Lily Odarno, Anjana Agarwal, Amala Devi and Hisako Takahashi
Access to electricity is recognized as fundamental to development, and many efforts are under way across developing countries to scale up access, both in terms of providing basic supply and enabling people to move up through the energy tiers. However, it has become apparent that providing a connection to electricity, whether from a grid or off-grid source, does not automatically bring development benefits.
In this paper, we propose that for electricity services to reach those who need them and catalyze development, electrification initiatives should be built on a disaggregated understanding of consumer demand from the bottom-up, exploit the links between electrification and other development sectors and make reliability and affordability of electricity services key considerations.
This paper proposes an approach to scaling electricity access that aims not only to provide electricity services to unserved or underserved populations but to ensure that those services are appropriately matched to people’s development needs.The work of the World Bank’s Energy Sector Management Assistance Program (ESMAP) has already demonstrated that people’s access to electricity supply cannot be understood as a binary issue of “connected/not connected.” ESMAP’s Multi-tier Framework for electricity access defines five tiers of access, each tier involving progressively higher demands in terms of power delivery and hours of availability. It emphasizes the real potential of nontraditional energy supply systems, like minigrids and stand-alone solar home systems, to contribute to development.
Access to electricity is recognized as fundamental to development, and many efforts are under way across developing countries to scale up access, both in terms of providing basic supply and enabling people to move up through the energy tiers. However, it has become apparent that providing a connection to electricity, whether from a grid or off-grid source, does not automatically bring development benefits. If the electricity supply is of poor quality, it constrains productive activity by households and enterprises. Regardless of quality, if electricity is too expensive, consumers will not be able to afford connections, or subsequent payments for service. Equally, even in the presence of good-quality, reasonably priced electricity, if there is not adequate, stable demand from potential users, then energy-service providers will not be able to sustain a viable business and the electrification effort will likely fail.
Building on this understanding of electricity supply and demand, we argue that the relationship between electricity access and development is two-way. Development cannot be accelerated without access to electricity. But financially self-sustaining electricity access initiatives cannot be supported without successful development that underpins strong and sustained demand for electricity services.
We propose an approach to closing the electricity access gap that is based on three clear strategies.
Understand electricity demand from the bottom up. Traditional electricity planning has relied on top-down projections of future demand based on extrapolations of historic demand patterns, or on forecasts of future economic growth. These methods do not take into account the very different levels of need among consumers; nor do they factor in the millions of consumers not yet represented in the connected load. Bottom-up demand forecasting, based on consumer surveys or on energy end-use modeling, allows a disaggregated perspective that facilitates appropriate technology choices and least-cost development that matches the variations in electricity service needs across different consumer segments.
Link electricity access with local development efforts. There is an urgent need to avoid the “vicious cycle of underdevelopment,” in which areas with low levels of economic development have low levels of demand for electricity, which makes them unattractive to electricity service providers. The lack of access to electricity, in turn, perpetuates the lack of economic development in these areas. Energy planners need to understand the enabling role of electricity if they are to design access initiatives that promote development objectives. And electricity planners need to consider how electricity impacts the livelihoods of the poor and how the poor value and use electricity in their decision-making processes. If access initiatives are linked more closely with development projects, with energy planners tapping into the expertise of other development actors, finance organizations, and community groups, then synergies can be exploited and additional funds leveraged to ensure that electricity access and development become mutually reinforcing endeavors.
Build good governance in electricity access. Good governance is concerned with issues of affordability and with the quality and reliability of electricity services. Governments are familiar with the affordability challenge and have traditionally responded with subsidies, either to service providers or directly to consumers. While the need for subsidies will remain, governments can also play other roles to facilitate more affordable electricity. Options include encouraging emerging end-user finance models, such as pay-as-you-go, streamlining policies and regulations for distributed generation options to reduce their costs and encourage greater involvement on the part of private lenders, and reducing trade barriers on imported alternative/high efficiency electrical products. Addressing reliability and quality-of-supply issues will call for improvements in the technical characteristics of electricity supply systems as well as strong and effective structures for accountability in electricity service delivery.
These three components of our proposed approach are all driven by the belief that electricity planning must be more responsive to consumer demand, and that “demand” should be understood to mean both conventional demand—defined in terms of connected load—and latent demand, which may be defined as the unmet demand of potential customers who currently lack physical connections to electricity supply, or cannot afford to pay for it, or do not have the development opportunities necessary to make productive use of it.
While the term “energy access” covers a range of services, including access to electricity and various fuels for cooking and heating, this paper focuses exclusively on access to electricity. Our central concern is how national and subnational electricity planning processes can be oriented to encourage initiatives that yield both access to electricity and sustainable development outcomes.
The paper is intended primarily for electricity planners, policymakers, and electricity-service providers in developing countries. These actors are working to close the electricity access gap in an energy-development landscape that is rapidly evolving. It is our hope that they can draw on this paper for guidance. To this end, we recommend a number of interventions in each of the three areas identified by this paper as critical for implementing effective electricity access initiatives. We also suggest other key stakeholders who should be engaged in the process of change.