Access to electricity is considered an important driver of economic growth. About 600 million people in Sub-Saharan Africa – over two-thirds of the population – are without electricity. Policymakers often assume that unelectrified households are too far away to connect to a low-voltage network. However, recent data suggest that this assumption may be inaccurate: in a study in Kenya, half of the 13,000 unelectrified households were found to be located within a short distance of a grid connection. While evidence remains limited, this suggests that the high cost of connections may be an important barrier to electrification and that last-mile connectivity may represent a promising opportunity for governments to significantly expand electrical access, while capitalizing on already existing grid infrastructure.
Since 2006, Kenya’s Rural Electrification Authority (REA) has rapidly expanded the national grid, installing electricity distribution lines and transformers across many of the country’s rural areas. Despite this expansion in grid coverage, household electrification rates in Kenya are estimated to be between 18 and 26 percent. There is now a unique opportunity to increase rural energy access through grid connections. There could be up to 3.3 million households in Kenya that are “under grid,” or close enough to connect to the national grid at a relatively low cost. A significant barrier to connectivity, however, is the high connection price. Currently, grid connections cost over KSh 35,000, or $412 USD. At nearly a quarter of Kenya’s per capita income of $1,730, this may be prohibitively expensive for rural households. Approaches such as subsidies and financing households with long-term loans may be effective at spurring increased electrification.
In partnership with the REA, researchers are distributing national grid connection subsidies of varying amounts to randomly selected unconnected households in rural parts of Western Kenya. These subsidies will allow households to connect to the national power grid at relatively low prices. Three levels of subsidies will allow researchers to measure the demand for rural electrification: high value subsidies equal to 100% of the connection cost, mid value subsidies equal to 57% of the connection cost, and low value subsidies equal to 28% of the connection cost.
The project is taking place across 150 “transformer communities” in Western Kenya. Each transformer community is defined as the group of all households eligible to connect to a nearby transformer. 75 treatment communities have been randomly assigned to receive one of the subsidies.. Within each treatment community, roughly 15 enrolled households will receive the same subsidy offer.
This experimental design will allow researchers to generate exogenous variation in electricity connections. In the first stage of the project, the intervention will allow researchers to: (1) trace out the demand curve for electricity connections in order to better understand the price at which the majority of Kenyans would connect to the grid, and (2) trace out the economies of scale in costs resulting from coordinated (grouped) connections. In the second stage of the project, the intervention will allow researchers to measure the social and economic impacts of electrification.
Results and Policy Implications
Results are forthcoming.
January 2013 -