Co-developing policy advice for advancing energy efficiency in Myanmar
By Jen Cronin and Dr. Gabrial Anandarajah, UCL Energy Institute
Energy demand in developing countries is increasing, driven by growing populations, economic development and widening access to electricity networks, a trend that is expected to accelerate over the next few years. In order to minimise negative environmental impacts and ensure energy security, it is therefore vital that this demand is met in a sustainable way.
Recent global initiatives recognise energy efficiency as a key part of this picture: for instance, UN Sustainable Development Goal (SDG) 7 aims to ensure affordable, reliable, sustainable and modern energy for all. This SDG specifically sets the target to double the rate of energy efficiency improvement by 2030. Energy efficiency measures can enable households, businesses and industries to lower their energy bills and greenhouse gas emissions. In developing countries that aim to provide electricity to millions more residents in the coming years, lowering the rate at which generation capacity needs to increase makes the whole system more manageable. Rolling out measures such as energy auditing, building insulation and appliance labelling schemes can also bring wider benefits such as job creation.
But more efficient appliances are often more expensive. How can governments of developing countries encourage households, which are often low-income, to make these investments?
In 2013–2015, I led a team of researchers from Thailand, Vietnam, Cambodia, Laos and Myanmar to consider this. The MECON project looked at effective energy efficiency policy implementation targeting “new Modern Energy CONsumers” in the Greater Mekong Sub-region. There is clearly a huge potential for improving energy efficiency in Myanmar and consequently obvious benefits for individuals and the country as a whole. However, the project showed there are several barriers to making it happen within the policy domain; including a lack of awareness of the issues, a lack of targets, insufficient regulation and mandatory minimum energy performance standards, and little economic incentives for consumers.
Recognising the critical importance of this topic, the Myanmar government set up a department in the Ministry of Industry in 2014, responsible for Energy Efficiency and Conservation. They have developed efficiency targets for each economic sector, set up an awareness-raising programme and are currently working on turning their strategy for energy efficiency and conservation into law. To address the same issues across the entire country, they are employing energy managers in a range of businesses and public sector organisations.
Although there is political receptiveness to increase action on energy policy, significant energy-related challenges remain in terms of consumer behaviour and knowledge, cost benefit and incentives for purchases, and low quality energy supply, which are specific to the residential sector.
In order to investigate and ultimately address some of these challenges to aid policymakers, my fellow researcher Jen Cronin and I, based at the UCL Energy Institute, organised a stakeholder engagement workshop with the Federation of Myanmar Engineering Societies (Fed.MES) in Nay Pyi Daw, Myanmar. We brought together participants from across the civil service, academia, the private sector, international development organisations, and the Fed.MES to discuss findings from the MECON project, academic literature and their own experience. After working with colleagues from Fed.MES to formulate a set of policy recommendations based on the outcomes of those discussions, we presented these recommendations to senior policy makers at the Ministry of Industry. Based on further debates on the requirements for more in-depth work, we created a comprehensive, co-designed policy brief for the Ministry with four key areas for intervention to reduce the energy efficiency gap in the residential sector:
1. Uncertainty and risks
Investing in expensive energy efficiency measures may be risky for consumers due to the irreversibility of the investment and because their perception of risk is related to their trust in a product’s performance and benefits. To address the risk of damage to appliances, engineers present at the workshop recommended that the government should enforce a ban on people operating unlicensed businesses in residential premises as they are one of the reasons for voltage fluctuations.
Consumers face a range of issues, such as upfront costs, availability of credit, quality of electricity supply, product reliability, and uncertain benefits on bills, which prevent them from buying more efficient appliances, even if energy efficiency is important to them and appliances are available. A number of schemes were proposed, such as retailers allowing customers to rent efficient appliances or pay for them in instalments. As most retailers in Myanmar are small independent businesses, some of the associated risk should be guaranteed by the government. Additional labelling of energy efficiency standards in the Myanmar language is necessary to give customers more confidence in expected product lifetimes.
2. Learning-by-doing to remove information barriers
Through using new energy-efficient technology, consumers come to understand how to best use the product and the long-term benefits (e.g. less electricity consumption, reduction in electricity bills and environmental benefits). This knowledge could help incentivise others to follow suit. As retailers start to sell efficient products, they build up knowledge on how to overcome information barriers which would be valuable to share with other retailers.
Through discussion with participants, we came to recommend that consumers could be encouraged to spread the word about their good experiences with energy efficient appliances in a number of ways. Retailers should be encouraged to display quotes from satisfied customers, a government body could set up a review website and ask retailers to encourage customers to use it (this was thought to be helpful as there is a trend towards online shopping), and endorsements from customers and local celebrities could be shared on social media and TV.
Other ideas to encourage retailers to share best practice include organising a series of local exhibitions where retailers share information about their products and attend seminars on marketing. Participants indicated that energy efficiency projects in public buildings (schools and hospitals) should be used as examples to attract interest and build support among public sector workers, students and government officials at all levels.
3. Principal agent issues
Principal agent issues are problematic where the person bearing the cost of the efficiency measure is not the same person who reaps the benefits, for example, in rented accommodation. Therefore, we recommended rented properties could be issued with energy performance certificates, accredited by a government agency, and in the long-term a minimum performance standard could be set. A tax incentive for efficiency improvements could be provided, though the efficacy of this in a largely informal rental sector could be limited. Schemes for benefit sharing between tenant and landlord could be investigated.
4. Consumer heterogeneity
Consumer heterogeneity may help to explain why various energy efficiency programs don’t work as expected. Products that appear financially attractive for the ‘average’ consumer may not be attractive for others. This is because of differences in preferences, expected use of the product, the cost of borrowing, electricity tariffs, where they live (urban/rural), education level, or cultural differences and behaviour. Strategies should therefore seek to understand the various consumer groups and target them specifically.
It was discussed that some consumers in Myanmar pay a fixed monthly price for electricity based on the number of appliances they own. This could thus potentially be adjusted down for appliances with a higher efficiency rating. (It was noted that quality control on rating certificates would need to be implemented to avoid forgery). More policy recommendations to take into account consumer heterogeneity could be to target geographic areas with particularly unreliable electricity supply, people with a high property value or those who spend a large portion of their household income on energy.
SDG7: Co-design and practical ideas for energy efficiency
Inviting a diverse range of participants to the workshops meant we were able to hear a wide range of points of view, experience and skills, and surface valuable insights on the practicalities of changing retailer and consumer behaviour. On the final day of our visit we presented the policy recommendations drawn from the workshop findings to senior policy makers in the Myanmar Ministry of Industry; this yielded very useful feedback and exploration on which measures could be implemented in the short and long term, and which require collaboration with other departments. Having developed the advice points with local partners from a range of organisations clearly gave them more credence and ensured that policy recommendations were based on localised knowledge and diverse understanding of problems and potential solutions.
With SDG7, countries aim to double the rate of energy efficiency improvement by 2030. This requires thorough understanding of the barriers for different consumer groups and innovative ideas for overcoming them that will work in the wider societal and economic context. Practical ideas on how to incentivise people to share their good experiences and enable them to overcome spending constraints and principal-agent issues are best explored with a diverse group of stakeholders and advisers. This kind of cross-sector international collaboration is invaluable for exploring practical solutions to the interlinked social, economic and technical problems of energy supply and efficiency in developing countries.
Jen Cronin and Dr. Gabrial Anandarajah, UCL Energy Institute
The Myanmar workshop was funded by UCL Public Policy and EPSRC Impact Acceleration Fund under the Rapid Response Advisory Scheme.
