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Economics of Energy & Environmental Policy
Volume 8, Number 1





Electricity Access: An Introduction

Valerie J. Karplus and Christian von Hirschhausen

DOI: 10.5547/2160-5890.8.1.vkar
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Abstract:
This EEEP symposium on electricity access introduces the readers to this topical field of research and policy, and brings together leading scholars from emerging and industrial countries that address a broad spectrum of related issues. After sketching out the challenge using standard targets and indicators, this introduction to the symposium provides a survey of the literature on the topic: For the sake of clarity, we have broken down these issues into three cornerstones of analyzing electricity access: Technology and costs (“supply”); socio-economic aspects of demand and pricing policies (“demand”); and political and institutional aspects to bring supply and demand together (“organizational models”). The paper then provides an overview of the symposium which contains two cross-cutting papers on defining and regulating electricity access, and four papers that combine specific country experiences (from India, China, Nigeria, and Mozambique, respectively) with specific policy experiences and research questions: Solar microgrids, financing the last mile of electricity access, the potential of natural gas for electrification, and the roles of government and public utilities in achieving universal electricity access. We conclude on a positive note: considerable success can be observed with respect to electricity access, both in absolute and relative numbers; yet, the issue will not go away soon, as implementation of universal access on the ground remains challenging, and the devil is in the details.




Guiding Action: A User-centric Approach to Define, Measure, and Manage Electricity Access

Abhishek Jain and Tauseef Shahidi

DOI: 10.5547/2160-5890.8.1.ajai
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Abstract:
The role of electricity in human development is well established as being key to improved quality of life, safer environments, greater communication and connectivity, better educational services, and increased economic opportunities. Despite it having such a fundamental role, nearly one billion people across the world are deprived of electricity access, and many more suffer with poor and limited access. Limited definitions of electricity access have led to improper measurement and monitoring and inadequate management, resulting in poor targeting of efforts by governments, enterprises, and investors. This in turn has adversely affected the pace of improvement. Based on a survey of the literature and policy discourse on the subject in recent years, the authors argue that multidimensional, multi-tier, multi-locale energy access can help not just to better define, but also to better monitor and manage electricity-access provision. While the multidimensional approach to energy access has been featured in the literature lately, no attention has been paid to the integration of this approach into planning and action. In this regard, we are proposing that an end-user-centric approach helps guide planning, execution, course correction, and operations, to achieve universal energy access while keeping the objective of overall human development at its core.




A Utility Approach to Accelerate Universal Electricity Access in Less Developed Countries: A Regulatory Proposal

Ignacio J. Perez-Arriaga, Robert Stoner, Roxanne Rahnama, Stephen J. Lee, Gregoire Jacquot, Eric Protzer, Andres Gonzalez, Reja Amatya, Matthew Brusnahan, Pablo Duenas, and Francisco J. Santos

DOI: 10.5547/2160-5890.8.1.iper
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Abstract:
We propose a high-level definition of a large-scale business model designed to accelerate electricity access and attract corporate investment in electrification in developing countries. The model is based on the findings of an investigation of the factors underlying the low level of electricity access in a large number of developing countries, and an examination of practical alternative business models to replace the nearly universal government-owned power company model. Our proposal - the Electricity Company of the Future, ECoF - seeks to address the existing problems that cripple the incumbent power companies and discourage further investment. The ECoF is built around the concept of an enhanced distribution utility we term the "Integrated Distribution Company" (IDC), incorporating a wide variety of additional context-dependent activities including, for example, operating and investing in generation and transmission, operating battery charging stations, and manufacturing and selling appliances. The ECoF does not necessarily have to cover the entire ensemble of activities needed for electricity supply - its fundamental role is to provide electricity services in underserved areas. The structure and scope of the company should be adapted and implemented differently in each country.




Financing the Last Mile of Electricity-for-All Programs: Experiences from China

Gang He

DOI: 10.5547/2160-5890.8.1.ghe
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Abstract:
Financing electricity for all programs has been a main barrier to achieve universal energy access. In this paper, we investigate the financing mechanisms of China's electricity for all programs with a focus on the last mile problem, and we find that central investment, cost sharing, and public-private partnerships are essential for China's success in such programs. We also discuss the challenges to disseminate those financial mechanisms to enable successful electricity for all programs.




Solar Microgrids and Remote Energy Access: How Weak Incentives Can Undermine Smart Technology

Meredith Fowlie, Yashraj Khaitan, Catherine Wolfram, and Derek Wolfson

DOI: 10.5547/2160-5890.8.1.mfow
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Abstract:
This paper documents the challenges faced by one company, Gram Power, installing and operating solar microgrids in rural India. We begin by summarizing the existing literature on best practices for microgrid deployment. Although Gram Power followed nearly all of these recommendations, the company nevertheless faced significant challenges. First, demand for solar microgrids was very limited, largely due to the perception that grid power was imminent and preferred. The company installed only 10 microgrids after visiting 176 villages, so customer acquisition costs were high and economies of scale were lower than expected. In villages where microgrids were eventually deployed, Gram Power faced challenges collecting revenues, mainly due to theft. Even though Gram Power installed sophisticated meters that could detect theft remotely, principal-agent problems hampered the company's ability to deter theft. We conclude with a discussion of policy changes that could better support the integration of solar technologies into a coordinated rural electrification strategy.




Is Natural Gas a Viable Option to Promote Electrification in Nigeria?

Donna Peng and Rahmat Poudineh

DOI: 10.5547/2160-5890.8.1.dpen
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Abstract:
Gifted with vast reserves of oil and natural gas, Nigeria is a country with low level of electrification but a rapidly rising demand. This invites the question of whether domestic natural gas can be leveraged to facilitate full electrification in Nigeria. We contend that while in principle natural gas is a solution to the problem of electrification, in practice, there are a set of gas industry specific and general power sector constraints to the use of gas for electrification in Nigeria. The specific constraints are the lack of an independent downstream regulatory regime for natural gas and poor geographical coverage of gas transportation pipelines. Even when gas sector constraints are resolved, and gas is readily available for use in power generation, electrification is inhibited by failure of power sector reform to encourage participation of private capital in financing new generation capacity, an unstable transmission network, and a liquidity crisis in the Nigerian power sector due to high energy loss, exacerbated by non-cost reflective tariffs and irregular bill collection regime.




The Roles of Government and the Public Utility in Achieving Universal Access to Electricity

Maria De Fatima, S. R. Arthur, and Andrew Cockerill

DOI: 10.5547/2160-5890.8.1.mart
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Abstract:
Although Mozambique is blessed with abundant fossil fuel and renewable energy resources, achieving the national goal of universal access to electricity by 2030 is a formidable task. This paper describes the current energy sector landscape in the developing nation of Mozambique and provides an on-the-ground account of the conceptual framework guiding the public utility in working towards the universal access goal. In particular, we describe the trade-offs faced by the public utility, Electricidade de Mozambique (EDM), as it attempts to operate as a viable efficient business (the commercial mandate) and achieve universal access (the social mandate), by 2030. The paper is organized into four sections, starting with a historical background, moving into a description of the access challenges from the utility's perspective, then performing a comparison between the proposed utility reform path and the standard model of power system reform, and ending with a discussion of the risks and opportunities.




Demand-Side Policy: Mechanisms for Success and Failure

Peter Warren

DOI: 10.5547/2160-5890.8.1.pwar
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Abstract:
Demand-side management (DSM) policy evaluations, including energy efficiency and demand response, primarily focus on ex-ante appraisals or ex-post evaluations of impacts, such as energy savings, carbon savings and implementation costs. However, there is a knowledge gap in understanding the mechanisms behind the success and failure of demand-side policies. The paper presents the results of a four-year project to systematically review the global evaluation evidence base in order to identify the key factors for success and failure for different types of DSM policy. The realist synthesis type of systematic review has had limited application in the energy policy field and the research developed a methodological approach to apply it to energy policy analysis. The paper inductively identifies 22 key success factors and 25 key failure factors for twelve types of demand-side policy from a sample of 102 high-quality documents, which cover 690 ex-post evaluations and 66 countries and sub-national states across six continents.




Cost-efficiency of the EU Emissions Trading System: An Evaluation of the Second Trading Period

Johanna Cludius, Vicky Duscha, Nele Friedrichsen, and Katja Schumacher

DOI: 10.5547/2160-5890.8.1.jclu
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Abstract:
Cap and trade systems are considered to be one of the most cost-efficient options to achieve emission reduction targets. This paper extends the literature on the evaluation of emissions trading systems (ETS) by providing insights into the methodology of the ex-post evaluation of cost-efficiency. Based on data from the second trading period of the EU ETS, this paper compares different settings for ex-post cost-efficiency analyses. A highly disaggregated base scenario reveals average cost savings from trade of about 865 million Euro p.a., an efficiency gain of 47% compared to the alternative policy scenario without trade. Sensitivity scenarios indicate lower efficiency gains in cases with higher sectoral and regional aggregation emphasising the importance of intra-industry and inter-country trade. Furthermore, assumptions regarding the abatement requirements under the alternative policy play a key role, along with the choice of marginal abatement cost curves. In line with ex-ante results from the literature, the backward looking empirical results of this paper uniformly support the theoretical cost-efficiency of the EU ETS.




What Models Tell us about Long-term Contracts in Times of the Energy Transition

Ibrahim Abada, Gauthier De Maere D’Aertrycke, Andreas Ehrenmann and Yves Smeers

DOI: 10.5547/2160-5890.8.1.iaba
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Abstract:
Uncertainty is a major hindrance to attracting investment for the energy transition. Yet European market design is mainly discussed with a focus on short-term efficiency. Based on computational results from market models for gas and power we derive lessons on the importance of contracts and the implications of incomplete markets. Specifically, we show that short-term efficiency is not sufficient to guarantee a well-functioning long-term market, whether expressed in standard welfare-maximization terms or with respect to the EU criteria (security of supply, sustainability or affordability). The end result can drastically depend on the extent to which one can deal with risk. This result is in line with economic theory.








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