Rural Energy Subsidies: “It's Déjà Vu All Over Again”

By Doug Barnes

I have noticed that there has been quite a bit of material circulating recently on energy access and subsidies.  The World Bank has prepared

Cooking with Ecofogon Stove, Nicaragua
Photo: PROLEÑA/Nicaragua

a background paper that will be published soon, and it is quite good. However, in reading this paper and other related material, I almost felt I had read it before—a kind of déjà vu.  So in this period when everybody is asking "Where is my bailout?" it seems a good time to review the justifications and implementation challenges for energy subsidies.

Jonathan Halpern and I had written both a paper and a short note on this subject about 10 years ago at a time when there were strong anti-subsidy sentiments in many development agencies. This blog contains a summary of that paper on energy subsidies published in 2000. So go to the original paper and read it, or read on. Or read on and then go to the paper! This work hopefully has withstood the test of time, but you can be the judge.

Why should we examine the role of energy subsidies for access to energy?  The answer seems obvious.  Energy policies that have the purpose of alleviating poverty must in some way bring down the costs of safe, clean, reliable energy services to make them more affordable. Low-income households often lack access to or cannot afford the initial costs of “modern” energy services. A good subsidy scheme is one that enhances access for the poor while sustaining incentives for efficient delivery of energy services without significant distortions in energy markets. But that is not all: the subsidy scheme must also be within the financial and human resource constraints of the government. This is quite a balancing act.


Much more below the break....

Solving Rural Electrification Problems: New Wine in Old Bottles?

Strong institutions, favorable financing, clear service territories, encouraging productive uses, reducing drudgery for women, and local involvement.  Do these all sound like familiar prescriptions for successful rural electrification?

Rural Electrification Administration Advertisement
Source: NRECA

In fact they encompass some of the eight steps to successful rural electrification highlighted in a previous blog. Recently I was doing a bit of research on the United States Rural Electrification Administration (REA) and I came across some interesting quotes that illustrate many of these points—some from the 1930s no less.

Before plunging into the quotes, some salient facts for those that do not live in the US—or for those living in urban areas in the US! The United States beginning in the 1930s began implementing a new rural electrification program as part of Roosevelt’s New Deal that was based on a newly created government agency called the Rural Electrification Administration. This government agency was created not to carry out rural electrification projects, but to support their implementation through electricity distribution companies called rural electric cooperatives. These cooperatives were and still are private, independent electric utilities anchored firmly in the communities that they serve. Today there are more than 900 electric cooperatives in the United States providing reliable electricity service to 42 million Americans while maintaining a unique consumer-focused approach to business. For more facts see US Utility Fact Sheet published by the National Rural Electric Cooperative Association.

With this background, it is now time for the quotes which have been paraphrased to provide a better context for understanding them.  

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Promoting Solar Home Systems and Improved Biomass Stoves: A Comparison

Solar PV Adoption by Herders, Qinghai, China
Photo by China REDP Team

Over the past 15 years strategies for solar home system promotion have moved from a niche activity to the mainstream. Recently I have been thinking that there are quite a few similarities in the obstacles that were faced by solar homes system in the early years and those confronting the new improved biomass stoves today. I thought it might be a good time to explore what we have learned over the years, and what lessons might be relevant for scaling up the adoption of improved biomass stoves.

Both solar home systems and improved stoves are used primarily for household energy services such as cooking and lighting. They both provide significant improvements compared to the kerosene lamp or an open fire. Both devices also involve fairly large initial costs that are barely affordable to the majority of populations in developing countries, but the cost to operate them is fairly low. Solar home systems cost on the order of US $200-$300 and the new generation of improved stoves range from US $10 to $70 or more. As the old joke goes “Solar (read that renewable) energy is free, but it ain’t cheap.”

 

Today solar home systems are considered fairly mainstream and adoption levels though still somewhat limited are rising quickly in many countries. With the exception for the older large programs such as china, progress is being made by improved biomass stove programs, but they also have quite a long way to go to be accepted on a large scale in more countries.

Much more below the break....

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.

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Comparative Cooking Costs in Developing Countries

By Douglas Barnes and Keith Openshaw

Kerosene Lamps and Stoves, Hyderabad, India by D. Barnes

Recently we have just reviewed many of programs for improved stoves in developing countries, and we were quite surprised to find that there were few analyses of comparative cooking costs. In the glory days of country energy assessments comparing the cost of cooking to enlighten energy policy makers was very common. Today we stress energy efficiency, combustion, emissions, and carbon. However, if people are going to adopt these stoves the comparative cooking costs are an obvious important place to start. Keith Openshaw who has extensive experience with improved stoves is a coauthor of this posting. 

To revive this lost art, we will explain the steps for calculating comparative cooking. The first step is to assemble the necessary data. This includes:

• Cost of the stove;
• Lifetime of the stove;
• Efficiency of the stove;
• Price of fuels used burned by the stove including wood or other biomass fuels;
• Fuel collection hours for biomass fuels;
• Quantity of fuel consumed in the household per month; and
• Average wage of agricultural workers.

One caveat is that the comparative costs in this analysis are hypothetical because they assume that families cook exclusively with one fuel. Also, we use world market prices and average fuel consumption levels as defined by many different household energy surveys. Thus, these figures can be considered as typical but they do not relate to any one country due to various policies to tax and subsidize household fuels. They at least give us some perspective on the comparative costs of cooking in developing countries.

For much more continue below....

Improved Stoves in Developing Countries by the Numbers

Nepal Improved Stove by Simon de Trey White WWF-UK

There are 3 billion people in developing countries that rely on solid fuels for almost all of their cooking. The question can be asked how many of these over 800 million households cook with an improved stove? The answer comes from a new study by the World Health Organization (WHO) and the United Nations Development Programme (UNDP). Like any good mystery story you will have to skip to the end for the answer. All I will say is that the results may surprise you.

Before turning to the numbers, it is important to define an improved stove, and this is actually quite a contentious subject among specialists. The original programs were developed during the energy crisis of the 1980s and stoves were developed mainly to conserve biomass fuels. So energy conservation is the first definition. During the 1990s the literature on indoor air pollution was starting to link smoky stoves and health issues. At the time it was accepted that you need a chimney to remove smoke from the house. Thus energy conservation and smoke removal became a popular mandate. More recently in the last 10 years there is beginning to be evidence that the pollution from incomplete combustion of biomass energy might be the main health issue. Chimneys simply move the smoke to the outside only to drift back indoors. Now let’s add to this mix climate change and green house gases that must be taken into consideration. The demands on the humble biomass stove seem to grow and grow.

More below....

Facing Rural Energy Realities in Bangladesh

Adult Literacy Class, Bangladesh by Shehzad Noorani

People often forget that once Bangladesh was close to being the poorest country on the planet. Things certainly have changed in recent years. Bangladesh has always had policies for open trade that have helped the country become an exporter of manufactured goods, much of which has resulted from allowing investments by multinational firms.  Generally economic growth has been very positive in recent years.

The country also has a very ambitious and successful grid rural electrification program that was modeled after the USA rural electric cooperatives which is considered a “best practice.” Even for those rural households distant from the electricity grid, since 2002 there has been a very successful rural energy fund that is administered by a government bank. This fund along with prominent non-governmental organizations such as Grameen Shakti (part of Grameen Bank) and BRAC have been very active in promoting solar household systems for basic electric lighting and communications services for those out of reach from the grid electricity system. In recent years they also have been expanding to other rural energy technologies such as biogas and improved cookstoves.

Much more below....

Rural Electrification and Communication

Vietnam Rural Television Viewing: Photo by WB Hanoi

Today most of us take electronic communications for granted. We are tethered to our emails, televisions, and computers.  Facebook, Twitter, sports and entertainment all are made possible by a combination of electricity and technology. Does this improve our productivity?  The answer is a resounding yes. Does it also make life more complicated? You bet. In fact, sometimes we feel that the world is getting too interconnected. This raises the question about how to value the electronic communication benefits of modern communications, and it is not an easy issue to tackle.

For the 1.6 billion people in this world who do not have access to electricity their electronic communication needs are more basic. People without grid or off the grid electricity often rely on battery powered radios for their communication devices. For people that adopt electricity for the first time, after household lighting the next most commonly purchased electronic device often is a television or a fan. Therefore in this blog, I am going to concentrate on televisions use and their implications for households with and without electricity.

For more on this issue continue below.....