The welfare impact of rural electrification : a reassessment of the costs and benefits ; an IEG impact evaluation

Rural electrification can have many benefits-not only bringing lighting, but improving the quality of health care, spreading information and supporting productive enterprises. The extent of these benefits has been questioned, arguing that they may be insufficient to justify the investment costs. This book quantifies these benefits. It finds that the benefits can indeed be high, substantially outweighing the costs, and that consumer willingness to pay is generally sufficient to achieve financial sustainability. However, benefits could be increased further by providing smart subsidies to assist connections for poorer households, promote productive uses and further consumer education. It has long been claimed that rural electrification greatly improves the quality of life. Lighting alone brings benefits such as increased study time and improved study environment for school children, extended hours for small businesses, and greater security. But electrification brings more than light. It's second most common use is for television, which brings both entertainment and information. The people who live in rural areas greatly appreciate these benefits and are willing to pay for them at levels more than sufficient to cover the costs. However, the evaluation of these and other benefits, as well as of their distribution, has been sparse. This report reviews recent methodological advances made in measuring the benefits of rural electrification (RE) and commends them. It also notes that the understanding of the techniques shown in project documents is sometimes weak, and quality control for the economic analysis in project documents lacking. This study shows that willingness to pay for electricity is high, exceeding the long-run marginal cost of supply. Hence, in principle, RE investments can have good rates of return and be financially sustainable. But caveats are in order. The first caveat is that attention needs to be paid to ensuring least cost supply, including limiting system losses. Second, continued attention needs to be paid to achieving the right balance between financial sustainability and reaching the poor Introduction -- World Bank Lending For Rural Electrification -- Who Benefits From Rural Electrification? -- What Is Electricity Used For In Rural Areas? -- The Benefits Of Rural Electrification -- Conclusion And Lessons Learned. World Bank Independent Evaluation Group. Includes Bibliographical References (p. 151-154).