Electrification brings a plethora of social benefits and is a key component in poverty reduction. Bank projects have succeeded in bringing electrical infrastructure to many rural areas over the past three decades. However, there has not been enough focus on translating the infrastructural improvements into successful energy delivery service through consumer education campaigns, productive use promotion, and properly focused subsidies and tariff mechanisms.
Rural electrification has been claimed to have substantial benefits, promoting production and better health and education. Yet coverage rates remain very low across Africa and in some other countries around the world. New analysis by IEG finds empirical support for many of these links. This report also demonstrates rates of return on rural electrification projects are sufficient to warrant the investment. Moreover, it shows that consumer willingness to pay for electricity is almost always at or above supply cost. Given these findings, the report argues that rural electrification is both an important goal and a feasible one. But the Bank has frequently neglected the poverty dimension failing to do all it can to ensure that the poor benefit from rural electrification.
Methodology The analysis unpacks the causal chain from the provision of electricity to the various benefits which it is claimed to bring, and quantifies these benefits where possible so as to address the balance of costs and benefits. The data were used to test the impact of rural electrification on several variables, such as the quantity of lighting used, opening hours of clinics, female health knowledge and income from home businesses. More on Methodology >
Electrification and Consumer Goods Ownership in Rural Areas Click on a button below to view the data
The graphs plot the percentage of people in rural areas owning the specified good against the RE rate. The 45o line and fitted line are also shown. As expected, electrification is close to a necessary condition for TV and refrigerator ownership (no points above the 45o line) but not for radio, for which there is a very weak association between ownership and electrification.
Source: DHS data (MEASURE DHS STATcompiler, http://www.measuredhs.com, March 8 2007).
While stimulation of productive enterprise is claimed to be among the benefits of electrification, few studies have tried to quantify these benefits using an impact evaluation methodology. IEG analyzed three different effects considered important to achieving higher economic benefits: (i) complementary infrastructure, (ii) stock of equipment and tools of microenterprises, and (iii) hours of operation. More on Microenterprise >
he effect of rural electrification was analyzed in rural households in 11 countries, specifically how access to information from TV and radio influences health knowledge and so health behavior and health outcomes; how the availability of refrigerated storage improves nutrition; and third, how electricity affects schooling. More on Health and Education >
A Number of trends in Bank projects have emerged, such as growth in off-grid electrification and the use of renewable energy sources
Explicit attention to poverty reduction in project design is growing, but remains limited.
Bank projects have been generally successful in establishing electricity infrastructure but weak in strengthening supplier institutions.
The larger share of benefits from rural electrification is captured by the non-poor.
High connection fees and community selection criteria that emphasize economic returns are barriers to reaching the very poor.
Consumer education and promotion of productive uses would enhance the benefits of electrification.
Properly calculating willingness to pay can demonstrate good rates of return on rural electrification projects.
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.
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.
Further increases in coverage require increasing connections in already electrified areas rather than laying new lines
Uncommon project design options, including financing schemes for connection charges, consumer education and support to productive uses would enhance project benefits.