The Welfare Impact of Rural Electrification
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Transcript of The Welfare Impact of Rural Electrification
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The Welfare Impact of Rural Electrification
Howard White
IEG, World Bank
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Introduction
IEG impact studies Rigorous and relevant Theory-based Link to CBA
Rural electrification (RE) Multi-country Portfolio review Multiple data sets Country case studies
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Overview
Strategy and portfolio Output achievements Who benefits? Identifying benefits Returns Policy implications
Underlying theme of evaluation design
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Evaluation design I: portfolio review Identify all RE projects – there is no list and RE
activities fall under many projects Dedicated RE – becoming more common Larger energy sector project – RE component may be
very small (e.g. a study), usual rule of thumb is 10% budget to count
Multi-sector – mainly Community Driven Development (CDD)
Portfolio review analyses the universe of projects Quantitative Qualitative
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What counts as a RE project?
1980-95 1996-2000 Total
Dedicated RE project
17 (33%) 25 (37%) 42
Energy sector with RE component
23 (44%) 21 (30%) 44
Multisectoral 12 (23%) 22 (32%) 34
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Shifting regional focus
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Changing strategy
1993 Policy Papers Environment Private sector
1996: Rural energy and development: improving energy supplies for 2 billion people
2001 sector board paper ‘helping poor directly’ one of four pillars, which includes priority to gender issues
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One consequence of strategy: Increasing number of RET and off-gird projects Percentage projects with off-grid
1980-95: 2% 1996-2006: 60%
Percentage RE projects with RET 1980-95: 35% 1996-2006: 62%
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Practice lags strategy: welfare
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Practice lags strategy: gender
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First conclusion
Disconnect between strategy and project design, with little explicit attention to poverty and gender objectives in the majority of projects
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Outputs
Most (but not all) projects deliver on infrastructure
In particular a series of dedicated projects can make a very substantial contribution to RE coverage Indonesia Bangladesh
There has been progress on institutional issues but it is uneven
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Evaluation design II: the role of descriptive analysis (the factual) Targeting – profiles of who benefits? So need
characteristics Uses of electricity – need detailed data on
appliance usage Alternative fuel sources – need detailed data
on fuel usage for all activities
Issues in questionnaire design
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Who benefits?
0
5
10
15
20
25
30
0 10 20 30 40 50 60 70
Rural electrification rate
Sh
are
of
the
bo
tto
m 4
0%
in
ele
ctr
ifie
d h
ou
se
ho
lds
Bangladesh
Philippines
Ghana
Peru
Nepal
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Who benefits? II
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Poorest remain excluded
0
10
20
30
40
50
60
70
80
90
0 2 4 6 8 10 12 14
Years since grid connection
Ele
ctr
ific
ati
on
ra
te
All households
Poor households
54% connect in first year
Another 10% connect in the next two years...
… then it takes 7 years for the next 10% to connect
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Second conclusion
RE reaches poorer groups as coverage expands, but there remains a residual of unconnected households in connected villages for many years
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Evaluation design III: who is the control group? (the counterfactual) Need a control group identical to treatment
group Selection bias
Program placement Self-selection
Approaches RCTs Statistical matching (PSM or regression discontinuity) Regression
Is selection just on observables?
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Uses
Lighting TV Other household appliances Small business appliances Social facilities
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Uses of electricity
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Benefits Domestic benefits
Recreation Homework Information NOT cooking
Productive uses Home enterprise Industry Agriculture
Social benefits Facilities Staffing SafetyEnvironmental benefitsNeed HIGH QUALITY data on all these
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Quantification of benefits
Approach WTP Income gain Value of fertility decline Environmental benefits
The problem of double counting
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Consumer surplus & WTP
0
2
4
6
8
10
12
0 20 40 60 80 100 120 140
Quantity
Pri
ce Pk
Pe
QeQk
A
B C
D E
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Costs versus benefits I
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
Bangladesh1990
Lao PDR 2005 Philippines1994
India (NathpaJhakri) 1989
India(Rajasthan)
2000
Indonesia 2000
US
$/kW
h
WTP Price Cost of supply
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Cost versus benefits 2
WTP > supply cost ERRs high (20-30%) Higher for grid extension than off-grid, for
which costs higher and benefits lower
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Third conclusion
WTP is high enough to ensure a good ERR and financial sustainability in many cases (caveat on Africa). Grid extension economically superior to off-grid programs.
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Policy implications
Good economic analysis can inform policy Design to catch up with strategy
Smart subsidies Consumer information Support to productive uses
Balance grid and off-grid