High energy costs prevent Moldovans from increasing energy efficiency, World Bank

Against the background of the high financial burden of energy costs, a significant number of poor Moldovans failed to improve the energy efficiency of their homes. The modernization of insulation, which can mitigate the effects of rising energy prices, hasn’t been implemented in about 56% of poor households in Moldova. Estimates suggest that medium-level renovations, such as insulation of walls, roofs, basements, windows and doors could lead to energy savings of around 45%. This is said by World Bank experts, who consider it essential for the Government to focus on providing affordable financing options for energy efficiency in order to help households manage more efficiently the costs for energy resources, IPN reports.

The latest World Bank Economic Outlook shows that the poorer Moldovans and those in rural areas, who are less likely to use modern energy sources, face greater difficulties in keeping their homes adequately warm. It usually goes to older buildings that are not energy efficient and this leads to higher costs for energy resource. The transition to more modern, cleaner and more energy-efficient energy sources could not only reduce costs and increase resilience to volatile energy prices, but also provide a number of co-benefits, including improved air quality, public health and environmental benefits.

The WB experts came up with a number of recommendations. In the short term, they believe that the Energy Vulnerability Reduction Fund (EVRF) could be improved by separating energy consumption from subsidies, ensuring that assistance reaches those most in need. The EVRF consumes the most significant part of the social assistance budget, alongside social welfare services. Further reforms could involve restructuring this fund by decoupling subsidies from real energy consumption to incentivize efficient consumption. For example, by introducing consumption rules related to the heated area and turning discounts on utility bills into monetized benefits. This adjustment can reduce energy costs for vulnerable households and prevent excessive spending increases in the program, thereby reducing the fiscal pressure on the budget.

The analysis also says that investments in energy efficiency measures will reduce the overall consumption of energy resources, thus reducing energy bills for households and businesses. This could include initiatives, such as improving insulation, modernizing heating and cooling systems and promoting energy-efficient appliances, which the authorities are starting to implement. Low-income homeowners lack the financial means to renovate their property, which prevents them from realizing the economic and other benefits of energy-efficient upgrades.

“Even with energy subsidies available, poor households’ limited financial resources make it difficult for them to contribute to the necessary co-financing or provide affordable financing options. Banks are frequently hesitant to lend because of these and other obstacles, such as lack of collateral. The successful implementation of financial assistance programs, such as subsidies or low-interest loans, for energy-efficient upgrades or renewable energy installations can help households and businesses invest in cost-cutting measures. In addition, raising awareness of energy-saving practices and technologies among consumers can enable them to make informed choices to reduce consumption and costs of energy resources.

Another recommendation of the experts is related to the improvement and modernization of energy infrastructure, including transmission and distribution networks. According to them, this will increase efficiency and reduce energy losses, which could lead to lower costs for consumers. In addition, it is recommended to encourage competition in the energy resources market by simplifying procedures and allowing private sector involvement, which can lead to more competitive prices and improved services for consumers. Increasing the share of renewables in the energy mix will help diversify energy supply and reduce dependence on imported energy, which could lead to lower energy prices over time. At the same time, Moldova should consider possible opportunities of obtaining funding from the European Union and other donors, as well as from the private sector.

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