The Quest for Impact: A Comment on the Energy Dividend Framework

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By Johannes Urpelainen

 

A new report by Sustainable Energy for All and Power for All proposes an analytical framework for quantifying the benefits of energy access. The report offers an innovative new approach to thinking about benefits and highlights the importance of timing, but applications of the framework are limited without massive investments into rigorous impact assessment.

 

The basic idea of the dividend framework is simple. As people and households gain access to energy, their benefits depend on the level of access. Although this seems obvious, earlier studies have not classified benefits by level of access. Even very basic energy access, such as lighting, could produce benefits. Quantifying these benefits can inform policymakers as they develop plans for expanding energy access.

 

The report offers two useful contributions to energy access policy. First, the report contains a cheat sheet of different levels of energy access. This is the first list on key benefits that I have seen by energy level. For example, while basic energy access can improve general lighting, benefits from other electric appliances require more power. The energy dividend report collapses these benefits into five tiers, ranging from no modern energy access at all to 24/7 reliable access to basically unlimited loads of power.

 

The dividend framework helps policymakers think through the value of different levels of energy access. For instance, while inexpensive solar lanterns can improve lighting and enable mobile charging, a larger but more expensive mini-grid enables appliances such as refrigerators. The dividend framework makes comparisons between the benefits of these options easier.

 

The second useful contribution is the emphasis on timing. Social scientists typically quantify benefits of energy access in a static sense, but the dividend framework offers a more sophisticated analysis that distinguishes between early and late energy access. Even if grid extension in 2025 might bring greater benefits than solar lanterns, rural households might still benefit from having a solar lantern right now, instead of waiting eight years.

 

This reasoning is critical because it reveals the limits of comparisons between grid and off-grid access. If grid access is a decade away, policymakers must consider the forgone benefits of basic energy access now.

 

The most important limitation of the energy dividend framework is that we simply lack good research to quantify these benefits. The energy dividend framework clearly shows that these benefits are quantifiable, but doing so requires rigorous impact evaluations that go beyond description and focus on estimating causal effects. Most of the studies used to quantify benefits in the report are descriptive in nature. They do not have experimental or quasi-experimental strategies, and they are thus vulnerable to all kinds of biases.

 

This is not the authors’ fault, but the fact remains that until we have better evidence on benefits of energy access, the energy dividend remains subject to great uncertainty. With clear quantitative evidence on the value of energy access at different levels, the energy dividend framework would offer more value for policymakers as they consider the costs and benefits of different approaches.

 

Without a much larger evidence base on the benefits of basic energy access, the dividend framework remains a theoretical construct. At ISEP, we reviewed the entire literature on small decentralized solar and only found four randomized controlled trials in refereed journals. While the number of studies will increase in the future, we are very far from understanding the benefits of energy access.

 

To make the most of the energy dividend framework, a massive expansion of impact evaluation is necessary. Without rigorous studies that correctly quantify the benefits of energy access, the full potential of the energy dividend framework cannot be realized.

 

Johannes Urpelainen is the Prince Sultan bin Abdulaziz Professor of Energy, Resources and Environment at the Johns Hopkins School of Advanced International Studies (SAIS). He is the Founding Director of the Initiative for Sustainable Energy Policy (ISEP).