In energy access, improving the quality of electric power is the next frontier
By Johannes Urpelainen
Universal electricity access is within reach, but the next challenge for policymakers is much more daunting. For people and firms to realize gains from rural electrification, the quality of electric power must improve. The supply of electric power must be reliable without extensive outages or voltage fluctuation. Energy policy research shows that the problem is political and cannot be solved with simple technical fixes or massive public investments.
A light in every home
Although one billion people still live without electricity at home, governments around the world are making rapid progress with rural electrification. At the global level, the household electrification rate has increased from 73% to 86% between the years 2000 and 2016. Large-scale grid extension programs and the ascent of distributed renewable energy, such as solar home systems, continue to elevate household electrification rates.
The only region that is lagging behind is Sub-Saharan Africa (SSA). While household electrification rates are increasing in SSA countries, the actual number of people without electricity at home continues to grow because of rapid population growth. In 2000, slightly over 500 million people lived without domestic electricity in SSA. By 2016, that number had increased to almost 600 million people.
The success of rural electrification is driven by favorable technical and political conditions. Although rural electrification can be expensive, the task itself is simple. Governments just need poles, wires, transformers, and other distribution equipment. Even governments with limited institutional capacity have succeeded in this task, often with external funding from development agencies.
The flip side of the coin is politics. Rural electrification is a highly visible accomplishment that allows governments to claim credit for providing concrete benefits to the people. From India to Latin America and SSA, rural electrification programs are important instruments in politicians’ electoral toolkit.
The bad news is that although household electrification rates continue to climb, the quality of electric power available is often bad. In India, our team’s 2014-2015 survey showed that in Bihar and Uttar Pradesh, two relatively poor but very large states in North India, rural households only had electricity available for nine or ten hours on a typical day. Similarly, the World Bank’s enterprise surveys rank unreliable electricity service as one of the four most important obstacles to doing business.
The problem is serious both for households and firms. For households, intermittent power is both frustrating and expensive. When even basic lighting is not reliable, households must either surrender to unpredictable outages or invest in expensive back-up solutions, such as solar home systems or diesel generators. Neither option is ideal, and research shows that intermittent electricity service is strongly associated with dissatisfaction.
For firms, the problem is perhaps even worse. Intermittent power supply makes production planning difficult. If expensive capital equipment Is unavailable because of an power outage, a factory or shop cannot generate profits. If the intermittency comes with voltage fluctuation, the electric equipment could also be damaged.
A political problem
Unfortunately, governments cannot fix the problem with electricity service with poles and wires. Improving the quality of electricity service requires solving two very difficult problems. One is pricing and the other is governance of electricity distribution companies.
A key reason for frequent outages in developing countries is administrative pricing. For political reasons, governments force electricity distribution companies to sell power at a low price that often does not even cover the cost of generation, distribution, and transmission – let alone enable profits that could go into maintenance and improvement. When governments have tried to increase prices, they have faced both popular backlash and intense lobbying from special interest groups that reap handsome gains from inexpensive power.
The other problem is the governance of electricity distribution companies. In most developing countries, electricity distribution is the exclusive domain of state-owned companies. Managed by political appointees and subject to intense political pressure, they are often very inefficient in their own operations. Even with reasonable electricity prices, poorly managed electricity distribution companies waste resources, suffer from corruption, and fail to plan and implement schemes that would improve the quality of electricity service.
These kinds of problems are difficult to solve. They depend on enlightened politicians, informed voters, effective bureaucrats, and institutional capacity. Price increases are painful in the short run, even though they often produce substantial gains over the years. Governance reforms may mean layoffs, removing incompetent managers, and reducing corruption and theft – to the detriment of the politically connected individuals and organizations who abuse the system for their private gain.
The next challenge for governments is to improve the quality of electric power. Grid extension and distributed alternatives, such as solar home systems, reach more and more people every year. Without access to a reliable supply of electricity, however, the gains will be limited.
This is a political problem. Outages are common when the price of electricity does not cover the cost and the system of electricity distribution is poorly governed. New technology can help, but even the most innovative gadgets and apps will prove ineffective unless policies and regulations enable producers and consumers to use them.
In the coming years, policymaking for energy access must deal with this realities. The easy task of extending electricity service to the remotest of villages is almost done, and now is the time to develop political solutions to the political problem of mismanagement and bad governance of the power sector.
Johannes Urpelainen is the Prince Sultan bin Abdulaziz Professor and Director of Energy, Resources and Environment at the Johns Hopkins School of Advanced International Studies. He is the Founding Director of ISEP.