Finding What Works in Ending Energy Poverty

By Johannes Urpelainen - 27 June 2018
Finding What Works in Ending Energy Poverty

Energy poverty is a global problem, as more than a billion people continue to live without access to electricity and almost three billion still have no clean cooking energy. However, efforts to remove energy poverty and unleash economic growth are hampered by the lack of a robust base of knowledge about effective policies that could inform large-scale interventions. Without major investments in impact evaluation, energy access policy will continue to roam in the dark.

Evaluating the Impact of Energy Access Policy Is Hard

There is no doubt that energy poverty is a major barrier to a productive and convenient life. Without access to abundant and affordable modern energy, life is hard and opportunities for economic development limited. If the energy-poor had electricity, they could reap benefits from bright lighting, water pumps, cold storage, and modern telecommunications. If the energy-poor had clean cooking fuels, they would not have to spend hours upon hours collecting firewood and then suffer from lung disease due to cooking with firewood and other traditional biomass. According to the World Health Organization, 4.3 million people die every year from indoor air pollution.

People living in industrialized societies use copious amounts of energy to run electric appliances, for heating and cooling, for transportation, and to produce goods and services. No society has industrialized without massive increases in the amount of energy used. Even ultra-efficient Japan used 7,800 kilowatt-hours per capita in 2014; Eritrea’s per capita electricity consumption at the time was 64 kilowatt-hours.

But knowing that energy poverty is bad does not mean we know how we should solve the problem. To inform policy, we need to know which interventions work and how to implement them. It is obvious that having access to abundant and affordable modern energy is good for society, but the best way to achieve this goal remains far from clear. Should an energy-poor society invest in off-grid solar power or clean cookstoves? Is industrial energy supply more or less important than household electrification?

Even figuring out whether a previous intervention worked or not is very difficult. Development economists have come to realize these difficulties in what is known as the “credibility revolution.” Simply put, correlation does not equal causation. When researchers observe, for example, that electrified households are wealthier and better educated than non-electrified households, this does not necessarily mean that electrification caused the households to become wealthier and better educated. In fact, the exact opposite could be true: wealthy and educated households might be better able to afford and more likely to seek electrification.

This conflation of cause and effect is a major problem for policymakers, as their interest is – or at least should be – in producing policies that will improve outcomes, especially for those suffering the most from energy poverty. Whether wealthy households purchase solar home systems is beside the point; but if solar home systems can lift a household out of poverty, then policies to promote these systems could be a valuable tool in rural economic development.

Distinguishing between causes and effects is very difficult, and the field of development economics has increasingly relied on experimental methods – randomized controlled trials – to establish causal relationships. These field studies are similar to medical trials, as subjects (e.g., households, firms, villages) are randomly assigned to “treatment” and “control” groups.

The treatment group receives an intervention while the control group remains as it was. In energy access, a treatment could be a subsidized mini-grid service for household electrification or a free connection to the electric grid. The outcomes for both groups are measured, and the randomization ensures that the difference in outcomes can be attributed to the intervention. By randomizing access to a household electricity connection, for example, a researcher can convincingly demonstrate that the connection caused -- or did not cause – an increase in household savings.

Unfortunately, our knowledge about the impact of energy access interventions remains thin. In an ongoing effort to review the literature, my research team has found only seven randomized controlled trials on the benefits of household electrification. This number of studies is so small that it cannot produce reliable knowledge to inform policy. We need dozens of studies to obtain a good understanding of the costs and benefits of household electrification. 

Priorities, Priorities

Without a robust evidence base, policymakers could commit two major mistakes. First, they might invest too much or too little in energy access. Second, they might choose ineffective or unnecessarily expensive interventions.

The first question policymakers must face is whether energy access is the best use of scarce resources. It is perhaps obvious that more energy access is better than less, but should governments and development agencies invest their limited resources to subsidize solar mini-grids or promote other worthy causes, such as girls’ education or primary healthcare? Without better impact evaluations, we just don’t know. Experimental methods are essential for evidence-based decisions on how these scarce funds should be allocated. Today, policymakers have a growing body of evidence in many fields, such as public health and schooling interventions. Sadly, energy access research lags far behind. By comparing the cost-benefit ratios of energy access and other development interventions based on experimental impact evaluations, policymakers can make informed choices when allocating scarce resources.

The second issue is how policymakers should tackle the problem of energy poverty. Even if we have good reasons to believe that energy access interventions are the need of the hour, choosing the right approach is difficult. Are small off-grid solar systems that offer lighting and mobile charging enough for real impact, or would it be better to accept the higher capital cost of grid extension to allow households run larger electric appliances? Could mini-grids achieve the same goal at a lower cost? At this time, we have little rigorous evidence to guide these decisions. Policymakers roam in the same darkness as the people whom the policies are supposed to help.

Evidence-Based Policymaking Can End Energy Poverty

While evidence-based policymaking is part of the standard operating procedure in many fields of economic development, it remains poorly understood and underappreciated in energy access. This is a sorry state of affairs because evidence-based policymaking can significantly improve the quality of energy access policy. If policymakers had access to a large body of evidence on the costs and benefits of energy access, they could design better policies and use available resources more productively. While evidence itself does not automatically lead to good policy, without evidence the prospects for good policy are highly uncertain. Even the most enthusiastic and honest leader cannot formulate good policies without an evidence base.

To improve policy, the global energy access community should commit to two basic principles. First, any major energy access intervention must undergo a rigorous – ideally experimental – impact evaluation. We owe it to the world’s energy-poor to test our ideas and abandon those that are a waste of money. While impact evaluations can be expensive and time-consuming, the can help policymakers avoid much costlier and more time-consuming mistakes when implementing interventions at scale.

Second, energy access advocates should adopt and embrace clear standards for what qualifies as credible evidence. Stories, anecdotes, and images are useful for drawing attention to the problem, but they have no value in actual decision-making. Surveys, before-after comparisons, and other descriptive studies are useful for developing a basic understanding of ground realities, but they say little about impact. In contrast, principled experimental and quasi-experimental can offer concrete insights into what works and what does not.

These are simple guidelines and adopting them would require only minimal cost, but they would have a major positive impact on energy access policy. The sooner we embrace evidence-based policy over ideology, the sooner we can make energy access work for social and development around the world.




Johannes Urpelainen is the Prince Sultan bin Abdulaziz Professor of Energy, Resources and Environment at the Johns Hopkins School of Advanced International Studies. He is also the Founding Director of the Initiative for Sustainable Energy Policy (ISEP). Follow him on Twitter @jurpelai.

Image credit: Atli Harðarson via Flickr (CC BY-ND 2.0)

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