Turkey’s energy poverty as inflation crisis deepens

Turkey entered the year 2022 with an unprecedented rain of hikes. We started to discuss inflation, price hikes, the rising cost of living, and poverty. Still, there is one more thing to add to these discussions: energy poverty! This term has been one of Turkey’s issues for over a decade and stands before us as a problem that has deepened even more after the recent electricity and natural gas price hikes.

The term energy poverty, in other words, energy deprivation, refers to the inability to access modern energy resources and lack of opportunity to use services linked to energy sources.

When a household’s total energy expenses (electricity + water + gas) exceed 25% of its monthly or annual budget, that household is considered poor in terms of energy. This classification applies to all energy expenses. For example, electricity poverty or gas poverty occurs when a house spends more than 10 percent of its budget on electricity or costs. Definition of gas poverty depends on the country that you are living in. In a developed country, the threshold is 3%; in a developing or underdeveloped country, the limit is 5 to 6%.

If we cannot have access to energy resources and basic needs such as heating, cooling, lighting, cooking, and using household appliances at the required level, we are considered poor in terms of energy.

Access to energy is a fundamental right

Low household incomes, high energy prices, and low energy efficiency of residences can be indicators to specify energy poverty.

If we would like to go into a little more detail, labor market, energy market, the housing market, unemployment rate, the welfare state practices, and failure of the policies regarding all of these aspects can make you an energy-poor country.

Studies suggest that the effect of the neoliberal transformation in the energy industry after 1980 is the main reason behind the high energy prices. Also, it is stated that monopolistic structuring created by privatizations in energy markets causes prices to rise.

Our dependence on foreign sources in the energy market, the rise in exchange rates, and increasing energy costs have resulted in high prices for energy consumption in industry, agricultural activities, and households.

Access to sufficient, qualified, permanent, low-cost, and reliable energy is the fundamental right of consumers, and governments should provide this service.

Everything will be expensive

Low-income families will not only have difficulty affording electricity, water, and heating. In addition, the prices of agricultural products, food, clothing, gasoline, etc. will also become more expensive and hard to attain since their costs are linked to energy prices.

In the new year, the government announced further gradual price adjustments for electricity prices. According to this adjustment, the energy prices are increased 50% for households that consume less than 5kWh for a day, 150kWh for a month. For the higher consumption, the increase reaches 125%. We should note that Energy Market Regulatory Authority defined 5kWh as a consumption value for the lowest income group. On the other hand, the Chamber of Electrical Engineers (EMO) announced recently that the monthly minimum electricity consumption of a family of four in Turkey is 230 kWh a month.

In this case, while the total electricity cost of a family of four with monthly electricity consumption of 230 kWh was 210.58 TL in December 2021, it will increase by 76% to 370.80 TL as of January 2022.

The government removed the Energy Fund and TRT shares from the electricity bills, but these are pretty small items compared to increases. So what EMO proposes is to reduce VAT from 18% to 1% and increase the limit from 150 kWh to 230 kWh.

Adjusted electricity price hikes with 2002’s numbers

After the Cabinet meeting on Jan 3, President Recep Tayyip Erdoğan explained how they protected the citizens by price increases ranging from 50% to 125%, which he said arranged in favor of the citizens.

The president has taken 150 kW of electricity and 125 m³ of gas consumption as his base point. He stated that the price to be paid within these limits corresponds to 13% of the minimum wage today. He also compared it with the year 2002 and pointed out that in 2002, households paid 47% of the minimum wage while using the same amount of electricity and gas.

His reference point was the election period when the political parties implementing these policies lost the elections. Then, the Justice and Development Party (AKP) was emerging as a new hope.

He didn’t prefer to compare the 50-125% increase in electricity prices to the 36% inflation rate, even though he was making this speech on the same day that even the Turkish Statistical Institute (TÜİK) announced the inflation. In fact, between 2005-2019, price increases in electricity and gas in Turkey have always been above inflation. It means that the increase in the minimum wage has already lost validity, even with the minimum spending amounts.

Pitch-black winter with poverty

Even if we consider the 230 kW electricity consumption value and 300 m³ of gas consumption amount (lowest heating values in winter) as a base point, we can say that a pitch-black winter is at our doorstep.

With minimum consumption, retired citizens, whose monthly salary is newly determined as 2500TL, will have to allocate 35% of their total income for electricity and gas. As a result, these people will become “energy poor”, and thus, their basic rights will be violated.

It is clear that while energy should be accessible and affordable for everyone, most of our citizens are deprived of this right.

As the Union of Chambers of Turkish Engineers and Architects recently stated:

“Privatization and liberalization policies in the energy sector did not provide access to cheap, high quality, and uninterrupted electricity, and Turkey was condemned to expensive darkness. Citizens are forced to choose between cold and poverty in the middle of winter. Dependence on imported resources is at high levels, energy-saving and efficiency policies cannot be implemented.

The price increases will affect all areas of social life and will reflect on all sectors that produce goods and services. Inevitably, prices will increase in all areas where electrical energy is the main input, and inflation will increase even more. Our people are getting poorer day by day while companies are getting richer with price increases that are linked to unstable exchange rates.”

It seems that poverty will be our fate in many aspects and a large part of the society will be affected.