File

THE ECONOMICS OF “LAST MILE”
ELECTRIFICATION
CATHERINE WOLFRAM | UC BERKELEY
2016 EAST AFRICA EVIDENCE SUMMIT
J U LY 1 3 , 2 0 1 5 | D A R E S S A L A A M , TA N Z A N I A
The Rural Electric Power Project (REPP)
In 2013, we formed a partnership with the Rural Electrification Authority
to answer four questions.
1
What is the last-mile
opportunity?
2
What is the demand
curve for power?
3
Economies of scale in
mass connections?
4
Social and economic
impacts?
Research
Partnership
Research study #1
What is the last mile opportunity in Kenya?
2013 to 2014
Building our sample of communities
In September 2013, we partnered
with REA to identify a
representative sample of 150 rural
transformers in Western Kenya
installed in the past five years.
Example #1
Legend
T
600 meters
Transformer & 600 meter radius
Example #1
Legend
T
Transformer & 600 meter radius
Households (scaled by household size)
Businesses
Public facilities (e.g. schools, health)
Example #1
Legend
T
Transformer & 600 meter radius
Households (scaled by household size)
Businesses
Public facilities (e.g. schools, health)
Electrified households
Electrified businesses
Electrified public facilities
Example #2
Legend
T
Transformer & 600 meter radius
Households (scaled by household size)
Businesses
Public facilities (e.g. schools, health clinics)
Electrified households
Electrified businesses
Electrified public facilities
Example #3
Legend
T
Transformer & 600 meter radius
Households (scaled by household size)
Businesses
Public facilities (e.g. schools, health clinics)
Electrified households
Electrified businesses
Electrified public facilities
150 communities in total
Half of the unconnected households in the study
are “under grid.”
Research study #2
Experimental evidence on the demand for
and costs of electrification in Kenya
2014 to 2015
Randomized controlled trial (RCT)
Different levels of
randomized subsidies for
households in treatment
group
Communities are randomly
divided into a treatment and
a control group
Compare changes in social
and economic outcomes for
both groups
Using our maps of all households…
Legend
T
Transformer & 600 meter radius
Households (scaled by household size)
Businesses
Public facilities (e.g. schools, health)
Electrified households
Electrified businesses
Electrified public facilities
…we sampled 15 households per community
Legend
T
Transformer & 600 meter radius
Randomly selected REPP households
Random sampling:
Distance to LV line is approximated by
the distance of the unconnected
household to either: (1) a transformer, or
(2) a connected household, public facility
or business.
This sampling procedure was determined
in collaboration with REA, in order to
reduce the average costs of connections.
Intervention: Subsidized connections
150 transformer communities.
2,504 households in total.
Treatment households provided with a
subsidized grid connection:
 0 KSh
 15,000 KSh
 25,000 KSh
 35,000 KSh
The experiment generated random
variation in:
 Price: Assigned at community level.
 Scale: Number of households connected at
the same time.
Step 1: IPA distributes “subsidies” to households
Step 2: REA extends national grid to households
Step 3: Kenya Power installs prepaid meters
Experimental Evidence:
Demand and supply
a. Pre-analysis plan assumptions
In 2014, we made assumptions about take-up, mostly for budgeting purposes, and
recorded these assumptions in our pre-analysis plan.
b. MoEP assumptions
In early-2015, the MoEP outlined a set of assumptions on demand.
c. Stated demand – Open timeframe
During the baseline survey, 2,094 households were asked whether they would be
willing to pay a randomly selected price for an electricity connection.
d. Stated demand – 6 week timeframe
Survey respondents were then asked whether they would be willing to pay the
price if they were given six weeks to complete the payment.
e. Actual demand curve
In our experiment, we trace out the actual demand curve for electricity connections
at four different price levels: 0 KES, 15,000 KES, 25,000 KES, and 35,000 KES.
f. New connection policy
In May 2015, the Kenyan Government announced that the connection price will be
reduced from 35,000 KSh ($398) to 15,000 KSh ($171).
May 2015
President Kenyatta announces
new connection price of 15,000
KES as part of Last Mile
Connectivity Program.
Economies of scale in mass connections
Electricity network has important
economies of scale in terms of costs.
When one household connects, it
becomes far cheaper for neighboring
households to connect.
Economies of scale by connecting
clusters of households along at the same
time.
Actual economies of scale
Research study #3
The Social and Economic Impacts of
Electrification in Kenya
2016 to 2017
The impacts of last mile electrification?
Our experimental research design will allow us to identify the impacts of
the electrification through follow up household surveys in 2016 onwards.
 Household income
 Employment and entrepreneurship (e.g., female employment)
 Children’s schooling performance (e.g., test scores and aspirations)
 Health (e.g., respiratory infections, asthma)
 Safety (e.g., better outdoor lighting)
 Spillover benefits to neighboring households (e.g., phone charging, tv)
 Others