, June , Geneva Available online at http://www.unece.org/env/europe/reps.pdf
99
100
The UK government set 3 % as a burden threshold for the lowest income decile (see http://www.sustainabledevelopment.gov.uk/sustainable/quality04/maind/04j06.htm and http://www.scotland.gov.uk/library5/environment/sfps.pdf). The US Environmental Protection Agency (http://www.epa.gov).
101 102
See, for example, Lovei L., Gurenko E. Haney M. OKeefe P. and Shkaratan M. (2000): Maintaining utility services for the poor, policies and practices in central and eastern Europe and the former Soviet Union, World Bank, Washington DC. See also Velody, M. Cain and M. Philips (2003), A regional review of social safety net approaches in support of energy sector reform, mimeo, USAID, October. See Tabor S. (2002): Assisting the poor with cash; design and implementation of social transfer programmes, World Bank, Washington DC; and World Bank (2000), Making transition work for everyone:
103
Page 72

monthly household income or expenditure that should be devoted to utility services, electricity, district heating, ting, etc. Governments and international financial institutions have developed ad hoc rules defining acceptable levels level of utility expenditures, which are summarized in the EBRD (2005)104 (see Table 27). Although there is no universal benchmark, the table suggests that around 25 percent of household expenditures devoted to electricity, heating, and water over the course of a year (expenditure re may fluctuate seasonally) may be a maximum acceptable threshold. Such uch affordability measures warrant further comment comment, , in a number of respects. Using household expenditures rather than income tends to provide more accurate information, as income data rarely capture all sources of household income. This is particularly true for transition economies, where informal activities s often provide substantial shares of household Figure 59: : Share of electricity payments in total income.
monthly household expenditure, average, %
4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 3.6 2.6 1.7 1.6 1.2 2.0 2.2 1.7 1.9 1.4
Utility expenditures can be defined either in terms of actual payments or as billed amounts. In transition economies economies, the differences can be substantia substantial, since many utilities only collect a fraction of payments due.
Average expenditures on utility services relative to average Poorest Second Third Fourth Top quintile quintile quintile quintile quintile household incomes can provide general information about affordability. . However However, assessing UNDP calculations, based on LSS 2007and 2009 database databases expenditure ratios for househ households belonging to different income/expenditure deciles/quintiles deciles/ and for specific vulnerable groups (such as pensioners and recipients of social assistance) can provide more accurate and more useful information. information
2007 2009 2007 2009 2007 2009 2007 2009 2007 2009
Changes in affordability should be assessed under different policy scenarios, taking into account the effects of tariff increases and income growth on the demand for utility services.
Figure 59 shows the shares share of household expenditures devoted to electricity in Tajikistan in 2007 and 2009. For the poorest quintile this share rose to 3.6 percent in 2009, from 1.7 percent in 2007. This is not high by international standards. However, households may use generators for lightingexpenditures es for which may not be captured by these data. data Also, heating expenditures can be a major burden for vulnerable households. The 2009 survey data on the shares of other energy expenses in household budgets in 2009 (see Figure 60Figure 59) indicate that the he major cost item for households are expenses on wood and coal, with higher proportions proportion for the poorest quintiles.
Poverty and inequality in Europe and Central Asia; and World Bank (2001), World development indicators, Washington DC.
104
EBRD (2005): Can poor consumers pay for energy and water? An affordability analysis for transition countries, by Fankhauser S and Tepic S., London, UK.

The share of wood in these expenses is highest for the poorest quintile (23 percent). percent Spending on coal is the next largest expense (around 14 percent). The burden of energy expenses is the largest for the poorest quintile in the towns: about 31 percent of their expenditures go to firewood purchases.
Figure 60: Shares of household expenditures on various energy services/sources, 2009, % Country
25 20 15 10 5 0 Average Electricity Q1 LPG Q2 Firewood Q3 Coal Q4 Other Q5 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Average Electricity Q1 LPG Q2 Q3 Firewood Q4 Coal Q5 Other
Dushanbe
Other towns
35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Average Q1 Electricity LPG Q2 Q3 Q4 Q5 Firewood Coal Other 10.0 5.0 0.0 25.0 20.0 15.0
Villages
Average Q1 Q2 Q3 Electricity LPG Firewood
Q4 Coal
Q5 Other
UNDP calculations, based on LSS 2009 database.
The next in line is the poorest quintile in rural areas, with around 22 percent of household expenditures devoted to wood. Households in the poorest quintiles in Dushanbe devote around 16 percent of their expenditures to wood. The poorest quintiles use of electricity is slightly lightly larger in Dushanbe (4.5 percent of expenditures), and around the same (3.5 to 3.7 percent) ) in other towns and rural areas. The largest share of expenditures on coal is in small towns at 18 percent. . Approximately Ap the same share (3.2 percent) ) of expenditures is devoted to LPG purchases across ross the country.

The following estimations are based on weighted consumption of all types of energy resources during the year by all households and are grouped by consumption quintiles and place of residency (includes weighted consumption of electricity, central heating, firewood105, coal, diesel, kerosene and other LPG), LPG) see Figure 61, Figure 62 and Figure 63.
Figure 62: Average annual energy consumption in total household consumption for the poorest quintile by location, 2009, %,
20.0 15.0 10.0 5.0 0.0 Figure 61: Average annual energy consumption in
total household consumption, by location, 2009, %
15.9 9.2
17.5
16.7
average Dushanbe Other town Poorest quintile
Rural
12.0 10.0 8.0 6.0 4.0 2.0 0.0
9.9 5.2
10.2
11.2
average Dushanbe Other town
Rural
UNDP calculations, based on LSS 2009 database
Figure 63: Average annual energy consumption in total
household consumption, poor/ non poor, 2009, %

12.8 15.0 10.0 5.0 0.0 Poor Not poor
8.9
As we can see, average spending on energy sources an and services is 9.9 percent, for the poorest quintile the average is 15.9 percent and 17.5 percent for the poorest quintile in the towns and 16.7 percent in villages. Average for the poor is 12.8% 12.8%.
These figures indicate that shares of spending on energy are UNDP calculations, based on n LSS 2009 database within the international benchmarks on affordability. It should be reiterated however that these are averages across the year and spending on energy during the winter would be be higher. Also, it would differ for the households who use various combinations of heating sources. For example, t the survey data shows that 30.2 percent of households are using simultaneously simulta firewood, coal and electricity for heating. . The shares share of expenses es of energy for this group are much higher than these averages described. Error! Reference source not found. shows the highest shares of household ousehold expenditures of the poorest quintile on this energy consumption bundle (consisting of electricity, wood and coal) is in small towns (with the households in the poorest quintile devoting up to 55 percent of their monthly expenditures on energy), followed by rural areas (poorest rural households spending up to 39 percent of their budgets on energy), and then Dushanbe (poorest households devoting up to 32 percent of their expenditures to energy).
These figures, especially in the small towns and villages villages might underestimate the actual levels of wood used for heating: expenditures on wood might not fully reflect consumption, particularly for the poor, since households might collect part or all the wood they use rather than purchasing it.
105

Figure 64: : Average energy affordability for households using simultaneously simultaneously electricity, wood and coal ( share of household expenditures, 2009, %) Overall
50 40 30 20 10 0 13.8
Coal
Dushanbe
40.0 30.0 20.0 10.0 0.0 15.7 4.5 11.9
Coal Firewood Electricity
22.7 3.6
Firewood Electricity
Other towns
60.0 50.0 40.0 30.0 20.0 10.0 0.0 3.9 31.3 18.3
Coal Firewood Electricity 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0
Villages
13.1 Coal 22 3.5 Firewood Electricity
UNDP calculations, based on LSS 2009 database.
Energy, food, and household indebtedness. As a result of the compound crisis of 2007-2008 vulnerable ulnerable households in rural areas saw their stocks of food and seed destroyed. In urban areas the most vulnerable were forced to spend their income on alternative heating, leaving less for food and healthcare. The 2009 living standard survey data indicate that poor households devoted 63 percent of their expenditures to food (see Error! Reference source not found.).
Figure 65: : Share of household expenditures on food (2009, %)
66.0 64.0 62.0 60.0 58.0 56.0 54.0 52.0 50.0 63.4 58.8 58.3 58.9 59.0 56.0 58.3 58.6 59.8 60.9 60.4 58.9 55.3
Figure 66: : New debts incurred in past three months, months 2008-2010
UNDP calculations, based on LSS 2009 database
Source: Tajikistan Food Security Monitoring System; WFP and UK Aid, April 2010
When combined ombined with spending on energy by poor in the range of 76 76-77 percent (and more for selected groups groups, and especially in the winter time), this implies little left for other ca categories of spending. This T is confirmed by the results of the regular surveys conducted by WFP/DFID (see Figure 66), which show an increase in the percentage age of vulnerable households contracting new debts since the beginning of 2009 2009.

4. POVERTY VERTY ALLEVIATION AND AN ENERGY SECTOR
DEVELOPMENT
The benefits of improving household electricity supplies. The large investment projects described above should help Tajikistan to reduce or eliminate energy shortages. Sangtuda-1 and -2 alone should add 890 megawatts installed capacity in power generation. . Tajikistans Center for Climate Change106 estimates that the implementation of the governments small hydropower programme Source: Enterprise perception survey, EBRD/WB should provide or improve electricity supplies to more than 240,000 rural households (around 1.5 million people).107
Figure 67: : Enterprise perception ranking: Top 10 constraints on business investments in Tajikistan
How would this affect income poverty? While there here are no established indicators directly linking changes in energy/electricity supplies to poverty, the value of lost l load (VoLL) shows the costs of power outages, both directly to consumers (e.g., added fuel costs to run back-up up generators) as well as indirect costs, such as the opportunity costs o of not having electricity to use. VoLL is typically estimated through:

Willingness-to-pay pay studies, in which respondents are asked what they would be willing to pay to avoid a power outage; Production loss surveys, in which a sample of firms are asked to estima estimate sales lost due to a real or hypothetical power outage; or Captive generation costs, which analyze the costs of back-up up electricity options (as a proxy for willingness to pay).
106
Kayumov A. and Kabutov K. Socio Socio-Economic Economic Assessment of the Production and Consumption of Renewable Energy Sources in the Republic of Tajikistan, Center of Climate Change, Hydro-Meteorological Hydro Meteorological Agency, Dushanbe, Tajikistan.
107
This estimate, which was developed within within the framework of the UNDP project on the Development of electricity supply for rural communities of Tajikistan, is based on an assumption that the mean level electricity demand per rural household is 5.7 kWh/day (cooking1.6 (cooking kWh/day; lighting0.5 kWh/day; Wh/day; heating heating2.0 kWh/day; television0.3 0.3 kWh/day; refrigerator1.1; refrigerator other0.2) or 2000 kWh annually.

No credible VoLL estimates have been found for Tajikistan; comparative studies suggest an estimated VoLL of 1.36 Euro/kWh for countries in similar circumstances.108 Country assessments can vary considerably, however. The government of Tajikistan estimates that it is losing about 7 percent from its annual GDP due to power cuts. Tajikistans 2010-2012 Poverty Reduction Strategy estimates that a 1 percent increase in GDP reduces the poverty rate by around 0.6 percent. A crude estimate would be that ensuring uninterrupted power supplies would reduce the poverty rate by 0.042 percent, which would lift 120,000 people out of poverty.109 A common short-term response to energy shortfallsespecially by households and other small-scale usersis to arrange for emergency power capacity (e.g., via diesel generators). Unlike traditional power generation projects, such capacity can be brought on line in a matter of days. But because of diseconomies of scale, the costs of generating electricity in this way are typically $0.20$0.30 per kWh. For some countries, the price tag can be 4 percent of GDP.110 Energy Sector Management Assistance Program (ESMAP)111 reports a willingness to pay of around $0.10$0.40 per kWh, for lighting and television alone.112 Based on this, a World Bank study estimates that, by adding public good benefits (such as street lighting, and global benefits of reduced carbon dioxide emissions, where applicable) the benefit for an average household consuming 3040 kWh a month is about $60 per month per household.113 Increased access and electricity supply reliability would also improve the business environment in Tajikistanespecially for small and medium-sized enterprises. As shown in Figure 67, access to electricity was cited as the most important constraint on business investments in Tajikistan (by 25 percent of respondent firms) in a recent sample.114 According to the Association of Power Engineering Specialists of Tajikistan, the construction and maintenance of small hydropower plants, and the output they generate, creates 40 new jobs per megawatt of installed capacity.115 In addition, the collection of firewood, dung, and other combustibles that may be gathered (as well as purchased) imposes a costly time burden of up to 8 hours a weektime which could be used productively. On the basis of a 15-year (1988-2003) panel data set, a
Regulation of continuity of supply in the electricity sector and cost of energy not supplied, Ilaria Losa ERSE S.p.A. and Osvaldo Bertoldi - ENGINET S.r.L; available at http://www.iccgov.org/iew2009/speakersdocs/Losa-etal_paper_RegulationOfContinuityOfSupplyInTheElectricitySector.pdf
109 110 108
E.g. http://www.waterpowermagazine.com/story.asp?storyCode=2052456
World Bank (2008): The Welfare Impact of Rural Electrification: A Reassessment of the Costs and Benefits, IEG, Washington DC. 111 Established in 1983, the Energy Sector Management Assistance Program (ESMAP) is a global, multidonor technical assistance trust fund administered by the World Bank and cosponsored by 13 official bilateral donors.
112
ESMAP (2003): Rural Electrification and Development in the Philippines: Measuring the Social and Economic Benefits. ESMAP Report 255/03, World Bank, Washington, DC. World Bank (2008): The Welfare Impact of Rural Electrification: A Reassessment of the Costs and Benefits, IEG, Washington DC http://rru.worldbank.org/BESnapshots/Tajikistan/default.aspx According to the Concept of the development of small scale hydropower (2009)
113
114 115
Page 79

recent World Bank study found that the number of home businesses grew significantly faster in communities that became electrified than in either communities that did not, or in those that had been electrified earlier. Electrification also extends the working hours of home businesses, increasing net income from these activities.116 The elimination of the power cuts, and better access to electricity, can be expected to significantly reduce non-income poverty (in terms of access to quality health, education services, etc.). A recent World Bank study found that in urban areas, improving household electricity supplies can reduce both infant and under-five mortality rates; and that the effect is large, significant, and independent of income levels.117 Less combustion of traditional solid fuels such as crop residue, and dung can be expected to reduce the incidence and severity of respiratory ailmentsespecially for the elderly, women, and young children. A review of existing studies showed that exposure to indoor cooking using traditional methods increased the risk of premature death by a factor between two and five.118 Improvements in indoor air quality can also come about through changes in lighting sources. The harmful particulates emitted by kerosene lamps can be measured by the concentration of the smallest particles per cubic meter (PM10). The extra risk of respiratory sickness from exposure to certain levels of PM10 is captured in the hazard ratio (the relative probability of the exposed versus unexposed being sick), which is 3.5. Lost adult work days average 3.0 per year, and the additional under-five mortality rate is 2.2 per 1,000. Substituting electric lighting for kerosene lamps therefore is estimated to have a quantifiable health benefit of $2.50 per household per day119. This is very important for Tajikistan, with its heavy reliance on firewood, dung, and kerosene/oil products. Improving energy sector governance. Movement toward cost recovery tariffs, and improving the governance and regulation of energy companies, are essential if Tajikistan is to attract the investments it needs into its energy sector. In many developing countries, pricegap comparisons understate the total size of the difference between actual and cost-recovery tariff levels, particularly because of theft and poor collection rates. Such hidden costs, which are estimated to typically average 4 percent of GDP, for Tajikistan are estimated at above 10 percent of GDP.120 The governments intention to encourage private investment in infrastructure, and in the energy sector in particular, is clear. Public-private partnerships have provided an important vehicle for attracting investment into utilities and infrastructure in many transition economies. Evidence of improvements in the quality of service provision as a result of private participation is abundant.121 In fact, Tajikistan has its own good example of the
116
World Bank (2008): The Welfare Impact of Rural Electrification: A Reassessment of the Costs and Benefits, IEG, Washington DC
117
Wang, Bolt and Hamilton (2003), Estimating the potential lives saved from improved environmental infrastructure, Environment Department, World Bank, Washington DC World Bank (2008): The Welfare Impact of Rural Electrification: A Reassessment of the Costs and Benefits, IEG, Washington DC
Ibid
118
119
120
Ebinger, Jane, 2006, Measuring Financial Performance in Infrastructure: An Application to Europe and Central Asia, Policy Research Working Paper 3992, World Bank, Washington, DC. While in some cases the results are mixed, and in others unsatisfactory, not all of these projects were equally well conceived to start with. For more on this, see Ibid.
121
Page 80

importance of good governance and public-private partnerships in utilities, in P Pamir Energy, Central Asias first energy-sector. sector. Pamir Energy generates more electricity in Gorno Badakhshan than Barqi Tojik had done; done it increased collections, reduced losses losses, improved service delivery, , and combined higher tariffs ta with donor-supported social pr protection. The better-than-expected expected revenue picture reflects public outreach (inter alia via working with local village organizations), a willingness to disconnect non-payers, non and the effective use of lifeline tariffs. The social ocial protection arrangements made transparent for the f first time the amount of subsidies that were being given, and to whom. Understanding where these subsidies went contributed to increased payment discipline.
Figure 68: Potential impact of increased elect electricity tariffs on affordability (% % of household expenditure expenditure) Dushanbe
10.0 8.0 6.0 4.0 2.0 0.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0
Other towns
6.8 3.7 3.9 2.2 4.7 2.7 4.8 2.8 4.1 2.3 2.6 1.5
7.9 4.2 4.5 2.4 5.6 3.2 4.9 2.8 4.9 2.8 3.3 1.9
Tariff= $0.0186 (7.5 dirham) Tariff = $0.034 (13.1 dirham)
Rural
7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 3.1 1.8 3.5 2.4 6.0 4.3 3.0 1.7 2.8 1.6 2.1 1.2 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 3.5 2.0
Country average
6.4 4.5 3.6 2.6 3.6 2.0 3.3 1.9 2.5 1.4
UNDP estimates.

Figure 69: Potential impact of increased electricity tariffs on average household energy affordability
Energy cexpenditures in total househols expenditures for the poorest quintile, %
25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Average Dushanbe Other town Rural
18.6% 12.6%
20.4%
19.3%
Poorest quintile
Energy expenditures in total household expenditures, average, %

14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Average Dushanbe Other town Rural
11.4% 7.0%
11.8%
12.5%
Rising energy tariffs and prices: potential impact on poverty. Tariffs increases in conditions of widespread poverty and food insecurity can have a dramatic impact on vulnerable households, particularly if they are not mitigated by effective, adequate social protection. In Figure 68 we show the results of a simulated impact on household budgets of the increased electricity tariffs alone: taking as a benchmark the cost recovery level at 13.1 dirham ($0.034).122 The effect on poor households will be dramatic, with the poorest quintile devoting 6 68 percent of their household expenditures to electricity alone. (We assumed that household electr electricity consumption and overall household expenditures remain unchanged. unchanged.) In Figure 69 we simulate the effect of the increased tariffs of electricity on the share of energy expenses in the household budget. (We assumed that the combined impact of household incomes growth and the inflation will be 0; we also assumed no increase in the prices s of other energy sources over and above the inflation). The poorest quintile in other cities will spend the most, around 20 percent of household expenditure being spent on energy related expenses. It needs to be remembered however that again, as in Chapter ter 3 (where the current energy affordability is discussed) these are annual averages, and the shares of household expenditures in the household budgets will be much higher, for some, reaching more than half of their monthly household expenditure budgets.
Average
Energy expenditures in total household expenditures , poor vs non-poor poor

15.0% 10.0% 5.0% 0.0% Average poor non poor
11.4%
12.8% 8.9%
UNDP estimates
122
Forecast parameters of social and economic development, Tajikistan.

These figures have a rough character; more rigorous estimates would require the application of more complicated theoretical tools (e.g., computable generable equilibrium models) with demanding data requirements. In making such calculations, it is importa important that all relevant costs and benefitsincluding benefits including environmental and health externalities externalitiesare captured by the relevant modeling framework (see Figure 70 below).123
Figure 70: Social, ocial, economic, and environmental e impact of energy subsidies ubsidies (UNEP)
Source: Analysis of the Scope of Energy Subsidies and Suggestions for the G-20 G 20 Initiative, IEA, OPEC, OECD, World Bank Joint Report, prepared for submission to the G G-20 20 Summit Meeting Toronto (Canada), 26-27 26 June 2010, adapted from United Nations Environment Programme (UNEP) 2004. The Use of Economic Instruments in Environmental Policy: Opportunities and Challenges. Division of Technology, Technology, Industry and Economics. Paris.
According to the governments programme for tariff increases, the process of raising tariffs toward cost-recovery levels is to continue at least through 2012. As the government skipped the increases that had been planned for July 2010 and January 2011 2011, this process could extend into 2013 and beyond. beyond Whether this pace is gradual enough is a very difficult question to answer, , for both analytical and philosophical reasons. reasons The example from Armenia indicates that sharper increases in tariffs are possible, if coupled with effective reform of the social assistance system (see Annex 1). 1)
123
The IEA/OECD/OPEC/World Bank joint report contains some examples of such empirical studies.

5. SOCIAL ASSISTANCE TO MITIGATE THE IMPACT OF
RISING ENERGY PRICES
Energy sector reforms are usually based on the proposition that households should face prices that cover most (at least) of the costs of the energy they consume. If energy prices are not set at cost-recovery levels, the investments needed to modernize old and build new infrastructure will not be forthcoming. This is particularly the case in conditions of rising global primary energy product prices and, for Tajikistan, disrupted regional energy trade and supplies. With more than two thirds of their budgets going to foodstuffs and another 30 percent going for heat and electricity, low-income households are poorly placed to withstand further tariff increases. This raises questions about the magnitude, form, and effectiveness of energy subsidiesand social protection in generalfor low-income households. Lovei et al (2000)124 provided one of the earliest generic quantitative evaluations of social policy alternatives, and recommended detailed surveys of the consumers and analysis of the sector before applying these alternatives in a given country. The World Banks 2006 regional infrastructure study125 summarizes the benefits and shortcomings of the main subsidy schemes (see Table 28). Key questions in selecting an appropriate subsidy scheme include:126

Coverage: What percentage of the poor is reached by this instrument? Targeting: What percentage of the subsidy goes to the poor? Predictability: Can the poor be sure what they will receive the subsidy, and plan accordingly? Distortions: While all subsidies have distortionary elements, are these of unacceptable dimensions or character? Administrative costs: How expensive and practical is the schemes administration? Target consumption: How good is the scheme at ensuring that households enjoy minimal access to heat and power? Balanced approach: How good is the scheme at balancing the financial needs of power, heat, and fuel suppliers with consumers ability to pay? Cross-subsidization: Is subsidization taking place within a sub-sector (for example, power) or between sub-sectors (for example, between power and heat)? Social protection in Tajikistan: the current system
The utility payment assistance programme has been in place in Tajikistan since at least 2003. Under this programme, low-income households are granted compensation for their usage of electricity and natural gas.
124
Lovei L., Gurenko E. Haney M. OKeefe P. and Shkaratan M. (2000): Maintaining utility services for the poor, policies and practices in central and eastern Europe and the former Soviet Union, World Bank, Washington DC.
125 World Bank (2006): Infrastructure in Europe and Central Asia region: approaches to sustainable services, DC. 126 World Bank (2010b): Lights out?: the outlook for energy in Eastern Europe and the former Soviet Union, DC.
Page 84

Table 28: Benefits and shortcomings of social assistance mechanisms
Mechanism
Notional burden limits approach
Benefits
Benefits can be predicted with reasonable certainty. Administrative costs are relatively low.
Shortcomings
Coverage and targeting of the poor is usually relatively low; there are heavy administrative burdens on the poor associated with its application. It is one of the most distortionary mechanisms of all utility subsidy mechanisms on the demand side. Costly for the budget. A network of offices needed to administer the scheme The administrative costs to identify and target the poor would still be considerable.
Life-line tariffs
High coverage of the poor. Targeting ratio improves as the size of the initial block decreases. The benefits received are highly predictable, especially through a twoblock life-line tariff. The scheme is simple to administer.
Since the poor tend to be under-represented among those with utility connections, many would not benefit. Reliable (tamperproof) metering or a reasonable proxy (such as apartment size for heating) are needed to estimate consumption. Disciplined meter readers/controllers are needed. There is a significant burden on the budget, on the finances of the utility, or on other (industrial) consumers (in the case of crosssubsidization). Coverage of the poor as achieved by earmarked cash transfer schemes is highly uncertain, and in most surveyed countries was low. It is administratively demanding.
Other earmarked cash transfers
Earmarked cash transfers or burden limits approach based on the notions of realistic basic minimum needs might operate better if the amounts are transferred directly to the utility or paid to the consumers only upon production of receipts for full payment of utility bills. The targeting ratio is relatively high; the net financial burden on utilities is low.
Nonearmarked cash transfers
Coverage depends on the ability and willingness of the poor to meet the eligibility criteria. It is the least distortionary of the utility subsidy mechanisms. There are no additional administrative requirements if a social assistance system is already in place. There is no financial burden for utilities or other (non-household) consumers.
The targeting ratio is often problematic. Analysis of household budget survey data (2002) from 17 countries indicates that the coverage by cash transfers such as pensions, family allowance, child benefits, unemployment benefit, housing allowance and means tested benefits is on average 69% of the poor for the region, the range being 25% in Turkey to 100% in Hungary. The percentage of cash transfers reaching the poor rarely exceeds the percentage of the poor in the population. Thus the design of any targeted subsidy for the poor based on these cash transfer systems would also have only a moderate coverage of the poor and high levels of leakage to the non-poor. There is a significant fiscal cost. This would be practical only in those countries where poverty levels are low (generally less than 10%) and state budgets can accommodate the administrative and substantive costs, and informal incomes are low or insignificant so as not to distort means testing necessary to design the levels of income supplement. Further, payment discipline must be strictly enforced, since the recipients of cash transfers would have the freedom of choice as to how they use their income supplement. Examples of such countries would be Hungary and Poland.
Compiled from different sources. Main reference: Azerbaijan: Issues and Options Associated with Energy Sector Reform, World Bank (2005)
Page 85

The amounts available in the past are as in Table 29:127
Table 29: State budget allocations for the electricity and gas assistance programme Year State budget allocation (million Somoni) 25 ($7.3 million) 28 ($8.2 million) 36 ($8.8 million) 36 ($8.2 million) Allocation to electricity (million Somoni) 17 ($4.9 million) 19 ($5.5 million) 25 ($6.1 million) 25 ($5.7 million) Share of electricity subsidies in programme 68% 68% 69% 69%
2007 2008 2009 2010
Source: ADB (2009): Republic of Tajikistan: Strengthening Corporate Management of Barqi Tojik, Harrison E., Corporate Solutions, under a contract with ADB for the Ministry of Energy and Industry, Republic of Tajikistan, September 2009.
Based on the official statistics, as of 1 January 2009 Tajikistan had 7,392,000 residents living in 1,218,500 households. Some 241,000 households (20 percent) were beneficiaries of these subsidies; their geographical distribution is presented in Table 30.128
Table 30: Number of electricity and gas assistance programme recipient households by region Region Gorno Badakhshan Sughd Khatlon City of Dushanbe Subordinated cities and regions TOTAL Population 191,000 2,171,000 2,657,000 695,000 1,678,000 7,392,000 Households 33,000 382,000 397,000 139,000 268,000 1,219,000 Poor households 7,000 76,000 77,000 28,000 54,000 241,000
Source: ADB (2009): Republic of Tajikistan: Strengthening Corporate Management of Barqi Tojik, Harrison E., Corporate Solutions, under a contract with ADB for the Ministry of Energy and Industry, Republic of Tajikistan,
Over time, the programme has undergone several modifications, in order to increase coverage and reduce leakage. In 2009, by presidential decree129 energy saving light bulbs were provided at no charge to 241,000 low income households, during the second half of the
ADB (2009): Republic of Tajikistan: Strengthening Corporate Management of Barqi Tojik, Harrison E., Corporate Solutions, under a contract with ADB for the Ministry of Energy and Industry, Republic of Tajikistan, September 2009.
128 129 127
Ibid. Presidential Decree no. 653, April 24, 2009.
Page 86

year. Approximately 2 million light bulbs at the cost of 18 million Somoni ($4.5 million) were distributed, absorbing more than half of the electricity and gas subsidy programmes budget. This assistance was provided in lieu of direct subsidy payments due. At present, the government pays a benefit of 9 dirhams ($0.02) per kWh, which is thought to be equivalent to the cost of a basic allocation for consumption of electricity and natural gas (see Table 31).
Table 31 Allowances under the social assistance program for electricity and gas Type of service Usage indicators- electricity Natural gas service available Usage indicators- electricity Natural gas service unavailable Usage indicators- natural gas Natural gas meter- absent Usage indicators- natural gas Natural gas meter present Allowances April- September, Up to 100kWh household October March, Up to 200 kWh household April- September, Up to 150kWh household October March, Up to 250 kWh household April- September, 10cm per person October March, 12 cm per person April- September, 20 cm per person October March, 30 cm per person
Source: ADB (2009): Republic of Tajikistan: Strengthening Corporate Management of Barqi Tojik, Harrison E., Corporate Solutions, under a contract with ADB for the Ministry of Energy and Industry, Republic of Tajikistan, September 2009
The amount of compensation provided to each low-income household is based on the time of the year, actual (or estimated) electricity consumption, the availability of natural gas service to the household, and whether or not such service is metered. Households that are not connected to the electricity and gas grids do not receive these benefits, even if they are very poor. The compensation scheme involves the following steps:130 1) Identification of eligible households. Beneficiaries are identified by the district administration (hukumat), with the deputy heads of the district hukumat serving as the chairmen of the commissions that selects beneficiaries. These commissions consist of representatives from the jamuats (sub-districts), local offices of the Ministry of Labour and Social Protection, local financial departments, local statistics office, local electricity and gas offices, and others. The secretary of this
The description is taken from ADB (2009),Republic of Tajikistan: Strengthening Corporate Management of Barqi Tojik, Harrison E., Corporate Solutions, under a contract with ADB for the Ministry of Energy and Industry, Republic of Tajikistan, September 2009: and World Bank (2010a): Tajikistan: Delivering Social Assistance to the Poorest households, Report No: 56593-TJ, Washington DC.
130
Page 87

commission, the only paid position (from the social assistance budget) updates the list of the approved households. 2) Application. Low-income households apply for the programme, providing information on specially designed application forms while visiting the jamuat office. Applicants must submit copies of internal passports; verification of address; statements of earnings from salaries, pensions, and other sources (including remittances); and in-kind agricultural production (if any). The number of questions has expanded and become more detailed over time. Beneficiary households must reapply every six months in order to remain eligible. 3) Creation of lists of eligible households. In each jamuat, a sub-commission prepares a list of candidates for approval by the committee at the district level. The members of the sub-commission are the rais-mahalas (village or neighbourhood headmen or women) and jamuat representatives, as well as representatives of local housing and utilities offices, if any. In practice, the jamuat and rais-mahalas do not search for eligible families. Rather, families come to the jamuat office to apply; sometimes they ask the rais-mahalas to bring them to the jamuat to apply. Once the list of beneficiaries in the jamuats is completed, the jamuats send the lists to the districts.131 4) Assessment. The assessment process evaluates the applications by the local and regional commissions according to the predefined guidelines. The income threshold for needy families has been steadily lowered over time, as is shown in Table
32.
132
Table 32: Income threshold to quality for compensation

Decision No.145, 03/04/07 Decision No.379, 03/08/08 Decision No. 306, 28/05/09
Income threshold to qualify for assistance
Official minimal monthly salary
50% of official minimal monthly salary
50% of the average monthly wage at place of residence
Source: Strengthening Corporate Management of Barqi Tojik. Prepared by Eric Harrison Corporate Solutions, under a contract with ADB for the Ministry of Energy and Industry, Republic of Tajikistan, September 2009.
The key step is establishing a households financial situation (its average monthly income per household member) and comparing it to the monthly threshold (which is currently less than 35 Somonislightly under $8). Additionally, the jamuat sub-commissions consider whether the household receives electricity and/or natural gas (as described above). In the case of competing households being in similar financial situation, priority is given to: families with many dependent children which have lost their bread-winner and have disabled children; families consisting of more than two people who are disabled; families headed by an
World Bank (2010a): Tajikistan: Delivering Social Assistance to the Poorest households, Report No: 56593-TJ, Washington DC. ADB (2009): Republic of Tajikistan: Strengthening Corporate Management of Barqi Tojik, Harrison E., Corporate Solutions, under a contract with ADB for the Ministry of Energy and Industry, Republic of Tajikistan, September 2009.
132 131
Page 88

unemployable disabled person; and single elderly and disabled people with unfavourable material situation when compared to other residents.133 Once qualified, the eligible household is entered into the programme for one year.134 5) Allocation and transfer of funds from the central budget to Amonat Bank. Once the state budget is approved, the Ministry of Finance transfers funds to the accounts for compensation payments in districts, which are managed by the district treasuries. Physically, these accounts are located at the local branches of Amonat Bank (Tajikistans state-owned savings bank with an extensive branch network).135 6) Beneficiary households receive subsidies, either by collecting funds in cash from Amonat Bank (and then paying their utility bills in person), or via a transfer of funds to their Barqi Tojik accounts. Households can therefore choose between receiving the payment in cash or transferring it directly to the utility company (see Figure 71). Amonat Bank handles the payments to beneficiaries, paying them every two months. Beneficiaries normally pick up their benefits at branch offices, but in rural areas, some receive cash payments at their homes from bank cashiers. Beneficiaries have three months to collect their benefits, after which time any remaining money is sent back to the Treasury.136 The payments made get recorded in the lists held at the district level. These lists form the only existing record: there is no central registry.137 Beneficiaries who do not use these funds to settle their electricity bills may be excluded from programme. 7) Reporting back. The districts report to the Ministry of Finance on the use of funds under the programme; they do not report back to the Ministry of Labour and Social Protection. Because the jamuats must return undisbursed funds to the Ministry of Finance, the MOF has an incentive to monitor the districts management of these monies.
Table 33: Budget expenditures on social assistance in 2009 Programmes Social assistance Social assistance plus social pensions Social pensions Annual budget $10 million $22 million $12 million Share of GDP 0.2% 0.45% 0.25%
133 World Bank (2010a): Tajikistan: Delivering Social Assistance to the Poorest households, Report No: 56593-TJ, Washington DC.
ADB (2009): Republic of Tajikistan: Strengthening Corporate Management of Barqi Tojik, Harrison E., Corporate Solutions, under a contract with ADB for the Ministry of Energy and Industry, Republic of Tajikistan, September 2009 World Bank (2010a): Tajikistan: Delivering Social Assistance to the Poorest households, Report No: 56593-TJ, Washington DC
136 135
134
In Dushanbe, about 7 percent of deposits were sent back. In Varzob District only about 1 percent was sent back.
Page 89

Programmes Main social assistance programmes Electricity and gas subsidies Subsidies for needy families with school children (conditional cash transfer) $5 million $3 million 0.1% 0.06 0.06% Annual budget Share of GDP
Sources: Ministry of Finance, State Agency for Social Insurance & Pensions, World Bank
Weaknesses in the current system In the 2009 state budget, social assistance totaled $10 million, with another $12 million allocated for social pensions (which the the State Agency for Social Insurance and Pensions pays to poor elderly people who have not contributed to the pension fund) fund), as in Table 33. Jointly this constituted 0.5 percent of GDP, which is far below the average of 1.6 percent of GDP for the Europe and Central Asian region as a whole.138 The main social assistance programmes are re the electricity and gas compensation programme, and a conditional cash transfer scheme for low-income low families with school-aged aged children. In 2009, about $5 million was budgeted for electricity and gas compensation.139
Figure 71: Current system of electricity and gas compensation
Source: Strengthening Corporate Management of Barqi Tojik. Prepared by Eric Harrison Corporate Solutions, under a contract with ADB for the Ministry of Energy and Industry, Republic of Tajikistan, September 2009. 2009
138
World Bank (2010a): Tajikistan: Delivering Social Assistance to the Poorest households, Report No: 56593-TJ, Washington DC.
139
Ibid.

A recent World Bank study identifies a number of shortcomings in Tajikistans social assistance system in general, and the electricity and gas subsidy programme in particular. These include:140
Small size. Social assistance in 2009 amounted to less than 3 percent of per-capita monthly consumption ption of the poorest 20 percent (lowest quintile) of the population. This was the lowest share in the Europe and Central Asia region. Poor targeting. Only 23 percent of social assistance payments reached the poorest quintile of the population in 2009. The second second poorest quintile received 27 percent percent, while more than 30 percent of social assistance leaked to the top two quintiles (see
Figure 72).
Poor coverage. Only about 2 20 percent of the poorest quintile of households received any social assistance in 2009. This was the lowest share in the Europe and Central Asia region. As a result, Tajikistans social assistance system has almost no effect on poverty; the World Bank study estimates that it lowered the poverty rate by only 0.3 percentage points in 2009. According to the World Banks analysis, the ineffectiveness of the electricity and gas subsidy programme reflect the following following:
Figure 72: Distribution of payments of social assistance across quintiles of consumption expenditure in 2009 (%)
30 20 10 0 Q1 Q2 Q3 Q4 Q5 27 22.6 19.9 18.4 12.1
World Bank (2010a): Tajikistan: Delivering Social Assistance to the Poorest households, Report No: 56593-TJ, 56593 Washington DC.
The Ministry of Finances annual budget for this program programme is based on the past years budget rather than on information on beneficiaries or on the population in need. Instead, the Ministry adjusts the past years budget for changes in the price of electricity and gas and for overall inflation.
Ministry of Labour and Social S Policy officials report some weaknesses in the work of jamuat commissions and rais-mahalas, including:
o lack of motivation in selecting beneficiary households, because they are not paid for this work, and because inspections are infrequent, resulting poor discipline. o poor understanding of the rules of and inaccuracies in the assessments; nepotism and corruption in the system (an ADB study finds that system systems of
140
Ibid.

bill collection and social assistance with electricity/gas is prone to fraud, due to heavy reliance on door-to door visits141). o potential conflict of interest by rais-mahalas, who are responsible both for collecting fees for electricity and gas use (as well as for communal service provision) as well as for disbursing funds under the electricity and gas subsidies programme. o While financial reporting (to the Ministry of Finance) imposes a degree of financial discipline on the districts, there is less accountability to the Ministry of Labour and Social Policy for non-financial aspects of the programme, such as the accurate identification of beneficiaries.142 o The absence of a central registry of beneficiaries, which limiting options for analyzing the effectiveness and improving the current system. o The rais mahalas weak incentives to seek out beneficiaries. o Potential difficulties for residents of remote areas (since they must visit the local Jamuat office in person in order to become beneficiaries). o The administrative burden on beneficiaries may be considerableparticularly since they need to resubmit applications every six months. o The assessment includes income from various sources as eligibility criteria: in Tajikistan as in all transition countries significant levels of economic activity goes on unrecorded. o Most importantly, households that are not connected to the electricity and gas systems cannot receive electricity and gas subsidies. Lifeline subsidies at Pamir Energy. A short comparison with the subsidy scheme employed by Pamir Energy is instructive. In winter time the threshold for the subsidy is 200 kWh. If a consumer has consumed, for example, 300kWh, s/he will pay: 200kWh* 0.25 US cents (the lifeline tariff) + (300-200) kWh * 2.75 US cents (normal tariff), i.e. $3.25. The threshold for the lifeline tariff in the summer is 50kWh.
Tajikistans social assistance reform programme High poverty levels combined with ineffective social assistance create a strong case for social policy reform. The poorly targeted nature of Tajikistans current system discourages donors from topping off these programmes with grant fundingas they have done, for example, in Kyrgyzstan. The example of Pamir Energywhich has successfully combined lifeline tariffs with grant funding to finance subsidized service deliveryshows that other approaches are possible in Tajikistan. The World Bank therefore recommends reform of Tajikistans social assistance system, by:
ADB (2009): Republic of Tajikistan: Strengthening Corporate Management of Barqi Tojik, Harrison E., Corporate Solutions, under a contract with ADB for the Ministry of Energy and Industry, Republic of Tajikistan, September 2009
142
141
This list is based on World Bank (2010a), unless otherwise noted
Page 92
consolidating the two programmes currently in operation (i.e., the electricity and gas subsidy programme and the conditional cash transfer for low-income families with children) into a single social assistance programme; using proxy means testing to improve targeting and coverage; and improving the management of social assistance (e.g., via the establishment of central electronic registries of applications, beneficiaries, and payments).
Of these three elements, the introduction of effective proxy means testing seems likely to be the most difficult. The World Bank argues that an appropriate proxy means targeting system for Tajikistan would meet the criteria of:143

accuracythe empirical ability to measure means and distinguish between the poor and the non-poor without distorting work disincentives; simplicity and administrative feasibility, taking into account institutional capacity and economic conditions (such as informality of incomes); and transparency in the weighting of eligibility criteria and consistency in their implementation across applicants.
The government in January 2011 started piloting this scheme, in Istaravhsan and Yavan rayon of Khatlon oblast; the pilot is to run for two years. Annual allocations will be 400 Somoni ($91), paid out quarterly through the Amonat bank. The criteria for the proxy means targeting were identified based on 2009 living standards survey database (see Table 34).
Table 34: Indicator composition of Tajikistans proxy means testing pilot
Characteristic Household size Gas oven Generator Electric radiator Refrigerator Satellite dish Car or truck Computer Household heads employment sector Household Heads Education Housing Roof Material Number of Children under 15 Oblast No of disabled of 1st category and disabled children in the household1 Total Number of Variables
Used for urban households *
* * * * * * * * * * * 11
Used for rural households * * * * * *
* * *
Source: Robert van Leeuwen (Team leader), EU/ Mott MacDonald , Presentation of the PMT system in Tajikistan , November 2010.
Page 93

In the pilot, the eligibility threshold is established at 130 points; households receiving more than 130 points will be entitled this benefit.
Income transfers versus lifeline tariffs One of the most contentious power sector reform debates concerns the desirability of tariff-based subsidies (such as lifeline tariffs) versus direct income transfers to low-income households. Critics of tariff-based subsidies argue that these measures are expensive, poorly targeted (in that they benefit both the poor and the non-poor), discourage energy conservation, and are impractical in situations of incomplete meterage. Defenders of tariffbased subsidies respond that, while theoretically attractive, income transfers in practice often fail to reach a large share of the poor because social policy institutions do not possess the capacity needed for effective targeting.144 In assessing subsidy schemes against various criteria (coverage of the poor, targeting effectiveness, benefit predictability, distortions and other side effects, and administrative costs and difficulties), Lovei et al found that instruments performing well on some criteria perform poorly on others.145 Not all subsidy mechanisms are applicable or perform equally well across all countries and utility services, and no single instrument has been identified that would outperform all others.146 A number of recent influential reports argue in favor of the income transfers. For example:
to protect the poor during and after tariff reform, the World Banks 2010 regional energy study recommends providing cash transfers to the poor as the preferred instrument, and lifeline tariffs as a second best if meters are installed.147 A 2010 IEA/OPEC/OECD/World Bank joint report argues that cash transfers have many advantages over universal subsidies and other transfers.148 The authors argue that social safety nets are much more efficient and equitable: out of 24 countries surveyed in the period 2005-2008, 16 were transferring more than 50 percent of their social protection funds to the poorest 25 percent of the population.149
144
Lampietti J.A., Banerjee S.G., Branczik A. (2007): People and Power: Electricity Sector Reforms and the Poor in Europe and Central Asia; World Bank, Washington DC.
Lovei, L., E. Gurenko, M. Hany, and P. O'Keefe. 2000. "Maintaining Utility Services for the Poor. World Bank Report 20874. Washington, D.C.
146
145
Lampietti J.A., Banerjee S.G., Branczik A. (2007): People and Power: Electricity Sector Reforms and the Poor in Europe and Central Asia; World Bank, Washington DC
World Bank (2010b): Lights out?: the outlook for energy in Eastern Europe and the former Soviet Union, Washington DC IEA, OPEC, OECD and World Bank Joint Report (2010): Analysis of the Scope of Energy Subsidies and Suggestions for the G-20 Initiative, prepared for submission to the G-20 Summit Meeting Toronto (Canada), 26-27 June 2010. Nemtsov R. (2010): Developing Effective Reform Strategies: Safety nets to protect the poor and vulnerable groups from the negative impacts of reform, Increasing the momentum of fossil-fuel subsidy reform, presentation at the WTO/WB joint conference, 2010, Geneve, Switzerland.
149 148
147
Page 94

However, Lampietti et al argue that income transfers tend to only be well targeted in countries with a small percentage of the population below the poverty line.150 When there are enough funds to finance the administration of social assistance and the informal sector is small, means testing is easy. By contrast, it is harder to produce well-targeted income transfers in countries where nearly half the population is poor, budget resources are insufficient, and means testing (or proxy means testing) is complicated by the presence of a large informal sector. The authors also argue that coverage of the poor varies inversely with the share of the subsidy that goes to the poorthe more households are eligible for assistance, the more likely it is that non-poor households will be eligible for assistance. That is: if a benefit system covers a large percentage of the population, the system is likely to be poorly targeted. Lampietti et al (2007) find that the case for lifeline tariffs is stronger in countries with high poverty rates, high inequality, high access of poor households to the subsidized network, and poor targeting of social transfers. Policy makers in such countries may find lifelines a more efficient way to deliver mitigating measures than direct income transfers channelled through questionable social protection systems. The report notes, however, that lifeline tariff blocks should be kept small (below 50-100 KWh), and that the government (or, by extension, donors) must compensate utilities for the social transfers they provide.151 Komives et al152 compare lifeline tariff schemes that subsidize some consumption of all customers versus schemes in which only households consuming below a certain threshold are subsidized. While they find that cash transfers are generally better, they also find that differences in terms of their targeting effectiveness are not very large. Tajikistan seems to tick off many of the boxes suggested by Lampietti et al for using lifeline tariffs. These include: high income poverty rates; relatively high connection rates (at least for electricity), compared to other developing economies; relatively high rate of metering; and serious administrative difficulties of implementing cash transfer programmes. Moreover, as described above, Pamir Energy has successfully used lifeline tariffs in Gorno Badakhshan (Tajikistans poorest region), financed by donor grants. Tajikistan had lifeline electricity tariffs until 2007, when they were abolished. If a decision were to be taken about reinstituting lifeline tariffs, their disadvantages should be kept in mind. These include:

Cross-subsidies between households; Leakages to non-poor households; Increased room for corruption, in light of current bill collection practices (e.g., doorto-door visits); A greater administrative burden on Barqi Tojik (particularly in the context of the companys ongoing structural changes);
150
Lampietti J.A., Banerjee S.G., Branczik A. (2007): People and Power: Electricity Sector Reforms and the Poor in Europe and Central Asia; World Bank, Washington DC. Ibid.
151 152
Komives K., Foster V., Halpern J. and Wodon Q (2005).: Water, Electricity, and the Poor: Who Benefits from Utility Subsidies, World Bank, Washington DC
Page 95
Weaker energy conservation incentives, and other distortionary effects.
Using the 2009 living standards survey data, we simulated the effects on poverty of the potential reintroduction (or rather expansion beyond Pamir Energy in Gorno Badakhshan) of a lifeline regime in Tajikistan, as follows: The month in which the survey was conducted (November 2009) is assumed to be an average month for electricity consumption for the year (i.e., no adjustments for winter/summer consumption patterns were made). The survey provides information on total household spending on electricity. We calculated average monthly spending for electricity and applied the tariff for the year 7.5 dirham/kWh ($0.018/kWh)153 to calculate average household electricity consumption for 2009. Thus our baseline scenario reflects the tariff structure as of 2009 (see Table 35). From this baseline we consider three alternative scenarios:154 Scenario 1: 2011 tariff at 9.9 dirham/kWh ($0.025/kWh); Scenario 2: cost recovery tariff at 13.1 dirham/kWh ($0.03/kWh); and Scenario 3: cost recovery + lifeline tariffs. The lifeline threshold is up to 100 kWh at 1.03 dirham/kWh ($0.002/kWh); the tariff shifts to 13.1 dirham/kWh ($0.03/kWh) when consumption exceeds 100 kWhthe tariff regime employed by Pamir Energy. We then calculate household electricity expenditures using the different tariffs under the three scenarios. (The reported averages are only for those households appearing in the LSS data as having non-zero electricity consumption.) The main assumptions under these calculations are: a) household electricity consumption remains unchanged; b) households consume the same amount of electricity under different tariffs; c) household incomes remain unchanged (i.e., they do not receive additional funds to cover the extra spending on electricity); and d) lifeline limits are applied to all households.
Table 35: Share of electricity expenditures in total household expenditures, by poverty level, under different tariff scenarios Average monthly electricity consumption (kWh) All households Poor Very poor Not poor 357 332 339 373 Baseline 2009 7.5 dirham per kWh Scenario 1 2011 tariff at 9.9 dirham per kWh Scenario 2 Cost recovery level 13.1 dirham per kWh 3.6% 5.3% 7.2% 2.9% Scenario 3 Cost recovery level (13.1 dirham/kWh) with lifeline (100 kWh at 1.0313 dirham/kWh) 2.6% 3.7% 5.1% 2.1%
2.0% 2.8% 3.6% 1.7%
2.7% 3.9% 5.2% 2.2%
UNDP calculations, based on 2009 LSS data.
153 154
Using the 2009 average Somoni/$ exchange rate. Using the 2010 average Somoni/$ exchange rate.
Page 96

Next, we compared electricity expenditures under each scenario to those under the baseline scenario, and calculated the impact on poverty of moving from the baseline to the alternative scenarios. Table 36 shows the impact on poverty and extreme poverty levels, respectively.
Table 36: Impact on poverty under different tariff increases Share of poor households (not weighted) Poverty levels Poverty level (baseline scenario) Poverty level under scenario1 Poverty level under scenario 2 Poverty level under scenario 3 Extreme poverty levels Extreme poverty level (baseline scenario) Extreme poverty level under scenario 1 Extreme poverty level under scenario 2 Extreme poverty level under scenario 3
UNDP calculations, based on 2009 LSS data.
Share of poor households (weighted)
Share of population (weighted)
38% 40% 41% 40% 13% 15% 15% 14%
39% 41% 42% 41% 14% 16% 17% 15%
46% 48% 48% 47% 20% 18% 20% 19%
Thus, under scenario 3 the extreme poverty rate would fall by 5 percent (from 20.2 to 19.1 percent). Next, we calculated the total subsidy amount under each scenario (see Table 37).
Table 37: Subsidies under different scenarios Somoni Subsidy value (baseline scenario) Subsidy value under scenario 1 Subsidy value under scenario 3
Source: authors estimates
$155 4,945,934 2,826,248 3,380,772
20,402,968 11,658,839 13,946,359
If the introduction of a lifeline tariff were to be combined with raising tariffs to the cost recovery level, the government (or donors) would need to spend $3.4 million in order to reduce extreme poverty by 5 percent. The effectiveness of the proxy means tested income transfer now being piloted would also be constrained by the small scale of the fiscal resources behind it. The World Banks analysis finds that the extreme poverty rate would fall by less than one percent if the social assistance budget for 2009 was consolidated and if benefits were perfectly targeted to the extreme poor. In other words, the lifeline regime would be more effective in terms of reducing poverty, Although our calculations are very rough, they are in line with the conclusions from Lampietti et al, described above. However, one of the main drawbacks of the lifeline regime
155
Using the 2009 average Somoni/$ exchange rate.
Page 97

is the leakage of subsidies to non-poor. Coady et al (2005)156 conducted a poverty and social impact analysis for Tajikistans electricity sector in 2005, and recommend cash transfers over the lifeline tariffs, primarily on these grounds. In our case, 40 percent of the $3.4 million subsidy would leak to households in the fourth and fifth quintiles. Additionally:
The cash transfer scheme allows the country authorities to know who are the poor, and understand their needs better, unlike the lifeline scheme where the poor are anonymous. This knowledge could be utilized for the purposes of channeling other assistance schemes to the identified poor. Many poor households (1.8 percent on average, according to our analysis of the 2009 living standard survey data, but higher in selected areas, like GBAO) live in isolated mountainous areas where they are not connected to the electricity and natural gas supply network. The World Banks 2007 poverty assessment reported that poverty rates rise with the altitude of residence in the mountainous areas (e.g., in Gorno Badakhshan). These poor households are the least likely to have access to electricity, and thus to electricity and gas compensation through consumption subsidies.157 Pamir Energy does operate a lifeline tariff regime, and while it is largely regarded as a success, numerous press reports indicate that in many remote and high-altitude areas, where households are not connected to Pamir Energys grid, the situation is desperate. In the sparsely populated Eastern Pamir region, which represents 26 percent of Tajikistans total area, there is virtually no electricity supply. Most residents there do not benefit from the lifeline regime, or from other state social assistance programmes. With the current winter energy situation, in which electricity cuts reach 10-12 hours per day, reductions in electricity tariffs may not matter very much. Cash transfers would instead help finance purchases of alternate fuels (e.g., LPG, firewood). While metering levels are high (96 percent),158 many meters are old and of uncertain quality, and are located within the apartments. These circumstances in many transition economies are associated with higher levels of corruption and bribery among meterreaders, especially since the billing and bill collection is done mostly door-to-door. Such problems would limit the effectiveness lifeline tariffs, should they be introduced now. With donor assistance (particularly from the World Bank, Asian Development Bank, and the Swiss Economic Cooperation Organization) new meters are being installed at building entrances, but this remetering process will take some time to complete.
In light of the above, the World Banks emphasis on, and the governments endorsement of, income transfers based on proxy means testing is understandable. Still, the small fiscal resources standing behind this system do not bode well for its impact on reducing poverty. Countries that have opted for proxy-means tested income transfers have had mixed results; the results were not perfect. (The authorities in Tajikistan would benefit from a review of these experiences; in Annex 1 we provide a case study of the Armenian
156 Coady D., Gassmann F. and Klytchnikova I (2005), An Evaluation of the Welfare Impacts of Electricity Tariff reforms and alternative compensating mechanism in Tajikistan, Maastricht University Maastricht Graduate School of Governance, Working paper, MGSoG/2006/WP2005/001, April 2005.
World Bank (2010a): Tajikistan: Delivering Social Assistance to the Poorest households, Report No: 56593-TJ, Washington DC
158
157
UNICEF and State Committee on Statistics Republic of Tajikistan (2009) Tajikistan Living Standards Measurement Survey 2007: Indicators at a Glance.
Page 98

experience.) These considerations, combined with Pamir Energys successes with lifeline tariffs, suggest that additional or transitional schemes employing lifeline tariffs could perhaps be employed. Is there room for transitional lifeline tariffs? The World Banks recent report on social policy reform in Tajikistan concludes that the government would have to budget an estimated 312 million Somoni ($70 million, or 1.4 percent of GDP) annually, to eliminate extreme poverty through payment of social assistance. This sum would be about seven times the amount currently budgeted for social assistance, and beyond Tajikistans fiscal capacity. Hence, the report recommends that the government increase the budget for social assistance, in order to finance delivery of a single proxy means tested income benefit. Having a single consolidated social assistance programme in a small country has important advantages, particularly in terms of simplification and reduced administrative costs. But introducing the pilot, testing its results, and then rolling out the programme across the country could take 4-6 years. During this time, poor households will face the burdens of tariffs rising toward cost-recovery levels. Hence, there is a strong case for continuing/introducing tariff-based electricity subsidies, at least until the new social benefit scheme is rolled out nationally. Options here include: (a) continuing the present system; (b) introducing a lifeline regime; and (c) combining a lifeline regime with some categorical targeting. The benefits of such a transitional measure are described in a number of recent reports. For example:
Lampietti et al conclude that, while poverty-targeted income transfers may be more efficient, they can take years to become operational. Ideally, tariff-based subsidies should not be phased out until targeting is significantly improved.159 Coady et al conclude that, while a comprehensive safety net system which explicitly targets poor households would be more effective than lifeline tariffs, a gradual approach combining tariff increases and the introduction of income benefits with lifeline tariffs is probably desirable. The authors also recommend a stronger differentiation between the lifeline and main tariff rates. Komives et al160 explain how means testing can be used in combination with lifeline tariff schemes. The authors argue that, if well implemented, such a hybrid scheme generates solid improvements in simulated subsidy performance.
Hence even in the medium term, Tajikistan could combine lifeline tariffs with cash an income transfer scheme based on proxy means testing. Or, it could subsidize only large households (or a subgroup, such as large households with many children), since the 2009 living standards survey database indicates a strong correlation household size and poverty (particularly energy poverty).
159
The joint IEA/OPEC/OECD/World Bank study similarly argues that, since putting in place effective social safety nets can take time, governments may want to consider
Lampietti J.A., Banerjee S.G., Branczik A. (2007): People and Power: Electricity Sector Reforms and the Poor in Europe and Central Asia; World Bank, Washington DC
160
Komives K., Foster V., Halpern J. and Wodon Q (2005): Water, Electricity, and the Poor: Who Benefits from Utility Subsidies, World Bank, Washington DC.
Page 99

assisting the transition of the poorer sections of the community, depending on the specific circumstances and challenges. The suggested s options include, inter alia: o Temporarily maintain maintaining universal subsidies on those fuels that are more important in poor household budgets; o Where poor households are connected to the grid and metering is in place, using lifeline (or volume differentiated) tariffs; o Where poor households are not connected co to the grid, providing subsidies to offset connection charges; charge and o Prioritizing broader structural expenditures that can benefit the poor, including road and rural-electrification electrification schemes, but also expenditures on health, and education.
Figure 73 provides an overview of the main subsidy schemes for utilities. There are only a few options for the electricity subsidies, however, with the lifeline tariffs being the main one. Voucher schemes are yet another option.
Figure 73: Typology of subsidies
Komives K., Foster V., Halpern J. and Wodon Q (2005). (2005
Extending transitional lifeline electricity tariff schemes may be justified in Tajikistan, in the light of Pamir Energys good experiences with their use, as well as the anticipated tariff increases during the coming years. A recent ADB study161 finds that many features of
161
ADB (2009): Republic of Tajikistan: Strengthening Corporate Management of Barqi Tojik, Harrison E., Corporate Solutions, under a contract with ADB for the Ministry of Energ Energy y and Industry, Republic of Tajikistan, September 2009.

Tajikistans existing assistance programme could be combined with such a scheme, thereby facilitating its introduction. In particular:

The list of households eligible for the electricity and gas subsidy programme could be used to determine initial eligibility for lifeline subsidies; The mechanism set up with Amonat Bank to allocate central budget subsidies could be redeployed, to facilitate their transfers to Barqi Tojik (rather to households); Barqi Tojik would provide utility bills, calculated using the lifeline tariffs, to qualified households with a copy to Amonat Bank; and Eligible households would pay the balance of their utility bills to Barqi Tojik.
Table 38 compares the tariffs at Pamir Energy and Barqi Tajik net of subsidy.
Table 38: Tariffs at Pamir Energy and Barqi Tojik net of subsidy, for residential consumers
Currency Low (1650 kWh/year) Pamir Energy US$ Somoni

Average consumption per year Medium (4200 kWh/year) Pamir Energy 6.81 29.78 Barqi Tojik 8.65 37.80 High (6000 kWh/year) Pamir Energy 10.94 47.81 Barqi Tojik 12.36 54.00
Barqi Tojik 3.40 14.85
1.62 7.08
Pamir Energys nominal tariffs for households are higher than those charged by Barqi Tojik. However, after subsidy, all Pamir Energy consumers pay actually less than Barqi Tojik consumers in the same category. Output based assistance for connection subsidies. In regions in which electricity and gas (or other) grids have not yet been fully extended, connection subsidies under outputbased assistance schemes162 could be considered. Output-based assistance approaches generally take the form of a one-off subsidy per household, covering part of the costs of establishing the initial connection/access to the grid.163 Such subsidies are less distorting than consumption subsidies, and have been shown to be quite effective, especially when combined with complementary non-price approaches to making utility services accessible and affordable to poor households.164 Heating allowances. Data from Tajikistan (as from many other transition economies) suggest that, on average, the poor spend almost twice as much of their household budgets on heating as do the non-poor. They also indicate that poor households demand for heat is less
162 163
Donor funding of services delivered by private- or third-sector service providers.
IEA, OPEC, OECD and World Bank Joint Report (2010): Analysis of the Scope of Energy Subsidies and Suggestions for the G-20 Initiative, prepared for submission to the G-20 Summit Meeting Toronto (Canada), 26-27 June 2010.
164
Komives K., Foster V., Halpern J. and Wodon Q (2005).: Water, Electricity, and the Poor: Who Benefits from Utility Subsidies, World Bank, Washington DC.
Page 101

income- and price-elastic than non-poor households demand. It should therefore be possible to design a heating subsidy that will benefit the poor more than the non-poor. However, as Lampietti et al note,165 several problems present themselves in attempting to design and implement heat subsidies in transition economies in general, and in Tajikistan in particular. For example:

Household access to (non-electric) networked heat systems is very limited outside of Dushanbe. Households have shown some ability to substitute other fuel sources (e.g., electricity, LPG, wood) for central heat, in response to price/tariff changes. Most household heating use in Tajikistan is not metered.
These considerations argue against the introduction of lifeline tariffs for central heat. But providing cash grants may also be problematic, particularly in light of the negative externalities (e.g., deforestation, greenhouse gas emissions, fire and health risks) associated with off-grid heat sources (e.g., firewood, dung, coal). Subsidies or vouchers to encourage the use of clean fuels (e.g., LPG) could offer important opportunities in this respect. In the longer term, the expansion of centralized heat generation and distribution capacityperhaps via electricity cogeneration in combined power and heating plantsmust be an important part of the solution. Tajikistan is planning to build two combined heating plants in Dushanbe, and other coal-fired plants elsewhere. In addition to increasing the numbers of households with access to dedicated heat networks, these plants will increase the scope for employing lifeline heating tariffs. Other possible energy subsidies. The government apparently operated a subsidy for LPG users, which seems to have been removed after 2007, leading to large declines in LPG consumption as prices rose. Moreover, international evidence indicates that subsidies for LPG (and kerosene) are generally less regressive than electricity subsidies, as these fuels are more likely to be used by the poor for cooking, and for lighting in rural areas.166 In contrast to coal and fuel oil, LPG and piped gas have a relatively modest environmental footprint. These considerations argue for the reinstatement of LPG subsidiespossibly via donor financing. Likewise, as suggested in Lampietti et al,167 subsidies for energy efficient household appliances, insulation, and other energy-saving technologies could be consideredpossibly via vouchers. The experience of Ukraines Housing and Municipal Services Allowance programme, which was in effect during 1995-2004, may be important in this context. Subsidies were paid under this programme to households if their total monthly housing expenses exceeded 15 percent of their average gross income during the preceding three months. This programme allowed the government to increase utility prices (and housing rents) substantially. One report
165
Lampietti J.A., Banerjee S.G., Branczik A. (2007): People and Power: Electricity Sector Reforms and the Poor in Europe and Central Asia; World Bank, Washington DC.
166 Nemtsov, R. (2010): Developing Effective Reform Strategies: Safety nets to protect the poor and vulnerable groups from the negative impacts of reform, Increasing the momentum of fossil-fuel subsidy reform, presentation at the WTO/World Bank joint conference, 2010, Geneva. 167
Lampietti, J.A., Banerjee S.G., Branczik A. (2007): People and Power: Electricity Sector Reforms and the Poor in Europe and Central Asia; World Bank, Washington DC
Page 102

found that, without these allowances, half of all Ukrainian households would have had to devote more than 50 percent of their income towards housing costs.168 Other, subsequent studies169 painted a less flattering picture; concerns were raised about the programmes financial sustainability, targeting, and coverage. In order to address the challenges Ukraines Ministry of Labour and Social Policy and the World Bank launched the Social Assistance System Modernization project in 2006. The World Bank provided $99 million for this project, aiming to enhance the effectiveness of the social assistance system. The key principle of the new system is the one stop shop model, similar to the system used in Great Britain. While the Housing and Municipal Services Allowance programme was eventually replaced in Ukraine, it can potentially work well. Voucher schemes have an advantage of being able to provide one subsidy against the bundle of housing/utility costs, which could be particularly important in transition countries, like Tajikistan.
168 169
Mikelsons M, Other Country Experience with a Consumer-Based Housing Subsidy.
RAND Graduate School (2010): Developing a Safety Net for Ukraine, Rohozynsky O., PhD dissertation, 2010
Page 103

6. CONCLUSIONS AND RECOMMENDATIONS
Poverty. Despite a slight decline in the overall poverty levels in Tajikistan in the recent years, the poverty is still high at 47.2 percent (2009), with the extreme poverty around 17.5 percent. Poverty is closely associated with household size, and in particular- the number of children in the households, and location: rural poverty is significantly higher (at 49.2 percent) and is declining more slowly. The poor experience compound pressures with increasing prices for food, and utilities. Access to energy sources/services. While electricity connection rate is high on average (98.4 percent in 2009), in remote and mountainous regions the connection rate is lower. Household across the country, and most notably in rural areas, experience power cuts reaching 10-15 hours a day, especially in the winter time, with negative impacts on the health status of the population, social services, education and environment. The households in the poorest quintile use 357 KWh per month of electricity, larger than the households in the second and third quintiles and on par with the fourth quintile at 361 KWh. The households, especially those in the urban areas use electricity for cooking and heating, given the deterioration of the gas supply and district heating in the recent years. Households in the rural areas have shifted to burning wood and dung. In contrast to natural gas, use of LPG was high in 2007, but then declined by 2009 (from around 70 percent to 25 percent) reflecting the increase in retail prices. The same is true for coal. This leaves limited alternatives for the poor households and the use of wood therefore is as high as 68-69 percent in the villages and small towns (leading to deforestation, with Tajikistans mountains regions having lost up to 70 percent of wood covered areas since late 1990s), using oil and petrol in small towns (19 percent) and continued use of electricity for heating (around 15 percent in the rural, areas, 33 percent in small towns, and 97 percent in Dushanbe), despite the increasing tariffs (but which are still below cost-recovery levels). Affordability of energy sources/services. The share of expenses on electricity in the households expenditure budgets in 2007 and 2009 were 1.7 percent and 3.6 percent on average respectively, for the poorest quintile. These are not high by international standards. While average spending on energy sources and services is 9.9 percent and for the poorest quintile 15.9 percent (17.5 percent for the poorest quintile in the towns and 16.7 percent in villages), for selected groups of households this share can be much higher, For example, for 30% of households who use wood, electricity and coal at the same time, for the poorest quintiles the share of energy related expenses can reach up to 55 percent in towns, up to 39 percent in the villages and up to 32.1 percent in Dushanbe. Potential impact of restoring supply reliability. The implementation of the large investment projects in generation and transmission infrastructure will allow Tajikistan to eliminate energy shortages. Only the Sangtuda 1 and Sangtuda 2 will add 890 MW in capacity and 3.7 billion KWh in generation annually. The implementation of the state Program of small scale HPPs has a potential to radically improve access and use of electricity in the remote rural areas. Restoring electricity supply reliability in the country will eliminate the loss in GDP, in the part it which is a result of the power cuts, and, according to some rough estimates will help reduce the poverty by 0.04 percent, and therefore potentially lift around 120,000 people out of poverty. Increased access and supply reliability will also
Page 104

improve the business enabling environment in the country, facilitating business development and foreign investment. The need to attract private capital. According to Asian Development Bank projections, Tajikistans electricity demand will grow at an annual rate of 1.9 percent, during the 2010-2030 period.170 Tajikistans energy sector has the potential to meet this demand particularly in hydro (big and small) and coal; possibly also in gas. The potential returns on energy savings and energy efficiency projects also seem significant. However, potential does not necessarily translate into development. Like many developing countries, Tajikistan does not possess the domestic capital, technology, or managerial capacity needed to fully realize its energy sector potential. Moreover, Tajikistan is competing for this capital and technology with many other countriesincluding its neighbours. A recent World Bank report171 finds that, without $3.3 trillion in new investments in primary energy development and power sector infrastructure over the next 20 years, the Europe and Central Asian region could be moving from being a large (at present) net energy exporter to a net energy importer by 2030.172 The need to improve the enabling environment for potential investors. Tajikistans prospects in this competition depend on a number of factors, including the extent of national commitment to the energy sector, the legal and regulatory environment, and domestic tariffs/prices. Its successes in attracting foreign investment in national energy projects like Sangtuda-1 and the South-North electricity transmission line, and its strong support for the Roghun hydropower plan, underscore the strength of the governments commitment to developing Tajikistans energy sector. However, in other respectsparticularly when it comes to attracting private capital, as well as Tajikistans reliance on the development of trans-national electricity transmission infrastructurethe picture is not so rosy. The relative paucity of private capital and technology inflows suggests that the burden of developing Tajikistans energy sector will continue to be born largely by the state budget. In light of the other development challenges facing the country, the state budgets ability to bear this burdenand the opportunity costs associated with trying to do soseem likely to remain in question for the foreseeable future. The alternativeimproving the energy sectors enabling environment via more ambitious reforms of legal and regulatory rules, establishment of an independent energy regulator, combined with higher and rationalized tariffs (with elimination of cross-subsidies), and greater attention to the social protection of those households most vulnerable in the face of higher tariffsneed to be addressed. In particular, the implementation of the governments small hydropower programme would benefit from measures to create a more attractive enabling environment for investors in small hydropower, and decentralized renewables in general, but it would require improving the regulatory framework for renewable energy producers (e.g. by achieving further progress in developing feed-in tariffs for electricity generated from independent power producers). Tajikistan has its own example of the impact of good governance on electricity utility performance: Pamir Energy, the first public-private partnership project implemented in
170 171 172
APEC/ADB Energy Outlook for Asia and Pacific, 2009. WB (2010b):Lights out?: the outlook for energy in Eastern Europe and the former Soviet Union
http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/ECAEXT/0,,contentMDK:21722062~menuPK: 258606~pagePK:146736~piPK:146830~theSitePK:258599,00.html
Page 105

Central Asia in the energy sector. Commercially oriented management in place enabled to: generate more electricity than Barqi Tojik; increase collections; reduce losses and provide an improved service and reduced losses. The better-than-expected revenues were achieved as a result of public relations efforts, a willingness to disconnect non-paying users, payment flexibility, and work through village organizations. The agreements on social protection made transparent for the first time the amount of subsidy that was being given and to whom it was being given. This helped people understand where their payments go, which further contributed to payments discipline. The need for parallel reforms in social assistance. The current system of social assistance, whereby the government pays a benefit of 9 dirhams (0.09 Somoni) per kWh to around 240,000 households for the consumption levels between 100-250 KWh (depending on whether the service is metered or not and the time of the year) is ineffective, poorly targeted and inefficient. The government, with support from the World Bank, intends to consolidate all current social assistance programmes into a single transfer programme based on proxy means targeting. The arguments for this form of social assistance for Tajikistandespite its administrative costsare well grounded. The scheme is currently being piloted in the Khatlon region; the pilot phase is intended to last through the end of 2012. Then comes the pilots evaluation, which will take up another 6-12 months. If assessed positively, the new system will be rolled across the country; such an exercise will take another 1-2 years. Thus, reforming Tajikistans social assistance network will take at least 4-6 years. Potential parallel/transitory social assistance schemes for the energy-poor. During this time, Tajikistan has two options: keeping the current system in place (possibly with some modifications to improve coverage and targeting); or combine this with introducing a supplementary scheme, ideally one that is quick to introduce and can be based on the current administrative system. The option of reintroducing lifeline electricity tariffs, coupled with some categorical targeting (for example, for large households), and supported in part by donor financing (as per the Pamir Energy model) during this 4-6 year transitional period should therefore be considered. Such a system can be introduced quickly, and could be corrected as needed during the transition period. Irrespective of whether a transitional lifeline option should adopted, the existing system could be improved in the identification of qualified households, in line with the strongest contributors to poverty identified in the 2009 LSS data, and further elaborated in the pilot scheme for the introduction of the proxy means tested targeted cash transfersmost notably, household size. Stronger donor support for subsidized grid connections (for electricity and piped gas) and for installing/updating meters and for LPG are recommended. Additionally, assistance schemes for sustainable firewood harvesting might be considered, is also strongly recommended. Implications for technical assistance. With the passage of the 2010 Law on Renewable Energy Sources, regulations for the laws effective implementation need to be developed. The same is true for the energy efficiency. UNDP is helping the Government with the development of a national Energy Efficiency Master Plan, as well as for the concept of Renewable Energy and Energy Efficiency Fund. UNDPs assistance package could be expanded to include support for the development of a national heating strategy. As for the other funding agencies, special credit lines through local banks for funding small HPP projects could contribute greatly to the implementation of the National Small HPP Program,
Page 106

as was the case in many other transition countries. For this to happen however, a more enabling environment should be present for the renewable energy sector. Tajikistan urgently needs to design and implement a national heating strategy. Such a strategy is needed to resolve uncertainties regarding the extent of the desired rehabilitation or expansion of the central heating system, as opposed to other alternatives, either of a centralized (e.g., electricity, piped gas) and/or decentralized (e.g., LPG) nature. The articulation of such a strategy could also help clarify the appropriate assistance programmes to mitigate the impact of higher heating costs on low-income households (e.g., via connection subsidies, lifeline tariffs, or income transfers). Need in better energy poverty related data. The importance of questions of access to and affordability of energy for poor households in Tajikistan underscores the need to improve the living standards surveys and the data they produce. There is likewise an urgent need to conduct willingness-to-pay survey research, to improve our understanding of household preferences, energy demand elasticities, and their possible implications for setting correct lifeline tariff levels. A multisector willingness-to-pay study, looking at energy, water and sanitation, and potentially other communal services, could be invaluable. Implications for future research. Some estimates of the impact on GDP, household incomes, and poverty rates of measures to improve energy supply reliability were provided in the report. But these are rough approximations made within the framework of partial equilibrium analysis; more comprehensive macroeconomic linkages are not captured. The complex relationships between energy infrastructure development and poverty reduction are best analyzed via the use of computable general equilibrium or macroeconomic models, such as PAMS (poverty analysis macroeconomic simulator). The design of such a model for Tajikistan would improve policy makers ex ante understanding of how specific policy changes or reforms (e.g., increased tariffs, the Roghun financing campaign) will affect national aggregates (e.g., personal consumption), household incomes and expenditures, and poverty levels.173 The use of such techniques requires extensive investments in data collection and model building. While these could be costly exercises, the costs of not making these investments could be greater. Such models can be constructed according to the principles of social cost-benefit analysis, which emphasize the importance of evaluating the inter-temporal impacts of energy subsidy changes on social welfare, through identifying, measuring, and discounting future and external (as well as private) costs and benefits associated with different policy options or investment decisions. Such an approach could help align commercial investment decisions made within the energy sector with criteria for mitigatingand especially adapting to climate change.174 For example, the commercial feasibility of large hydropower projects like Roghun may depend on the pace of glacier melt in the Amu-Darya basin. Should global warming and glacier melting accelerate, a temporary surge in water flow along the Vakhsh cascade could resultfollowed by significant subsequent reductions, if the glaciers size and water tower capacities were to be considerably reduced. As a $3 billion water project can
173 Pereira da Silva L.A., Essama-Nssah and Samak I.: Linking Aggregate Macro-Consistency Models to Household Surveys: A Poverty Analysis Macroeconomoic Simulator (PAMS)
IEA, OPEC, OECD and World Bank Joint Report (2010): Analysis of the Scope of Energy Subsidies and Suggestions for the G-20 Initiative, prepared for submission to the G-20 Summit Meeting Toronto (Canada), 26-27 June 2010.
174
Page 107

only be commercially viable if it is amortized over many decades, the correct inclusion of the possible environmental costs associated with climate change adaptation could be crucially important in Roghuns future.
Page 108

ANNEX 1: Armenia Case Study
Armenia electricity sector reforms
Background: In the late 1980s and early 1990s, Armenias economy suffered a catastrophic earthquake, the breakup of the Soviet Union, protracted conflict, and the closure of borders with Azerbaijan and Turkey. Political and economic isolationlandlocked and entirely dependent on imported oil and gascompounded the effects of rising energy prices. The cost of supplying electricity and central heating skyrocketed, while residential electricity prices remained very low. Unable to cover internal maintenance costs and crippled by the shutdown of the nuclear power plant and weekly interruptions in natural gas supply, by 1992 electricity utilities were on the verge of collapse. Residential consumers bore the brunt of the utility crisis. From 1992 to 1995, most of the population received only two to four hours of electricity per day, and central heating and natural gas supplies were virtually terminated. The economy also suffered as public infrastructure and the industrial sector were hit by shortages. Consumers stopped paying their utility bills, and in 1994, payment for electricity fell to only 10 percent of billings, further threatening the sectors sustainability. With district heating also gone, residents of the capital Yerevan burned trees, telephone poles, and books to get through the winter, and deforestation for fuel wood took place on a devastating scale. Initial recovery: In 1995 the economy began to stabilize, and the Armenian government embarked on reforms to put the energy sector back on its feet. The focus was on restructuring and regulating the energy sector, raising tariffs, improving payment discipline, and making the electricity supply more reliable. The result was a dramatic improvement in the supply of electricity: by 1999 most households were again receiving service 24 hours a day, and outages were shorter and less frequent. Increasing cost recovery by utilities became a cornerstone of the governments economic reform program. Until 1999, Armenia had a lifeline tariff structure. The first 100 kWh of electricity consumed cost households $0.029/kWh; the second bloc (100250 kWh) cost $0.038/kWh; and the third bloc (above 250 kWh) cost $0.048/kWh. The first 100 kilowatt hours (kWh) of electricity consumed was highly subsidized for all households. Dramatic tariff adjustment: A pivotal moment in Armenias electricity sector reform was a tariff increase in January 1999, several years into the reform program and after the height of Armenias energy crisis. The increase was largeto $0.048/kWhfor all households. For poor households, this shift from a lifeline to a single rate system amounted to an average tariff increase of some 47%. These higher tariffs were coupled with the introduction of generalized social transfers targeted at low-income households. Restructuring the tariff had a disproportionately negative impact on the poor: poor households cut electricity consumption by more than non-poor households; the percentage of poor households with arrears was higher; and the average size of their arrears increased more. Poor households reduced their electricity consumption by some 20% (from 152 kWh per month in 1998 to 121 kWh in 1999)enough for a refrigerator and a few light bulbs. Consumption declined significantly more among rural households (26%) than urban (13%)probably because rural households had greater access to substitutes. Despite this 20% reduction in consumption by poor households, their average bills increased by 13 percent (from dram 2,680 in 1998 to dram 3,020 in 1999). The tariff increase was 50% greater than what was originally conceived when the mitigating transfers were formulated, so their impact on poor households was underestimatedunderscoring the need for careful modelling and mitigating the reforms consequences. Parallel social assistance reform: The Armenian government took two actions to minimize the impact on the poor of the 1999 tariff increase. First, a newly designed family benefit, targeted at the 28% of the households living below the poverty line, was introduced in 1999. Second, an additional 9% of households not eligible for the family benefit, but expected to have difficulty paying their electricity bills, received a smaller sum to assist with electricity payments. While the reduction in electricity consumption and increases in total electricity expenditures experienced by these households were similar to poor households overall, the households receiving cash transfers increased average monthly payments to the utility by 4%. It is not clear whether the cash transfers offset the adverse impact of the tariff increase. However, these transfers may have prevented greater declines in consumption and larger arrears among poor households. Lessons: Opponents of the pre-1999 lifeline tariff system correctly argued that it benefited 100% of consumers, when only 33% were classified as poor. But with the new tariff structure, only 55% of the poor actually received the income transfers, leaving almost half of them uncompensated for the 47% tariff increase. With limited access to low-cost substitutes, increases in tariffs and collection rates meant greatest hardship for the urban poor, who devoted 16% of their monthly cash expenditures to electricity. Moreover, the revenues accruing to electricity suppliers only increased by about 6% from sampled households, thanks to falling consumption and growing arrears. This suggests that the benefits of the reform program did not materialize as quickly or easily as intended, and that tariff increases must be accompanied by moves to encourage greater payment. Further developments: As electricity consumption dropped, consumption of natural gas and wood for heating has increased. This highlighted the need for a heating strategy. Since 2002, Armenia has had a national heating strategy. Use of gas for heating has increased, while use of wood has declined. The economy has continued to grow and poverty has declined significantly since 1999. Armenia has continued to reform the electricity sector, including the sale of its loss-making distribution network to foreign strategic investors. By 2004, collections had reached almost 100%. Long term impact: The Armenian reform experience raises obvious questions about the poverty and social impact of energy sector reform, particularly over a longer period. How can cost recovery be improved while maintaining a balance with social protection? If affordability is an issue, how can tariffs be increased at the same time as collections? And what difference, if any, does it make if a private operatorwith stronger motivation to improve revenue collectionenters earlier in the process? Source: Lampietti J.A., Banerjee S.G., Branczik A. (2007): People and Power: Electricity Sector Reforms and the Poor in Europe and Central Asia; World Bank, Washington DC.
Page 109

Armenias Family Poverty Benefit Programme Armenias social protection system has become better targeted since 1999, and efforts to improve it further continue. Currently four types of benefits are in place in Armenia: family benefit, lump-sum childbirth allowance, childcare allowance, and benefits to the families of deceased national heroes of Armenia. Much importance is attached to improving targeting of these programmes. Eligibility for the family benefit is determined by the family vulnerability score, which reflects household incomes, the number of household members unable to work, domicile size and conditions, pensioner status, and the like. Each indicator has its numerical value, and the family vulnerability score is determined by the product of such values. The higher the score, the more vulnerable the family is judged to be, and the greater its eligibility for benefits under this programme. Targeting: By 2006, coverage under the family benefit programme among the bottom consumption decile improved to 61% by 2006. Approximately 45% of programme benefits resources went to the poorest 10% of Armenias households. Lessons: Challenges in further improving the family benefits programme include improving the: Motivation/compensation for the social workers who determine family vulnerability scores. The system, especially in its early days, was prone to fraud and corruption. Inclusion/exclusion indicators in the family vulnerability scores. For example households who receive a refrigerator or a computer as gift can be included in the programme. The drastic differences in living standards in Yerevan versus other regions need to be better reflected in the income transfers to households in other regions. The current mechanisms for defining benefit size direct assistance to families with children, and to families living in high mountainous and border regions. Other categories of vulnerable households may suffer from this emphasis.
Sources:
USAID Armenia Social Protection Systems Strengthening Project (2008) Social Workers Perception of the Family Vulnerability Assessment System in Armenia
Page 110
Armenias output-based assistance scheme for heating In line with the national heating strategy (developed in 2002), the use of gas for heating has increased, while use of wood and electricity for heating declined. This was made possible in part by a $7 million programme ($530,000 of which came from the government, and $470,000 of which came from participating households; the rest came from donors) funding connection subsidies for poor households (so defined under the family benefits programme). This programme allowed some 10,000 households to install gas heaters and in some cases boilers. Lessons learned: 1) Institutional barriers were significant in terms of promoting the installation of gas boilers in apartment houses. Underdeveloped housing associations and difficulties in ensuring the realization of collective payments limited the application of this programme to such buildings. 2) Early and active involvement of central and local governments is crucial for taking the programme to scale. Early involvement in implementation particularly in terms of informing potential beneficiaries, collecting applications, encouraging household co-financing, and the subsequent recognition of their contributionswas particularly important. 3) Adequate public outreach is critical. A number of tools were employed; direct mailing worked best. 4) When household gas tariffs accelerated sharply toward the end of the past decade, household interest in gas heat declined and demand for electric heat rose. This underscored the need for effective long-term forecasting of energy sector pricing and other commercial trends.
Sources:
Lampietti J.A., Banerjee S.G., Branczik A. (2007): People and Power: Electricity Sector Reforms and the Poor in Europe and Central Asia; World Bank, Washington DC; IEA, OPEC, OECD and World Bank Joint Report (2010): Analysis of the Scope of Energy Subsidies and Suggestions for the G-20 Initiative, prepared for submission to the G-20 Summit Meeting Toronto (Canada), 26-27 June 2010; GPOBA (2008): Armenia OBA scheme for provision of gas and heating, SDN week, Washington DC.
Page 111

ANNEX 2: Major Development partners/projects
Source: ADB: Country Partnership Strategy: Tajikistan, 20102014, Manila, Philippines

ANNEX 3Energy sector investment projects: Budgets and funding gaps
Annex 3.1 Investment projects in electricity (US$)
Source: adapted from PSRP Tajikistan 2010-2012
Page 113

Annex 3.2. Investment requirements for key coal mines (in US$ million)
Names of enterprises Budget financing
2007-2008 2008-2010 2010-2015
External financing
2007-2008 2008-2010 2010-2015
Section construction East deposit Fon-Aygnob Plan construction by production of coke Section construction and mine Ziddi Section construction and mine Nazar-Aylok
19.0
44.2
4.44
10.36
19.05
44.45
20.9
48.78
Source: Ministry of Energy and Industry of Tajikistan
Annex 3.3. Examples of small scale HPPs funded with IFI support
Funder SHPP
Asian Development Bank (ADB)
Dushokhzamin plant in the Nurobod district Kalandak plant in the Rasht district 2750 KW Marzich station (Ayni district in Sughd) 667 KW Sangikor station in the Rasht district (northeast) 600 KW Fathobod station in Tojikobod (northeast of Tajikistan) 850 KW Pitavkul station in Jirgatol (northeast of Tajikistan) 100 KW Shahboloi station in Nourobod (eastern Tajikistan) 360 KW Khorma station in Baljuvon (Khatlon) 500 KW Toj station in Shahrinav (central Tajikistan) 700 KW Shirkent station in Tursunzoda (central Tajikistan) 30KW Doshtmandi, Baljuvan district 40 KW Yol, Shuroobod district 10 KW Hissorak Shuroobod district 10 KW Safedob Shuroobod district.. 100 KW Nurofar, Vahdat district
The IDB funded the construction of eight small power plants in rural areas of Tajikistan. The loan of US$ 9.3 million provided by the IDB will support the construction of another five small hydropower stations in the rural area of Tajikistan The Government allocated US$ 2.4 million to utility company Barqi Tojik for construction of following small hydropower plants: UNDP
Source: based on Tajikistan: In-depth review of the Investment Climate and Market Structure in the Energy Sector, Energy Charter Secretariat, 2010
Page 114

7. REFERENCES
ADB (2010): Development Effectiveness Brief Tajikistan: Rising Path to Progress, Manila, Philippines ADB (2006): Tajikistan: Power Rehabilitation Phase II, TA Consultant Report; Project Number: 34515: Prepared by Hydro Electric Corporation ADB: Country Partnership Strategy: Tajikistan, 20102014: Poverty analysis summary, Manila, Philippines ADB (2009): Republic of Tajikistan: Strengthening Corporate Management of Barqi Tojik, Harrison E., Corporate Solutions, under a contract with ADB for the Ministry of Energy and Industry, Republic of Tajikistan, September 2009 ADB (2007): Technical Assistance for Governance and Capacity Development Initiative, Manila, Philippines ADB: Country Partnership Strategy: Tajikistan, 20102014, Manila, Philippines ADB (2006): TA 1817-TAJ Power Sector Restructuring Plan, Final, Manila, Philippines ADB (2009):Social Assistance and Conditional Cash Transfers: Proceedings of the Regional Workshop, edited by Sri Wening Handayani and Clifford Burkley, Manila, Philippines APEC/ADB (2009): Energy Outlook for Asia and Pacific Aga Khan Development Network: PamirEnergy, www.akdn.org Barqi Tojik (2010): Investment Program 2010, Dushanbe, Tajikistan BiC Information Center: Best practice model in Central Asia: Sustainable energy model for rural communities Bertelsmann Stiftung, Barqi Tojik 2010 Tajikistan Country Report. Gtersloh: Bertelsmann Stiftung, 2009 Bronchi C. (World bank) and Aisen A (IMF) (2010):Developments and Outlook 2010-13, DCC Presentation; IMF Development Forum, 3-4 December, 2010 Dushanbe BP (2010):Statistical Review of World Energy, June 2010 Coady D., Gassmann F. and Klytchnikova I (2005): An Evaluation of the Welfare Impacts of Electricity Tariff reforms and alternative compensating mechanism in Tajikistan, Maastricht University Maastricht Graduate School of Governance, Working paper, MGSoG/2006/WP2005/001, April 2005 Climate Investment Funds, PPCR/SC.7/7, October 26, 2010, Meeting of the PPCR Sub-Committee, Washington, D.C. November 10, 2010 CAREC (2009): Energy Demand/Supply Balances and Infrastructure Constraints Limiting Trade (Backgrounder), Energy Sector Coordinating Committee Meeting (ESCC) 2-3 September 2009, Almaty, Kazakhstan CAREC (2009): Energy Sector Progress Report, Senior Officials Meeting on CAREC, 28-29 May 2009, Ulaanbaatar, Mongolia CAREC (2010): Energy Statistics and Outlook for Asia and the PacificFocusing CAREC Members CAREC ESCC Meeting Almaty, Kazakhstan 25 26 March 2010
Page 115

EUCAM (2010):Destruction of Central Asian Electricity Grid: Causes and Implications: commentary, Gulnura Toralieva, EUCAM, Place du Congres, 1000 Brussels, Belgium | +322.229.39.17 | www.eucentralasia.eu ESMAP (2003): Rural Electrification and Development in the Philippines: Measuring the Social and Economic Benefits, Washington DC ESMAP Report 255/03, World Bank, Washington, DC. Ebinger, Jane, 2006. Measuring Financial Performance in Infrastructure: An Application to Europe and Central Asia. Policy Research Working Paper 3992, World Bank, Washington, DC. Estache, Q. Wodon and V. Foster (2002), Accounting for poverty in infrastructure reform: Learning from Latin America's experience, World Bank, Washington DC. Energy Charter Secretariat (2010): Tajikistan: In-depth review of the Investment Climate and Market Structure in the Energy Sector EBRD (2005): Can poor consumers pay for energy and water? An affordability analysis for transition countries, by Fankhauser S and Tepic S., London, UK EBRD (2007):Towards Sustainable energy in Central Asia: Scope for Regional Cooperation?, Erik Berglof, Chief Economist, London, UK Eurasian Development Bank (2008):Water and Energy Resources in Central Asia: Utilization and Development Issues Financial Standards Foundation (2010): Country Brief Tajikistan, eStandardsForum Forecast parameters of social and economic development, Tajikistan, 2009 Foster V. (2000):Measuring the impact of energy reform-practical options, in Chapter 4 of ESMAP (2000), Energy and development report 2000: Energy services for the worlds poor, Energy Sector Management Assistance Programme, World Bank, Washington DC. Foster V., Tre J-P. and Wodon Q (2000): Energy prices, energy efficiency and fuel poverty, 2000, World Bank, Washington DC. GTZ (2010): Forest Sector Analysis of the Republic of Tajikistan GTZ (2009): Renewable Energies in Central Asia: Country Chapter for the Republic of Tajikistan, Dr. Ing. Klaus Jorde, Entec Consulting & Engineering AG.; St. Gallen, Switzerland Government of the Republic of Tajikistan (2009): Poverty Reduction Strategy Paper 2010-2012 Government of the Republic of Tajikistan (2010): Medium Term Expenditure Framework 20112013, Dushanbe, Tajikistan Government of the Republic of Tajikistan: National Development Strategy up to 2015 Government of the Republic of Tajikistan and UNDP (2010): Promotion of Renewable and Sustainable Energy Use for Development of rural communities in Tajikistan, by Dr. Zoran Morvaj, Dushanbe, Tajikistan Government of the Republic of Tajikistan and UNDP (2010): Millennium Development Goals. Dushanbe, Tajikistan Government of the Republic of Tajikistan: Statistical Yearbook 2010 GPOBA (2008): Armenia OBA scheme foe provision of gas and heating, SDN week,, Washington Dc Global Energy Network Institute: maps of CAPS IEA, OPEC, OECD and World Bank Joint Report (2010): Analysis of the Scope of Energy Subsidies and Suggestions for the G-20 Initiative, prepared for submission to the G-20 Summit Meeting Toronto (Canada), 26-27 June 2010
Page 116

IEA (2010): The Politics of Central Asian and Caspian Energy, Chatham House, 23-24 February 2010, UK IMF (2010): Tajikistan Country Report No. 10/374, Washington DC IMF (2010a): IMF completes Reviews Under Extended Credit Facility Arrangement with Tajikistan, and Approves Request for Augmentation and Waivers, Press Release No. 10/230, 7 June 2010. INOGATE (2008): Report on the progress made by the EU and the INOGATE Partner Countries toward achieving the objectives of the Energy Road Map adopted at the 2nd Ministerial Conference in Astana on 30 November 2006 Integrated Food Security Phase Classification (2010): Tajikistan- phases in Food insecurity, FAO/OXFAM/Save the Children/WFO/FEWSNET/ EU JRC, sponsored by the Government of Canada, Dushanbe Tajikistan Kabutov, K. (2007): Tajikistan: Priority Directions and Status of Research in the Field of Renewable Energy Sources , published in Geliotekhnika, 2007, No. 4, pp. 91-96 Komives K., Foster V., Halpern J. and Wodon Q (2005).: Water, Electricity, and the Poor: Who Benefits from Utility Subsidies, World Bank, Washington DC Kayumov A. and Kabutov K. Socio-Economic Assessment of the Production and Consumption of Renewable Energy Sources in the Republic of Tajikistan, Center of Climate Change, HydroMeteorological Agency, Dushanbe, Tajikistan Lovei L., Gurenko E. Haney M. OKeefe P. and Shkaratan M. (2000): Maintaining utility services for the poor, policies and practices in central and eastern Europe and the former Soviet Union, World Bank, Washington DC. Lampietti J.A., Banerjee S.G., Branczik A. (2007): People and Power: Electricity Sector Reforms and the Poor in Europe and Central Asia; World Bank, Washington DC Mikelsons M.: Other Country Experience with a Consumer-Based Housing Subsidy Mercados EMI (2010): Central Asia Power System Study funded by the World Bank, Washington, DC Ministry of Energy and Industry of the Republic of Tajikistan (2009):Renewable Sources of Energy in the Republic of Tajikistan: current status and perspectives and a call for cooperation, Valam-Zade T.G., Dushanbe, Tajikistan NEPAD/OECD Investment Initiative (2005): Encouraging Public Private Partnerships in the Utilities Sector. The role of development assistance OECD/IEA (2004):Coming in from the Cold: Improving District Heating Policy in Transition Economies, Paris, France Nemtsov R. (2010): Developing Effective Reform Strategies: Safety nets to protect the poor and vulnerable groups from the negative impacts of reform, Increasing the momentum of fossil-fuel subsidy reform, presentation at the WTO/WB joint conference, 2010, Geneve, Switzerland Pereira da Silva L.A., Essama-Nssah and Samak I.: Linking Aggregate Macro-Consistency Models to Household Surveys: A Poverty Analysis Macroeconomoic Simulator (PAMS) Regulation of continuity of supply in the electricity sector and cost of energy not supplied; Ilaria Losa - ERSE S.p.A. and Osvaldo Bertoldi - ENGINET S.r.L RAND Graduate School (2010): Developing a Safety Net for Ukraine, Rohozynsky O., PhD dissertation, 2010 SNC Lavalin (2010): CASA-1000 Feasibility Study Update, Interim Report presentation
Page 117

Tajikistan: Reducing Poverty through Private Infrastructure Services. The Pamir Private Power Project, a case study from Reducing Poverty, Sustaining Growth, What Works, What Doesnt and Why: A Global Exchange for Scaling Up Success.; Scaling Up Poverty Reduction: A Global Learning Process and Conference, Shanghai, May 2527, 2004 Tabor S. (2002):Assisting the poor with cash; design and implementation of social transfer programmes, World Bank, Washington DC. UNESCO (2008): Tajikistan country case study, Briller V. for the Education for All Global Monitoring Report; Education for All by 2015 we make it? UNDP Energy and Environment Programme (2010):Analysis of the energy efficiency in rural Tajikistan, Dushanbe, Tajikistan UNDP DRMP (2008): Multi-Cluster Assessment, Dushanbe
UDPP Tajikistan (monthly issues 2010): Monthly Risk Monitoring & Warning Report, Dushanbe, Tajikistan USAID (2007); Regional Energy Markets Assistance Program (REMAP) for Central Asia, The United States Energy Association UNDP (2010a): Tajikistan: Accelerating Progress towards the MDGs by improving energy, by Umarov H.U, Musaeva R.G., Rustamov M., and Robic S., Dushanbe, Tajikistan UNDP (2010b): Intermediate Strategy for Renewable Energy Sources Based Integrated Rural Development, Dushanbe, Tajikistan. UNDP (2009): Central Asia Regional Risk Assessment: Responding to Water, Energy, and Food Insecurity, Regional Bureau for Europe and CIS, New York UNDP-GEF (2010): Assessment of the Energy Efficiency and energy Saving in rural Tajikistan, Dushanbe, Tajikistan UNDP-GEF (2005):Heating in Transition, Susan Legro and Grant Ballard Tremeer, with Lous Jensen, New York, USA UNEP (2004): The Use of Economic Instruments in Environmental Policy: Opportunities and Challenges, Division of Technology, Industry and Economics, Paris France UNICEF and State Committee on Statistics Republic of Tajikistan (2009) Tajikistan Living Standards Measurement Survey 2007: Indicators at a Glance USAID Armenia Social Protection Systems Strengthening Project (2008) Social Workers Perception of the Family Vulnerability Assessment System in Armenia UK AID/Public Foundation Panorama (2010);Impact of Global Economic Crisis on Households in the Republic of Tajikistan. Dushanbe, Tajikistan Velody M. Cain and M. Philips (2003): A regional review of social safety net approaches in support of energy sector reform, mimeo, USAID World Energy Council (2007): Survey of Energy Resources: Tajikistan. Wang, Bolt and Hamilton (2003), Estimating the potential lives saved from improved environmental infrastructure, Environment Department, World Bank. WHO (2004), Energy sustainable development and health, in Chapter 3 of Access to electricity and heating, WHO background papers, June , Geneva WHO and the Ministry of Health of Tajikistan (2008):Health Assessment for Tajikistan World Bank (2010a): Tajikistan: Delivering Social Assistance to the Poorest households, Report No: 56593-TJ, Washington DC
Page 118

World Bank (2002), Sourcebook for poverty reduction strategies, core techniques and cross cutting issues, Washington DCWorld Bank (2010a): Lights out?: the outlook for energy in Eastern Europe and the former Soviet Union, Washington DC World Bank (2008): The Welfare Impact of Rural Electrification: A Reassessment of the Costs and Benefits, IEG, Washington DC World Bank (2000): Making transition work for everyone: Poverty and inequality in Europe and Central Asia, Washington DC World Bank (2010b): Lights out?: the outlook for energy in Eastern Europe and the former Soviet Union, Washington DC World Bank (2006): Infrastructure in Europe and Central Asia region: approaches to sustainable services, Washington DC World Bank: Europe and Central Asia: Tajikistan Poverty Update, 2007-2009 World Bank: Bringing Power to the Poor in the Pamirs, press release WFP and UK Aid (2010): Tajikistan Food Security Monitoring System, Dushanbe, Tajikistan World Resources Institute (USA), Prayas Energy Group (India) and the Open Society Institute Foundation Tajikistan (2010): Electricity Governance in Tajikistan: Applying the EGU Indicator Toolkit to Tajikistan, Dushanbe, Tajikistan World Bank (20005): Project Appraisal Document on a Proposed Credit in the Amount of SDR 12 Million (US $15 million equivalent and proposed grant in the amount of SDR 2 million (US$3 million equivalent) to the Republic of Tajikistan for the Energy Loss Reduction Project, Washington, DC World Bank (2009): Country Partnership Strategy (CPS) Tajikistan, FY10-13, Washington DC. World Bank (2009): Energy Strategy Approach Paper Sustainable Development Network, Washington DC
Page 119

Poverty and Social Impact Assessment: Energy Sector in Tajikistan

Загружено:

Сведения о документе

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Poverty and Social Impact Assessment: Energy Sector in Tajikistan

Загружено:

Авторское право:

Доступные форматы

PSIA Energy Tajikistan 2011

Authors: Lilit V. Melikyan, Hasmik Ghukassyan Editor: Ben Slay

PSIA Energy Tajikistan

Draft Final Report May 20, 2011

PSIA Energy Tajikistan 2011

PSIA Energy Tajikistan 2011

COUNTRY BRIEF ............................................................................................................................ 16 ENERGY SECTOR ........................................................................................................................... 19

PSIA Energy Tajikistan 2011

PSIA Energy Tajikistan 2011

PSIA Energy Tajikistan 2011

PSIA Energy Tajikistan 2011

PSIA Energy Tajikistan 2011

PSIA Energy Tajikistan 2011

Intermediate Strategy for Renewable Energy Sources, p. 8.

PSIA Energy Tajikistan 2011

PSIA Energy Tajikistan 2011

PSIA Energy Tajikistan 2011

PSIA Energy Tajikistan 2011

PSIA Energy Tajikistan 2011

PSIA Energy Tajikistan 2011

PSIA Energy Tajikistan 2011

PSIA Energy Tajikistan 2011

PSIA Energy Tajikistan 2011

PSIA Energy Tajikistan 2011

PSIA Energy Tajikistan 2011

2008, % oil 4 22 gas hydro 56 18 coal

ADB: Country Partnership Strategy: Tajikistan, 20102014, Manila.

PSIA Energy Tajikistan 2011

World Energy Council (2007): Survey of Energy Resources: Tajikistan.

PSIA Energy Tajikistan 2011

PSIA Energy Tajikistan 2011

PSIA Energy Tajikistan 2011

Nurek* Baipaza Sangtuda 1 Golovnaia** Perepad** Central** Varzob Kairakum TOTAL

Water reservoir Run-of-river Run-of-river Run-of-river Run-of-river Run-of-river Run-of-river Run-of-river

PSIA Energy Tajikistan 2011

Switchyards units/ thousand kWh

2002 2003 2004 2005 2006 2007 2008 2009 2010

from own resources (BT), million USD

Source: Central Asia Power System Study, Mercados, July 2010

Source: Barqi Tojik Investment Programme 2010

PSIA Energy Tajikistan 2011

Source: Mercados, 2010

Source: UNDP, based on data from National Statistical Agency

PSIA Energy Tajikistan 2011

Production Import Export Consumption

16509 4605 4596 16518

16401 4810 4466 16835

17090 4637 4402 17325

16935 5022 4429 17528

17494 4552 4464 17582

16147 6404 5539 17012

16117 6003 5960 16160

Source: Statistics Yearbook, Tajikistan 2010

Figure 12: Shares of main consumption categories of electricity, %

Figure 11: Electricity consumption, million KWh

8080 3908 3359

8060 3612 3044.3

7802 7007 3144 2906 3722 3680

losses others irrigation Industry

2006 2007 2008 2009

Source: Statistical Yearbook Tajikistan, 2010 and Barqi Tojik

Central Asia Power System Study, Mercados, 2010.

PSIA Energy Tajikistan 2011

Nurek* Baipaza Sangtuda 1 Golovnaia Perepad Central** Varzob Kairakum TOTAL