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Energy Poverty and Poverty Alleviation in Indonesia: Evidence from East Nusa Tenggara PREPARE BY MAXENSIUS TRI SAMBODO RESEARCH TEAM: SIWAGE DHARMA NEGARA (COORDINATOR), AHMAD HELMY FUADY, INNE DWIASTUTI, FELIX WISNU HANDOYO, ERLA MYCHELISDA JAKARTA, 24 SEPTEMBER 2014 1

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Energy Poverty and Poverty Alleviation in Indonesia: Evidence from East Nusa TenggaraP R E PA R E BY M A X E N S I U S T R I S A M B O D O

R E S E A R C H T E A M : S I WA G E D H A R M A N E G A R A ( C O O R D I N ATO R ) , A H M A D H E L M Y F U A D Y, I N N ED W I A S T U T I , F E L I X W I S N U H A N D OYO, E R L A M YC H E L I S D A

J A K A R TA , 2 4 S E P T E M B E R 2 0 1 4

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Outline 1. Energy Poverty and Global Agenda

2. Global multidimensional poverty index

3. Promoting electricity infrastructure

4. Electricity access and poverty reduction: case study

5. Development agendas

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Energy PovertyThe International Energy Agency (IEA) defines energy poverty as a lack of access to modern energy services, i.e., access to electricity and clean cooking facilities.

Reddy and Reddy (1994) as cited in Masud and others (2007), said that energy poverty  could  be  defined  as  “the  absence  of  sufficient  choice  in  assessing  adequate, affordable, reliable, high-quality, safe and environmentally benign energy  services  to  support  economic  and  human  development”.

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Why is it important?The World Summit on Sustainable Development, Johannesburg, South Africa, 2002, highlights the energy for sustainable development. The summit mention that:

…access  to  energy  facilitates  the  eradication  of  poverty…improve  access  to  reliable,  affordable,  economically viable, socially acceptable, and environmentally sound energy services and resources…

UN Resolution 65/151, decides to declare 2012 as the International Year of Sustainable Energy for All. There are three objectives that are going to be pursued up to 2030, namely: (1) ensuring universal energy access; (2) doubling the share of renewable energy; and (3) doubling the rate of improvement in energy efficiency.

UN Resolution 67/215, in 61st plenary meeting, 21 December 2012, decides to declare year 2014 – 2024,  as  the  “UN  Decade  of  Sustainable  Energy  for  All”.  

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Access to modern energy services in ASEAN, 2011

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World Energy Outlook 2012 – Energy Development Index 2010

Country Rank EDI

Household level energy access Community level energy access

Access to electricity indicator

Access to clean cooking

facilities indicator

Household level

indicator

Public Services Productive use

Community level

indicatorElectri-

fication rate

Per-capita residential electricity

consumption

Electricity access

indicator

Share of modern fuels in residential

total final consumption

Per-capita public

services electricity

consumption

Share of economic

energy uses in total final

consumption

Myanmar 71 0.10 0.49 0.05 0.15 0.00 0.07 0.02 0.21 0.12Laos 59 0.14 0.63 0.12 0.27 0.05 0.16 0.10 0.15 0.12Cambodia 56 0.16 0.31 0.06 0.14 0.05 0.09 0.02 0.42 0.22Indonesia 37 0.34 0.73 0.22 0.40 0.12 0.26 0.13 0.70 0.41Vietnam 36 0.35 0.98 0.31 0.55 0.07 0.31 0.06 0.74 0.40Philippines 34 0.38 0.83 0.17 0.38 0.21 0.29 0.11 0.83 0.47Thailand 15 0.64 0.88 0.42 0.61 0.20 0.40 0.79 0.96 0.88Malaysia 4 0.78 0.99 0.69 0.83 0.30 0.56 1.00 1.00 1.00

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Total 80 countries. Energy Development Index (EDI),  which  is  devised  as  a  composite  measure  of  a  country’s  progress in transitioning to modern fuels and modern energy services, as a means to help better understand the role that energy plays in human development

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Global Multidimensional Poverty Index (MPI)

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Percentage contribution of deprivations of each dimension to overall poverty

Country

1 2 3 4 5 6 7 8 9 10

Years of Schooling

Child School Attendance

Mortality (any age) Nutrition Electricity Improved

SanitationDrinking

Water Flooring Cooking Fuel

AssetOwnership

Thailand 29.2 11.5 19 12.2 1.2 4.8 4.4 2.5 10.6 4.6

Vietnam 18.5 14.3 12.9 12.2 1.5 12.1 5.5 5.5 13.1 4.4

Philippines 15.8 - 56.5 - 3.8 5.3 2.5 1.5 9.6 4.9

Indonesia 6.2 6.4 60.7 - 1.5 6.7 5.1 1.9 8 3.5

Lao PDR 16 15.4 18.9 11.5 6.3 9 5.3 2.3 10.9 4.4

Cambodia 14 8.1 13.5 19.3 10.9 10.6 6.8 1 11.9 4

Source: Alkire, S., A. Conconi,  and  S.  Seth  (2014):  “Multidimensional  Poverty  Index  2014:  Brief  

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Electrification Ratio (2012)

0102030405060708090

100N

ADSu

mut

Sum

bar

Riau

Jam

biSu

mse

lBe

ngku

luLa

mpu

ngKe

p.Ba

bel

Kep.

Riau DK

IJa

bar

Jate

ng DIY

Jatim

Bant

en Bali

NTB NTT

Kalb

arKa

lteng

Kalse

lka

ltim

Sulu

tSu

lteng

Sulse

lSu

ltra

Goro

ntal

oSu

lbar

Mal

uku

Mal

utPa

p.Ba

rPa

pua

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Length of Transmissions Line (medium and low voltage) at Province Level 2012

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000N

ADSu

mut

Sum

bar

Riau

Jam

biSu

mse

lBe

ngku

luLa

mpu

ngKe

p.Ba

bel

Kep.

Riau DK

IJa

bar

Jate

ng DIY

Jatim

Bant

en Bali

NTB NTT

Kalb

arKa

lteng

Kalse

lka

ltim

Sulu

tSu

lteng

Sulse

lSu

ltra

Goro

ntal

oSu

lbar

Mal

uku

Mal

utPa

p.Ba

rPa

pua

kilo

met

er c

ircui

t (km

s)

10

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Length of Transmissions Line and Electrification Ratio

11

R² = 0.379

0

20

40

60

80

100

120

6 7 8 9 10 11 12 13

Elec

trifi

catio

n ra

tio

Log transmission line

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Rated Capacity (MW) and Convergence Rated CapacityNo Region 2009 2010 2011 2012 2013

1 Sumatera 3,327.59 (15.1) 3,761.68 3,157.38 3,020.89 2,885.76 (9.9)

2 Java-Bali 16,991.45 (77.1) 17,535.23 20,611.98 23,379.62 24,267.10 (83.7)

3 Kalimantan 766.04 (3.5) 1,063.27 674.23 664.29 695.76 (2.4)

4 Sulawesi 605.73 (2.7) 762.45 639.72 632.72 721.49 (2.5)

5 Papua 93.49 (0.4) 192.13 100.81 93.91 103.07 (0.4)

6 Maluku 92.05 (0.4) 96.96 91.19 94.61 99.82 (0.3)

7 West Nusa Tenggara 97.88 (0.4) 99.91 82.13 96.87 129.47 (0.4)

8 East Nusa Tenggara 73.40 (0.3) 29.22 93.48 103.31 107.30 (0.4)

Convergence rated capacity 1.987 1.915 2.093 2.155 2.165

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Convergence in electrification ratio and kWh sold per capita

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

0.0

0.1

0.1

0.2

0.2

0.3

0.3

0.4

2009 2010 2011 2012 2013

kWh

sold

per

cap

ita

Elec

trifi

catio

n Ra

tio

Convergency electrification ratio Convergency kWh sold per capitaLinear (Convergency electrification ratio) Linear (Convergency kWh sold per capita)

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Metodology - Location

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Ulumbu Geothermal and Waso Diesel Plant electrified 15 villages/areas

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Ulumbu Geothermal Power Plant

(installed capacity 2 x 2.5 MW; )-Nov 2011

TantongMarch 2014

Waso Diesel Power Plant (6,5 MW);

rent 2.3 MW

Wae ajang

Wewo

Pogeo

Paka

Legu

Iteng

Tae Melo

Sater MeseBarat

Ulungali

Umug

Pongkor Cancar

Tentang

Gelo WeluLungar 2KM

Peak load 7.2 MW; rated capacity 6.9 MW; January 2013); PLTM Wae Garit 1978

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Saving due to less oil consumption from Ulumbu Power Plant – 2013 (in million IDR)

- 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

4,710 4,231

6,000 6,128 6,609 6,407

7,135 7,712 7,446

6,732 6,437 5,900

PENGHEMATAN (RP x 106)

Source: PLN Waso Office

Total IDR 75.4 billion

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Characteristic Respondents

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Spending IDR

Control Treatment

Damu Lungar/Mesir Tantong

2013 2014 2013 2014 2013 2014

Food 136,011 181,000 196,508 297,123 185,923 136,750

Energy 102,756 223,814 126,516 94,898 136,731 170,208Non-energy (exclude food) 277,884 550,015 354,383 330,656 221,198 324,444

Total spending 516,651 954,829 677,407 722,678 543,852 631,403Total spending per capita 103,330 190,966 120,966 129,050 102,614 140,312Number of sample-households 43 187 51

National poverty line-Rural-March (IDR/Capita/Month); 2013 IDR 253,273; 2014 IDR 286,097

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Access on Electricity

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Village 2013 2014Damu-on gridPLN-with meter 20 31

PLN-without meter 23 12Total household 43 43Tantong-on gridPLN-with meter 0 47

PLN-without meter 21 0Without - electricity 30 4Total household 51 51Lungar-off grid-SEHENConnected 99 98Not-connected 85Disconnected - 13New connected - 21Total household 187 187

1 Kalimantan Timur 3,2932 Maluku dan Maluku Utara 2493 Papua dan Papua Barat 12,0694 NTT 115,434

131,045TOTAL

Unit NameNONumber of

SEHEN's customers

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Interrelated pathway on electricity access (Khandker, S.R., Barnes, D.F., & Samad, H.A., 2013, Welfare Impacts of Rural Electrification: A Panel Data Analysis from Vietnam, Economic Development and Cultural Change, 61(3):659-692

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Panel Estimation (OLS – FE – RE) – Model 1

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Independent variable

OLS FE RE

Coef. Std.Err. Coef. Std.Err. Coef. Std.Err.Family 0.1124 0.012* 0.161 0.081** 0.1127 0.013*Raskin -0.1446 0.071** 0.095 0.0913 -0.0996 0.067Floor 0.245 0.0727* -0.101 0.175 0.233 0.077*On grid 0.364 0.067* 0.3078 0.137** 0.344 0.088*SEHEN 0.0476 0.062 -0.419 0.169 0.036 0.64Rural grid -0.079 0.0693 0.302 0.145** -0.0265 0.088

Number of sample 537R-square/interclass variations 0.2067 0.549 0.197

Dependent variable: household spending

Note: *significant at 1%; ** significant at 5%; the Hausmann test suggested the FE model; the LM test suggested for RE model

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Model 2We applied difference in difference (DID) estimation to calculate net benefit from having access on electricity. We selected three outcomes (outcome_vari) to measure the impact of electricity access as follows:

1. Share of kerosene spending to food spending

2. Share of kerosene spending to non-food spending

3. Share of kerosene spending to total spending

iikkiiiii xtreatedperiodtreatedperiodoutcome ,3210 ....var_

control variables (xk,i) such as total area of floor, beneficiary of cash transfer or not, beneficiaries of rice for the poor or not, and number of family member.

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Immediate ImpactsIndicator Tantong village

(treatment group)Damu village

(control group)Lungar village

(control group)

2013 2014 2013 2014 2013 2014Share of kerosene spending to energy spending

0.28 0.13 0.24 0.14 0.22 0.28

Share of kerosene spending to food spending

0.21 0.17 0.18 0.18 0.14 0.09

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Net Impact on Rural Electrification ProgramNo Output Net impact

without control variables

(observation 564)

with control variables(observation 521)

1 Share of kerosene spending to food spending -0.178* -0.176*

2 Share of kerosene spending to non-food spending -0.507* -0.551*

3 Share of kerosene spending to total spending -0.086* -0.092*

4 Share of food spending to non-food spending -1.420* -1.510*

Note: *significant at 5%

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We calculate how much CO2 emission can be reduced by replacing kerosene lamp with electricity from geothermal (we assume that geothermal consume small amount of fossil fuel). Between 2013 and 2014, the average kerosene spending decrease by IDR 15,100/family/month. The price of kerosene is IDR 4,000/litter. Thus one household can save kerosene by 3.8 liter per month (IDR 15,100 / IDR 4,000). In Tantong village there are 52 number of households, thus in a year Tantong village can reduce kerosene consumption by 2,371 litter (3.8 litter/month/household x 12 month x 52 households). If we convert 2,371 litter kerosene to CO2 emissions is about 5.4 ton CO2 (1 litter petrol = 2.3 kg CO2). The market price of kerosene is about IDR 11,000 per litter, then gap between economic price and subsidy price is about IDR 7,000 (IDR 11,000 –IDR 4,000). Thus total amount of subsidy that can be save is about IDR 16.6 million (USD 1,421 ; we assume IDR 11,600/USD). (Picture of Village Tantong, May 2013). (If we include carbon tax at 30USD/tonne, the net benefit is about IDR 18.5 million/year)

Externalities

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Development Agendas1. Reach electrification ratio 100% in 2019 2. Energy conversion program from kerosene to electricity3. Easing the installation cost (in the 1980s and 1990s, Rural Electrification Credit/Kredit Listrik

Perdesaan / KLP) 4. Village Fund5. Special Allocation Fund 6. One door policy (PLN and MEMR)7. Reallocate fuel and electricity subsidy for energy infrastructure8. Unit on rural electrification program in PLN

◦ The Rural Areas Electric Power Section, as stated in Decree No.058/DDPLN/59◦ Minister of Public Works and Electric Power Decree No.016/PRT/1976 dated 20 October 1976 formed a

Sub directorate of Rural electrification within PLN Directorate of Operation

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