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The value of benefits from rural electrification to households is above the average long-run supply cost so that cost recovery tariff levels are achievable. Analysis of feasible tariff levels can be informed by good quality economic analysis, of the sort pioneered by the Philippines ESMAP study. But the quality analysis of that study has not been uniformly replicated, so that the quality of project-level analysis is uneven. In order to demonstrate the feasibility of rural electrification projects, proper analysis of the benefits and tariff levels need to be mainstreamed in Bank project analysis.

More empirical evidence of the claimed benefits of rural electrification will help in properly calculating the benefits and returns to electrification projects, and therefore proper tariff levels. Tailor-made surveys, designed to test these benefits, need to be built into a greater number of Bank projects, and designed in such a way as to allow rigorous testing of the impact of electrification

Countries with low coverage rates, which are now mostly in Africa, still have to make investments in generation, transmission, and distribution. This implies relatively high average supply costs and low coverage, increasing slowly by extensive growth for some years to come. The principal challenge is to balance financial sustainability of the supplier with growing coverage in rural areas. Future electrification projects will need to: ensure efficiency by limiting system losses and consider off-grid generation, with an eye to maintaining technical quality, since grid connections will grow slowly many areas may be eligible for off-grid connections.

Some countries in Asia and Latin America are reaching the limits of grid extension. Further increases in coverage require increasing connections in already electrified areas (intensive growth) rather than laying new lines (extensive growth), which requires instruments designed for that purpose, or off-grid schemes, which need design improvements if they are to be financially sustainable.

There are project design options which have been uncommon but which would enhance project benefits. These include financing schemes for connection charges, consumer education and support to productive uses.




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