Electrification alone does not unlock economic prosperity; the real benefits emerge when electricity is harnessed for productive use. A May 30 article by Applied Microeconomist, Ass. Prof. Ama Baafra Abeberese for Energy for Growth Hub explained that providing rural households or businesses with grid or off-grid access does not provide the financial means to purchase essential electrical appliances or equipment.
Consequently, programs that offer electricity without immediate practical applications often see underutilization. Abeberese went further to provide strategies to power economic development through electrification.
Support Purchases of Electrical Appliances
An effective strategy to maximize electrification benefits is subsidizing loans for purchasing electrical appliances. The 1930s US rural electrification program exemplifies this approach. The program significantly boosted productivity by financing electricity generation, transmission, and distribution in rural areas through government loans and concurrently offering low-interest loans for electrical appliances. Appliances such as milking machines, refrigerators, water heaters, sewing machines, and washing machines played crucial roles in enhancing productivity and income.
Disseminate Information on Productive Uses of Electricity
While residential electricity use is vital, the real economic impact lies in its non-residential applications. Firms utilizing electricity for production are crucial for harnessing the full benefits of rural electrification. A lack of awareness about transformative uses of electricity can hinder the effectiveness of electrification efforts. In rural areas, where baseline electricity levels are low, people are often little familiar with its potential uses.
Promote Productive Uses of Electricity
Disseminating information and encouraging productive uses of electricity, especially in newly connected communities, can bridge this awareness gap. World Bank rural electrification projects have included outreach efforts to small businesses to promote productive uses of electricity. In Indonesia, the rural electrification project partnered with local NGOs to disseminate information via radio, community meetings, field visits, and demonstrations.
Build Complementary Infrastructure
Complementary infrastructure, such as roads, enhances the economic impact of rural electrification. Electrification powers production processes, but these processes require inputs and means to transport outputs to markets. Improved transportation infrastructure boosts development by facilitating market access, thereby complementing the role of electricity in production.
Implement Integrated Infrastructure Frameworks
An integrated approach to infrastructure development can magnify electrification benefits. Uganda’s Kalangala Integrated Infrastructure Programme developed roads, ferries, water supply systems, and power plants, transforming the fishing town into one of the wealthiest regions due to easy market access and improved facilities. Studies in rural India and sub-Saharan Africa highlight links between electrification and road access. Access to electricity and roads yields greater production and employment increases than access alone.
Improve Reliability and Affordability
Connecting villages to the grid cannot spur development if consumers cannot afford electricity or if its quality is poor due to frequent outages. High electricity prices and outages force firms to adopt less electricity-reliant production processes, reducing productivity and growth. Studies in India and Ghana indicate high electricity prices and outages negatively affect output and productivity.
Enhance Reliability and Affordability
Improving electricity reliability and affordability requires strategic investment planning to align generation with growing demand, targeted subsidies for the poorest consumers, financial viability measures for utilities, such as prepaid metering to reduce theft and non-payment, and smart metering to detect quality issues. Successful interventions include prepaid metering in South Africa, which reduced utilities’ revenue recovery costs, and smart metering in the Kyrgyz Republic, which improved electricity service quality.