Energy poverty and technology leapfrogging: a look on

end-use efficiency programs for low income households

in Brazil

Gilberto De Martino Jannuzzi

Introduction
Stern & Aronson (1984) recognized the different dimensions in which energy is
perceived in our society. These authors in light of public energy policies to
address the requirements of the population and also energy conservation
studied energy as a social necessity. Consistent with this view, several
countries, including developing countries, have provisions, programs and
funding mechanisms to ensure adequate access to supplies of modern fuels
and electricity to their low-income populations (Modi et al. 2005; Pereira,
Freitas and Da Silva 2010). However, this has not been enough and energy
poverty still prevails in large extensions of the planet and the incredible figure
of 2-3 billions of people still have no access to electricity and modern cooking
fuels (Goldemberg et al. 2004; Sarkar 2006; Karekezi 2002;).
The literature on the topic “energy poverty“ is as abundant as there are
specific programs and proposals with the aim to address the problem
(Fulkerson et. al. 2005; Sagar 2005), however the main characteristic of
poverty is the fact that basic human needs - - food, shelter, health care,
education, and livelihoods -- remain unfulfilled, and energy services are
intrinsically connected to these needs direct and indirectly. As stated by
Batliwala and Reddy (undated):
The real determinant (or correlate) of poverty is the level of services
that energy provides -- heat for cooking, illumination, accessible water
supply for personal and domestic needs, enhanced productivity of
labour, etc. This viewpoint increases the range of options -- from a
mere increase in the magnitude of energy consumption to
improvements in the efficiency of energy utilization (and of course,
combinations of both). Thus, poverty and scarcity of energy services
go hand in hand, and exist in a synergistic relationship).

This paper intents to contribute to the argument developed initially by

Goldemberg et al. (1985, 1994) that energy poverty can be addressed in a
substantial part by using the best available technology in order to provide
more services to these customers. It has the purpose to illustrate that private
agents (i.e. utilities) can also be interested parties in promoting the
technological leapfrogging in low-income households because they also have
benefits.
Mandated low-income energy efficiency programs which have been
implemented by Brazilian utilities are used here as example of ways to provide
better technologies and services to these customers.

Low-income energy efficiency programs in Brazil

In Brazil all major cities have large fraction of their population settled in their
peri-urban áreas. About one third of all municipalities have population living in
peri-urban areas (IBGE 2008). Access to modern energy services is a challenge
to local governments and energy utilities. These areas are usually irregular
settlements, with precarious housing and lack minimum urban planning which
do not facilitate the installation of electrical distribution grid. Utilities have to
face high commercial losses due to power thefts and illegal connections in
these areas.

About 37% of the Brazilian residential consumers legally connected to the

electricity grid are considered to be low-income consumers by current
regulation and receive subsidies amounting to a total around US$ 60 million
per month. There are almost 18 million consumers classified as low income in
the country, of which 43% are concentrated in the Northeast region, followed
by the Southeast (36%) (Jannuzzi 2007).

Certainly, a number of particular and complex issues needs to be tackled

specially in the peri-urban areas, which includes the inefficacy of enforcing
legal regulations, the need to develop more creative and technical solutions to
treat and avoid theft and fraud in services, better education and social
assistance. It is also necessary to consider the economic situation of such
populations living in the urban setting and create opportunities for income
generation.
Efforts to secure funds and activities in energy efficiency started in a more
systematic way in 1998 when the Brazilian regulator ANEEL established
mandatory investments to privatized utilities. Since 2005 a minimum of 50% of
those investments must be allocated to low-income energy efficiency
programs, and in recent years about US$ 80-100 millions have been invested in
specific programs to low-income households, about half of their compulsory
investments in end-use programs under current regulation (Jannuzzi 2009;
Jannuzzi 2005). Figure 1 shows the accumulated investments in mandatory
energy efficiency programs implemented by utilities in the country. Low-
income EE programs dominate by large these investments up to now (about
66% accumulated investments).
New technology to connect households to the local grid and end-use energy
efficiency programs are options to reduce the scarcity of energy services
available to the population. Modern and state-of-the-art technologies are being
used in peri-urban areas of Brazil, including remote digital metering and real
time demand monitoring of households, more efficient transformers, new
cabling systems and materials are being used. In a way these regions are leap-
frogging to other technological stages.
Refrigerator and lamp replacement programs have been the preferred end-use
energy efficiency programs targeting these populations, because not only the
existing equipment is obsolete and inefficient but also utilities face serious
problems with commercial losses (electricity thefts, irregular connections and
lack of payments).

Some results from utilities’ programs1

Incandescent lamps are still predominant technology in urban and peri-urban
slums and the average wattage found in surveys is about 67W, which have
been replaced in recent programs by 15 W CFLs (Jannuzzi, Paccola, and Gomes
2010). Figure 2 illustrates the impacts on the daily household load curve from
end-use measurements before and after the replacement. The total household
energy savings in lighting were reduced by 77% on average in programs
implemented in some Rio de Janeiro slums. The average number of
incandescent lamp per household is between 5-8 lamps, and the one used the
most is located in the room served as kitchen. Usually this is the preferred
lamp for replacement, but utility programs have installed about 3 lamps per
household.
Around 30% of Brazilian refrigerators are more than 10 years old. Furthermore,
the majority of the oldest refrigerators, as expected, are found amongst the
lowest income families, averaging 8 years old. None of these models are grade-
A labeled appliances (Jannuzzi 2007). Even older refrigerators (15 years) are
usually found in the urban slums surveyed. The consumption of these older
refrigerators are several times the best commercially available model in the
local market. Utility programs have targeted these refrigerators and also
recycled the old refrigerators in order to capture the CFCs refrigerant gases of
these models2. These programs also include retrofits in the domestic wiring of
the houses and sometimes even architectural interventions in order to improve
internal ventilation and natural lighting (Mascarenhas and Pinhel, 2006).

Figure 3 shows the electricity demand reduction (75%) of the average existing
refrigerator by the new model implemented by the utility program in Rio de

1 This section is based on field work done by the author in the concession area by the utility
serving Rio de Janeiro city.

2 New refrigerators are more energy efficient (Label A according to the existing Brazilian energy
efficiency labeling scheme) and also manufactured in compliance with the Montreal Protocol.
Janeiro slum area. This particular program replaced 20,000 refrigerators,
300,000 lamps, internal re-wiring of 4,500 houses and connected 31,000
households to the grid over a period of 18 months.

Some utilities, particularly in Sao Paulo and Rio de Janeiro have also invested in
modern and sophisticated distribution systems in the peri-urban and slums
areas. Digital metering, underground cabling systems, remote demand
monitoring and billing. These systems are more resistant to fraud and power
thefts.

The combination of interventions performed on the end-use and electricity local

distribution systems have contributed to lower utility commercial losses, and
customers’ energy bills, as is illustrated in Figure 4. In this case, the significant
92% reduction value was achieved as a result from educational, lamp and
refrigerator programs coupled with a complete upgrade of the local electricity
distribution system, which also included internal re-wiring of local houses.

Another pilot case study was performed in a “favela” in São Paulo and it
reported the reduction of household electricity consumption from 250
kWh/month to 151 kWh/month and an internal rate of return of the investment
of 276%, or a payback of 1.36 years. The financial analysis assumes a
reduction in commercial and technical losses and regular payments from the
customers (ICA 2008).

Some utilities have also designed local-income generating programs as part of

their mandatory programs. Recycling urban waste has been one of these
efforts. These programs help local low-income households to collect and sell
recyclables and they get a bonus to pay for their electricity bill. Some utilities
use magnetic cards in order to monitor and compensate their program
participants.

The results obtained from these programs have been encouraging both for
customers that now can afford their electricity bills and for local utilities that
have reduced significantly their commercial and technical losses as a
combination of better technology to connect households to the grid and lower
bills to their clients, i.e. utilities experience increased revenues for the utilities
with reduced arrearage and non-payments by their clients.

Concluding remarks
Access to modern energy services, electricity in particular is a necessary
condition to overcome poverty, however it is hardly a sufficient condition.
Technology can be part of a package of measures that aim to alleviate and
promote social welfare. Educating consumers in the use of new technology and
energy issues has to be part of any program. Income generation and
employment are other key measures that need to be in place in order to
preserve the economical sustainability of low-income energy.
Energy programs are not, and cannot be, a substitute for social programs in
order to address poverty alleviation issues, but certainly are part of the effort.

Brazilian low-income energy programs do need better oversight and evaluation

in order to warrant cost effectiveness to the society. The savings measured
need to assessed over time and the medium to long term project results need
to be monitored. Currently these programs are paid for all electricity customers
and are included in the regular tariff.
Figures

Figure 1: Utility EE programs breakdown by program type (US$ invested during 1998-
2010)

Source: (ANEEL 2010)

Figure 2: Impacts of lamp replacement in daily energy demand

Note: Data collected from surveys done in Rio de Janeiro during 2009. Source: (Jannuzzi, Paccola,
e Gomes 2010)

Figure 3: Impacts of refrigerator replacement

Note: Data collected from surveys done in Rio de Janeiro during 2009. Source: (Jannuzzi, Paccola,
e Gomes 2010)
Figure 4: Results
from an energy efficiency and improved local electrical distribution system in Rio de
Janeiro slum "Santa Marta

Source: Light Energy Services (2010)

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