2022 - ongoing
Government (Ministry of Labour and Social Protection; Ministry of Finance), National Bureau of Statistics, private sector (Energy providers; IT company), UNDP
Energy Vulnerability; Energy Poverty; Targeted Compensations
Energy Providers (MoldovaGaz; FEE-Nord; Premier Energy); State Fiscal Service; National Bureau of Statistics, Land Relations and Cadastre Agency
Since October 2021, Moldova has been facing a severe energy crisis. This situation has worsened given the war in Ukraine, with Moldova facing a significant decrease in gas supply due to high dependence on Russian sources, combined with a further increase in gas prices in a very tight global energy market. Inflation, energy vulnerability and pre-existing poverty have combined to put significant pressure on Moldovan households.
With technical assistance from UNDP, the Government of Moldova introduced a law creating the Fund for Reduction of Energy Vulnerability (EVRF) in July 2022. UNDP supported the government in developing an online platform for households to register to apply for financial compensation, launched on October 12, 2022. Based on their registration, consumers are assigned a level of energy vulnerability and corresponding compensation. This information is then shared with energy providers, which apply the compensation payments directly to household bills.
The provision of a decentralised needs-based compensation mechanism provides a targeted solution to energy poverty and vulnerability in Moldova while minimising costs to the government. The compensation scheme is also the first platform to connect so many sectors within the government and represents a successful case of connecting private sector actors and the government.
The compensation scheme contributes significantly to SDG 7 (Affordable and clean energy) by reducing energy poverty and vulnerability.
Moldovan households are at risk of falling below the poverty line due to inflation.
As a result of tight global energy markets and a recently amended contract with Gazprom Moldova, the country has faced an acute energy crisis since October 2021.
The war in Ukraine has further exacerbated this. On October 1st, 2022, Moldova experienced yet another price increase and 30% cut in gas supplies, which have been reduced by yet another 50% since then. The increased energy prices have contributed to Moldova’s inflation, now reaching an all time high (34% above 2021 values).
Energy vulnerability represents an emerging form of poverty and threatens to affect other aspects of human development, such as access to quality food, education and health. According to an early income simulation by UNDP, an additional 25% of people (about 250,000 additional households) are at risk of falling below the poverty line due to inflation.
To tackle the impact of the energy crisis and with technical support from UNDP, the Government of Moldova introduced a Law creating the Fund for Reduction of Energy Vulnerability in July 2022 (Law 241/2022), coming into effect in September that year. The law establishes five categories of energy vulnerability for households: consumers with very high, high, average, low or no energy vulnerability. Based on the reported energy expenses and disposable income of each family, households are assigned to one of the categories. This allows energy subsidies to be focused in the most efficient way to reduce energy vulnerability by the maximum amount for the money spent. Upon completion of online registration on the dedicated platform www.compensatii.gov.md, information on eligible compensation payments is automatically forwarded to energy distribution companies who adjust consumers' bills accordingly. For households struggling with the online registration system, a network of more than 1000 librarians and 1200 social workers were trained to offer registration assistance. Moreover, a dedicated call centre and communication unit within the Ministry of Labour and Social Protection was set up to support consumers via email and telephone.
As of 19th January 2023, an approximate 750,000 households have already applied for compensation, representing more than half of Moldova’s households.
The breakdown in categories of vulnerability is the following:
Further legal amendments and technical improvements of the platform have already been suggested. A flexible approach is required due to changes in electricity prices and the need to include households that are not currently supported by the scheme. Constant dialogue between the Ministry of Labour and Social Protection, UNDP, technical IT partners and parliamentary officials has allowed the compensation system to be rapidly redesigned and improved.
As an information system that connects more government datasets than almost any other, the energy vulnerability system represents a step towards more transparency, efficiency and inter-operability within government, while promoting its digital transformation.
The data generated from the energy vulnerability system also contributes to better understanding energy poverty and energy vulnerability in Moldova, and therefore helps develop further preventive measures towards energy resilience. For instance, the national project to replace highly energy-consuming households’ appliances with more energy-efficient ones will be based on the data generated by the energy vulnerability system, in particular by comparing energy vulnerability levels with consumption data.
This data will allow a more targeted approach to better understand and improve:
UNDP Moldova will continue to support the government in evaluating the impact of the country’s fund on energy vulnerability and poverty. The datasets available to the government will be used to simulate and measure the impact of compensation on poverty and on the energy consumption at granular level. An energy vulnerability and poverty dashboard will be generated to support further decisions on the implementation, monitoring and evaluation of the EVRF and to derive further actionable intelligence for the improvement of the mechanisms.