Box 1.4
Financial losses of businesses due to electricity shortages
result of the irregular supply of electricity. This negative development will inevitably have an equally negative impact on the aggregate potential for job creation within the territory. A greater, though incalculable, impact on employment rates may be the loss of new foreign investment in Kosovo. Many foreign investors have undoubtedly based their decision to bypass Kosovo on the poor quality of the local energy infrastructure.
Household incomes The persistent high levels of unemployment are just one indirect outcome from the poor quality of energy supplies. The economic health of many households is also severely constrained by the need of businesses catering to the domestic market to pass along their higher costs, in the form of increased retail prices of consumer goods and services. This is another indirect impact of energy on households. The key direct impact relates to the amount of household income35 that is needed to pay for energy services, including power, heat, and fuel for private transport. Household survey data collected by the Statistical Office of Kosovo does not separate energy-related expenditure from other housing expenses, and therefore it is not known what proportion of household income is taken up by energy bills. However, data from a recent household energy survey carried out for UNDP indicate that the highest amounts are needed for electricity and heating:
KHDR 2007 | Energy for Development
concluded that 36.9 percent of the businesses operate under supply plan A, 38 percent under supply plan B, and 26 percent under supply plan C. According to the MEM report, power-supply problems cost individual businesses an average of €2,188 ($3,100) a month . These losses include: • production and raw material losses; • equipment damage; • costs of buying and running generators; • fuel costs; and • maintenance costs In its report, MEM emphasized that the annual energy-insufficiency opportunity cost for an industry is €4,657, an amount that could have been used for different purposes (including investment).
the average proportion of household income spent is 15 percent for each. The government has attempted to assist the poorest households, those that qualify as “social cases”, by providing them with electricity subsidies. In the period 2005–2007, the total annual subsidy paid from the Kosovo Consolidated Budget to KEK on behalf of these households amounted to €4.5 million ($6.6 million). Individual subsidies cover household consumption of the first 200 kWh of electricity per month for eligible households. One major limitation of this scheme is that heating fuels other than electricity are not subsidized. Households that rely on imported heating oils and gas are thus regularly vulnerable to major cost fluctuations in those commodities. With a limited range of alternative affordable domestic resources, electricity and firewood have become the two dominant sources in the provision of household energy services. In both cases, their use has potential adverse impacts on human health and the environment.
Human health and the environment There are close and direct relationships between the production and use of energy and the linked (in such situations) areas of human health and the environment. There are four main aspects to these relationships in Kosovo: • the aggregated environmental impacts of mining, energy production and energy consumption on emissions to air, water
Energy and Human Development in Kosovo
KEK’s “ABC” supply scheme groups customers into three categories. Those in the “A” band include large industrial customers holding pre-paid supply contracts for electricity and all other customers (residential, public and commercial) who pay electricity bills on a regular basis. “B” band customers are those that pay bills irregularly and/or have significant outstanding debt to KEK. “C” band consumers are those that pay bills rarely, or not at all, but who have not yet been disconnected from the supply system. Under normal supply and demand conditions, “A” band customers are scheduled to receive an uninterrupted supply, with “B” band consumers scheduled to receive supply for 5 hours in every 6 hours, and those in the “C” band receiving a supply on a 4:2 basis or less, depending on availability of supply. A Ministry of Energy and Mining (MEM) survey of 305 businesses in sectors of trade, production and service found that
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