Utilising Electricity Access for Poverty Reduction

TERI, Practical Action Consulting, and Institute of Development Studies of the UK have recently completed a DFID-funded project that aimed to understand the links between electricity access, productive uses of electricity, and poverty reduction. In particular, the study sought to explore relationships between different levels of electricity access and impacts and map out the enabling factors and constraints to the provision, take up, and productive use of electricity access.

Objectives

The research aimed to find answer to the following two questions:
  • What level of electricity access is required to enable and sustain poverty escape?
  • What constraints, despite increased access to electricity, mean that people are not able to use that electricity productively and how can they be removed?

The research presented in the report has sought to explore these questions through a review of existing literature and case studies in India and Kenya where the findings of a programme of field research were analysed in the context of a supporting review of policy and regulation and a consultation of stakeholders involved in electricity access provision.

Findings

An examination of the literature and a review of the regulatory and policy framework in the case study countries (including stakeholder consultations) found that the features of policy and regulation that are most critical in increasing the use of electricity access for productive purposes by poor people are:

  • Clear policy focus on provision of electricity for productive use (relative to basic household provision) and of off-grid electricity in the many contexts in which grid extension is not feasible.
  • Electricity access policies with explicit links to policies in other areas of livelihood creation and income generation, such as industrial and agricultural development.
  • Regulation that encourages the provision of off-grid electricity access by non-governmental actors. In the case of mini-grids, tariff-setting, cross-subsidization, and licensing regulations are keys to bringing about new mini-grid investments. Furthermore, mini-grid developers need policies that protect them from uncertain grid extension plans.

Stakeholder interviews and research in communities, which had received electricity access, confirmed that socio-economic context and the presence (or absence) of a number of critical enabling factors (or barriers) strongly affect the extent of getting the desired benefits of electricity. The most significant factors appear to be costs and access to finance, knowledge & skills, and access to markets among others.

The study recommends that the design of programmes, as well as policies, must give more attention to the productive use of electricity access, and ideally electricity access should be delivered as part of broader development initiatives that tackle infrastructure, skills, and foster access to markets and finance. By putting village-scale productive uses at the heart of electricity access provision, policy makers and programme developers can simultaneously improve the viability of electricity access projects and better ensure that the ultimate aims of poverty reduction and economic development are achieved.

Sponsor(s): DFID UK
Project partners: Practical Action Consulting, UK, TERI, India and Institute of Development Studies, UK
Duration of the project: March 2014 - January 2015
Recommendations
  • Electricity access for productive use must be prioritized in policies and programmes alongside basic electricity access for households.
  • Policies and plans for electricity access should be linked to those in other areas of livelihood creation and income generation, such as industrial and agricultural development.
  • Electricity access provision should be combined with measures to tackle other barriers to enterprise development and poverty reduction such as building skills, improving transport and communications links, developing market systems, and providing access to finance.
  • Policy interventions that tackle barriers faced by rural communities with respect to access to markets, poor infrastructure, resource supply, and inadequate skills, should be coordinated with electricity access provision.
  • Livelihood improvements may be achieved through relatively low levels of access, and policy makers should encourage a range of electricity solutions to meet the various needs of different communities. While the reliability and availability of grid-supplied electricity access must be improved, the need for off-grid solutions should also be recognized.
  • Mini-grid operators should be permitted to charge tariffs that cover costs and make business models viable while financial support arrangements should be re-balanced to recognize the higher costs faced by off-grid providers and the cross-subsidies inherent in grid systems so as to ensure that off-grid communities can compete on equitable terms in markets.
  • Clear, publicly available plans for grid expansion and regulatory provision for mini-grids in areas into which the grid expands will reduce risks faced by developers and bring down costs.
  • Development of 'standard' models for community engagement could reduce a barrier to scale-up and the replication of similar projects on a national scale and thus, foster private sector provision of mini-grid access.

For more details and study reports, please Click here.

Posted on: 27 February 2015