The Microeconomics of Energy Access | Foundations for Energy Data Analytics
- Robyn Meeks is an assistant professor at Duke Sanford School of Public Policy and a faculty affiliate of the Energy Initiative and the Center for International Development. And her research is at the intersection of environmental and development economics with much of her work focusing on understanding individual and household responses to the introduction of various water and energy technologies, policies, and types of infrastructure in developing countries. And this work has included energy efficiency technologies, smart meters, comparing grid versus off-grid electrification and much more. And Robyn is just a wonderful person to have speak with a wide and diverse background of experiences to draw from and interesting anecdotes from the places that she has done her research in. So please join me in welcoming Robyn and Robyn it's all yours. - So we're thinking about sort of energy and human development.
And this is sort of, the role of energy in human development has been certainly been discussed for a number of decades. And we sort of tend to think about sort of modern energy or modern energy access is sort of one of the most basic levels at which we might be sort of considering, or sort of thinking about the role of energy in development. And so when we think about sort of modern services, you might think about sort of access to electricity or natural gas, modern cooking fuel, et cetera, things like that. This would differ from people that are sort of households that are relying on, for example, burning biomass for heating or cooking, or having to use kerosene for lighting in their houses. Those would be examples of non-modern energy services, okay? So we're really thinking about sort of how in these places where there is not access to modern energy services, how there can be this transition and what might be some of the benefits or impacts of this transition, okay? And so like in general, there's a lot of literature and certainly a lot of like white papers and documents by different development organizations that talk about how we think that this transition could improve health and education, access to information, agricultural productivity, but then sort of income and many other sort of outcome measures that we might be interested in, okay? And so energy was sort of mentioned in the Millennium Development Goals, but wasn't highlighted as much as I thought it should be. But then in the Sustainable Development Goals, which I think, actually that meant to be 2015, set up by the United nations, it took on a more prominent role in that SDG 7 became this focus of providing access to affordable and clean energy to people around the world by 2030 or 2030, okay? So there's been sort of increasing emphasis on energy and development in recent decades, okay? And so for people that don't focus on developing countries in their research or haven't spent much time in developing countries, it may not be obvious why this requires attention but there's actually large variations both in access to these modern energy sources, but then also as a result, variations in the actual energy use between developed and developing countries, right? So just a quick stat is that the per capita energy consumption in North America is approximately 18 times that in Africa and four times that of the world average.
So there's big disparities sort of across countries around the world. The figure here, it just sort of shows these disparities across regions of the world. It's a little bit of an older graphic but I think it still nicely highlights sort of the differences across regions of the world in terms of their per capita energy consumption across these regions, right? So there's a lot of heterogeneity across regions. This also then relates to a lot of differences in terms of the energy consumption per capita and how it relates to these Human Development Index values, okay? So it certainly seems like a strong correlation, positive correlation between energy consumption per capita and the human development index, right? So we think that human development and energy consumption per capita are certainly positively correlated, okay? And what we can see is that these countries that have the lowest on the Human Development Index do indeed have very, very low per capita energy consumption, okay? Now what we have seen is that there have been these big increases in access to electricity and modern energy over recent decades. But we do have still a large number of people that are lacking access to these modern fuels. And we can see this in the number of households that are relying on sort of traditional biomass fuels for cooking but then also households that are relying on, that don't have access to electricity and therefore are relying on other sources of energy for lighting and things along those lines, right? And we think that sort of access might be restricted for multiple reasons, such as availability, sort of access to electricity and electricity infrastructure that governments or sort of utilities might have a low or lack of access to finances to build infrastructure.
But there's also often in many countries that have challenges with respect to the political institutional structures and that might limit availability and access to some of these modern energy sources, okay? And then there's also affordability when we get to sort of thinking about trying to electrify rural areas of countries that haven't previously been electrified, then it becomes a concern with whether or not those potential customers, those house support, rural households will be able to afford connecting to the electrical grid and actually purchasing electricity given sort of low income levels in these areas, okay? So there's a number of challenges that are sort of working to sort of hinder. sort of challenge the increased access in many settings, okay? And then along these lines, not only do we see the sort of disparities or sort of heterogeneities across countries and across regions, we also see big differences even within countries between the rich and the poor in terms of their energy consumption and sort of along those lines in their electricity use. So this just sort of highlights this point for a handful of countries in which there are sort of large disparities between the rich populations and the poor populations within the country, right? So there's a lot of disparity just even within countries and within regions. Just sort of to build on this and to sort of then start connecting this to the economics literature that is in this space, what we see is that even though there have been these great improvements in electricity access and electrification in many countries over the last few decades, worldwide there are still this sum of 840 million that lack electricity access.
So they're living in homes that are not connected to sort of either the central grid or off-grid, sort of regular sources of energy. And then it's estimated that approximately a billion people are connected to low quality electricity services. So this would be electricity services where the service is unreliable.
So there's a lot of outages, frequent outages, or that the voltage is very low such that households can't actually power appliances and things like that. And so what we've seen in the economics literature is that there's been a big effort to try in the last like decade or so to try to estimate what are the impacts of this increased electrification, increased electricity access. And this literature has really produced sort of mixed results, I would say. Some papers have found low returns to electrification.
So that's those first papers that I have listed under that low returns bullet point but there are other papers that have found substantial returns to electrification in a number of different settings. There have been potential explanations that have been discussed in the literature as to why there might be these differences in the returns to electrification in different settings. It could be sort of the different contexts and sort of different institutions of the different settings. But another factor that I would sort of emphasize here is the role of service quality as a potential explanation for heterogeneity and the returns to electrification across settings.
I've sort of increasingly been focused on thinking about the need to not only think about just electrification and sort of electricity access but also thinking about the quality of the service or sort of quality of the access that people might have. And so this is because these outages that I mentioned a few minutes ago, sort of unreliable electricity, or sort of being in a place where there's frequent outages in the electrical grid. So you imagine like you're at home, in the evening you wanna study or you wanna do something on your computer and there's sort of every night the electricity goes off.
Well, if you have the money you might try and purchase something that helps you sort of an extra battery or some sort of backup charger, et cetera. But for poor households, they might not have the ability to sort of smooth their consumption in such ways. And so sort of unreliable or poor quality of electricity service can really hinder or hamper the benefits that households or firms might get from connections to the electrical grid or sort of other energy or electricity sources. So we think that such low quality and irregular services really could sort of limit or attenuate the economic benefits that these different entities, households and individuals, firms might get from electrification and sort of energy access in this way, right? And this is a problem because the estimates show that there are hundreds of millions of households that are depending on these such unreliable grid connections across many countries, okay? Here I'm differentiating unreliable service in this scenario.
One would be sort of outages, the power shuts down, you can't use any of your appliances, et cetera, during that time period. In this scenario two, I'm thinking about most service quality, which is often sort of low voltage. So in settings or voltage fluctuations, right? And so what that can mean is you may, if electricity is being delivered to your household, but at a very low voltage, you may be able to power some of your appliances but not all of the appliances, right? So you may still be able to have a light bulb running, providing lighting services but at sort of a dimmer, like not at the same quality level, but you might not be able to run like a vacuum cleaner or a hairdryer or sort of something that requires a higher voltage. So that's why these two figures look slightly different.
But what I wanted, the point that I was really for this, the purposes of this talk, really hoping that you would see is that either of these quality issues, whether it be voltage fluctuations or outages, they both result in basically a lower quantity of electricity services being consumed than would be otherwise. If these households were in a setting where they had sort of perfect or standard electricity service quality. So these quality issues, hinder electricity service consumption is sort of the big thing that I would love you to take away.
Beyond this sort of debate about sort of electricity access and sort of a need to focus more on quality of electricity services, there's also a lot of debate about how to increase electricity access, right? And so, should we be focusing in many of the countries that don't have 100% electricity access, should we be focusing on sort of just extending the grid everywhere, which is expensive. Or should we be focusing on sort of decentralized renewable energy sources and thinking about sort of either solar and mini-grids that are powered either by solar or micro-hydro, or even sort of individual household level solar units. So there is a lot of debate and there is certainly room in this space to be providing more insights on this. There are certainly some people that would say that real electricity needs to come from the main electrical grid, whereas other people sort of talk about sort of this idea of leapfrogging and sort of moving more towards decentralized renewables or the off-grid sources to reach some of these places that are not yet electrified in many countries.
I would be remiss if I did not mention that certainly we wanna be thinking about, as we're thinking about increasing energy access, we are expecting sort of increased energy demand as sort of households buy more appliances in many different countries and locations. And so with this increased energy demand, we certainly wanna be thinking about energy, the role of energy efficiency to sort of both increase energy access but do this in a way that is potentially sort of minimizing some of the needs to increase electricity generation and transmission, and also sort of decrease some of the negative externalities that come from electricity generation depending on the fuel source. So we certainly wanna be, don't wanna be forgetting about energy efficiency in all of this. And so we're sort of thinking about and sort of in my role as an economist, thinking about sort of how we want to evaluate these different programs and policies that have been developed to increase energy access, increase electrification and sort of related goals, right? And so I would argue that it's really important for us to be thinking about, as we're thinking about sort of these different ways to increase energy access, we wanna be thinking about also sort of evaluating the impacts of these different programs and policies and that's really of the core of where my research is. And it's important because when we think about sort of policymakers, they need to make decisions about sort of how to invest resources, taxpayer money, et cetera.
And they need to be thinking about, well, what are the benefits from these different interventions or policies? Should we be, for example, investing in grid electrification, or should we be investing in off-grid and decentralized renewable energy sources for so the off-grid electrification, right? And given sort of finite resources that we have for development and sort of in pretty much any country that we're talking about, it's important for us to be informed about sort of what are the benefits from different types of energy sources, electrification sources and different technologies. So this can sort of inform policy makers decisions and inform our way of thinking about how to invest various resources that are limited, okay? So what I certainly wanted to make sure I was able to get to was this slide, which was sort of laying out clearly some of the areas that I think now after providing my very quick overview of energy access in developing countries, what are sort of some of the key areas of research where there is actually research in these areas that I think all of these areas could certainly benefit from more work and more attention. So these are sort of the four categories that I think are important and obviously I'm biased because these are four of the areas that myself I am working on topics in these four categories.
But so first electrification and development, I think is an important area for more research in this energy access field. And as I said a handful of sides ago, in the last decade there has been increasingly more evidence in the academic literature and specifically in the economics literature even looking at estimating the impacts or these returns to electrification in various settings in various countries. But given that we're finding, and these studies have found, different studies have found great differences in the impacts across these settings, I think there's more work to be done in the future, sort of trying to understand why, why there are sort of these potential differences across settings. Sort of like are they sort of institutional differences? Are there sort of other issues going on that might make electrification lead to larger benefits for populations in some settings and smaller benefits in others? And I have some work with Zhengxuan, where we're looking at micro-hydro mini-grids in Nepal. And one of our findings is that the impacts of those micro-hydro mini-grids on enterprise and sort of from development, those impacts are much smaller in remote areas than they are in areas that are sort of closer to the national grid, the historical national grid, and sort of areas that have been developed for a long time, right? And so if we're thinking about sort of where to electrify and we can't necessarily think that if we electrify this very far remote area, that it will have the same impact as if we electrify this area that's not too far away from main market center, sort of places where there's a lot more access to job opportunities and places to sell there people's products and et cetera, okay? But there is still a lot more work to be done, sort of thinking about impacts and heterogeneities in electrification.
And sort of building on that also sort of as different countries have been sort of grappling with increasing electrification, many countries have been implementing different regulations and reforming the entire energy sector or electricity sector, sort of decoupling different parts of the electricity generation transmission distribution systems and things along those lines. And there's a lot of work that could be done, sort of trying to understand these different sort of regulations and different policies that have been implemented in many of these countries as the countries are trying to not only address new electrification but also sort of prepare for increased electricity demand and things along those lines. And very much related to that sort of energy demand would be issues around sort of pricing for electricity. So how do we best price electricity? And I guess this could go for other energy sources, these modern energy sources that are part of SDG 7, how do we price them such that the poorest populations where we have seen these like huge disparities between the rich and the poor in different countries, how do we price electricity such that the poor populations can have access, some minimum access that will allow them to have sort of access to some of these development benefits that we might expect from electrification without encouraging richer or sort of consumers that might be able to just consume a lot, how do we make sure that they don't just consume, without any sort of consuming excess, right? So these are all issues that... There's some work on these topics, but there could certainly be more. Second, as I mentioned already there's some work on the role of service quality or sort of unreliable service, but I think there could be a lot more work being done, trying to understand what are the factors that are related to continued maintenance and sort of continued investment in energy infrastructure to sort of make sure that service quality does not degrade over time.
And other aspects such as non-technical losses, which are really important because of the continued financial sustainability of these electricity providers in many developing countries, okay? The third that category here, and I've sort of touched on it a little bit in talking about this micro-hydro, but also with other renewable energy sources such as rooftop solar and solar mini-grids. There's certainly a lot of work that's indicating that these technologies are promising, that they can play a role in increasing energy access in many countries, particularly in remote areas where it might be really expensive to extend the electrical grid to remote locations, then decentralized renewables might be a very cost effective way to provide electrification, but we still see that there's some substantial or we still see that there's not nearly the take-up of these technologies that we might expect. So there's some who trying to understand why are people not adopting these technologies at the rate that we think they might want to, but there's a lot more work that could be done in this space to try and understand sort of how can we encourage households or firms to adopt these technologies? How can we sort of increase the benefits from these technologies to make sure that the technologies continue to function after people purchase them or invest in them and things along those lines. And then the last thing on this list and maybe this will be a sort of a good point for me to wrap up for here and then I can take questions in my last minutes. But the last point I would focus on is just sort of the role of energy efficiency in climate mitigation, climate change mitigation.
And I've done some work in this space and recently finished a review article on this. And there really is not nearly as much work, at least in the economics field on the impacts and the role of energy efficiency in developing countries as I would have expected. And I think there's a lot more room for thinking about how we can sort of incentivize investments in energy efficiency and also thinking about sort of what are some of the positive externalities or sort of aggregate impacts, the aggregate benefits that communities may have from energy efficiency and the role that might play in both increasing investments in energy efficiency, but also hopefully contributing towards climate goals and sort of helping in the efforts towards climate change mitigation. So I think there's certainly a lot more that can be done on energy efficiency in developing countries.