Friday, April 30, 2010

Rural Electrification in Developing Countries by the Numbers

Rural Electrification Lineman Bangladesh
Photo by WB Dhaka
The rural electrification figures in developing countries are pretty well known by now. There are now an estimated 1.5 billion people without electricity in developing countries, and 85 percent of them live in rural areas. However, I am going to give a brief history of the context in which these numbers were compiled. So this post will discuss rural electrification numbers with a twist.

In the early 1990s, several ESMAP energy staff including me were asked to complete a rural energy strategy for the World Bank. One the first things we were asked to do was to find out how many people in the world were without electricity and cooked with biomass fuels. Believe it or not this had never been done in a comprehensive way. This was before the age of instant access to facts and figures over the internet, so it was not an easy task. For the electricity figures we looked at surveys, examined power company annual reports, consulted with those involved in rural electrification projects, and contacted statistical departments in country governments. After well over a year of compiling the data we presented them to our very supportive managers. I remember them saying, “These figures better be right!” Knowing the uneven quality of the sources we were nervously confident. The document was published in 1996 with the title Rural Energy and Development: Improving Energy Supplies for Two Billion People. Yes the answer for data mostly from the early to mid-1990s was two billion people without electricity and coincidentally just over two billion people dependent on biomass fuels.

These figures were widely quoted at the time, but they were not updated annually. Around 2000 the energy group decided that it was time for an update of these figures. I was not directly involved with this effort, but was asked to review the numbers as they collected the information. A new set of figures were published informally in 2002 with the new level of 1.7 billion people without electricity, and most of the progress that had been made during the previous decade was in China. After taking population growth into account this meant that over the previous decade about 1 billion people had gained access to electricity.

Much more below the break.....

Once it was realized that many people were interested in these newly published 2002 numbers, all sources and spreadsheets were turned over to the International Energy Agency who promised to maintain them yearly and publish them. These figures are now available in the World Energy Outlook which has many useful statistics for energy researchers. I would recommend a World Energy Outlook link, but in order to get the rural electrification country level data that we used to send out free in a spreadsheet to anyone who asked, you now have to pay 200 US dollars for a paper copy and 160 US dollars for a one user PDF copy of this reference book on all types of energy. No I am not kidding.

But I have good news for those looking for country level data on rural and urban electrification. The best new source for this is a publication by WHO and UNDP that compiles energy access figures for both biomass energy and electricity. The report is The Energy Access Situation in Developing Countries and is the same source used for the previous post on improved cookstoves. 

I know that many governments and international organizations have raised the bar to deal with electricity access issues, and given the modest efforts in the early 1990s this is quite a welcome trend. I know the numbers are now well known, but I cannot resist giving my view of them.

As indicated in a previous blog, the development of rural electrification programs is not an easy task. From a private business or even government utility perspective, investments in rural electrification without any form of incentive or subsidy is a losing proposition. The reason is that the break even point for investments in new distribution takes many years. However, over the long term with the growth of electricity demand in once poor regions, the business can be a winner. Not only is rural electrification a winner for the electricity company, but electricity facilitates growth opportunities in many different sectors.

Number (Millions) and % of People without Electricity, 2008 
Source: WHO & UNDP
As a consequence committed governments and donors need to provide either very long term loans or subsidies to soften the sting of the early capital costs necessary for rural electrification. At the same time the electricity companies receiving these resources need to spend them well. Otherwise, the electricity company will start losing money and then follow the dysfunction spiral of underinvestment, leading to brownouts and blackouts, leading to dissatisfied customers who will not pay their bills. Revenue collection then suffers and things can get worse. I think you get the picture.

Africa is the region with the largest number people without electricity—only one in eight people in rural areas have access to electricity. To my mind this is an unacceptable number in this modern day and age. There are different reasons why the number of people without electricity are so high.  Many African countries just have not made the financial commitment to rural electrification. Even when they do make a commitment, the  necessary institutions are not developed to carry out these difficult programs. As a consequence, many countries are locked into a cycle of low growth and high poverty described above.
Rural Electrification Billing, Rural Bangladesh by WB Dhaka
(Rural Cooperatives have well over 90% Collection Rate)
In South Asian countries about one-half of rural people have no electricity. In contrast to the situation in Africa, countries such as India have had made substantial political and financial commitments to rural electrification. Unfortunately, poor policies have often led to disincentives for the electricity companies called State Electricity Boards to invest in the maintenance and upgrading systems after they are installed. It may sound contradictory, but subsidies are absolutely necessary for successful rural electrification, but the wrong type of subsidy can cause financial strain for electricity provision companies. This generally means that programs grow slower than they should. To have healthy programs requires combination of countries, electricity companies, and/or international donors to take seriously the eight necessary steps for successful rural electrification described in a previous blog.

For this week’s poll, I would like to know who you think largely is responsible for slow electricity growth in Sub-Saharan Africa. Is it the country governments, international donors, or electricity companies?

Answer the poll and comment below. 

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