Ethiopian Energy^Power Business Portal

Raise the overall price of electricity to reflect the cost of service after taking into account any capital cost subsidies for extending service to rural areas. Also, incorporate other best practices into the distribution sector to promote rural electrification. Ethiopia’s low electricity prices cause problems for rural electrification as a business. The electricity price for rural households is extremely low, making it difficult for EEPCo to recover its costs. The price for those consuming 50 kW or less per month is about US$0.02 per kWh. Even at the level of 400 kWh, the price of electricity is only $0.03 per kWh. This means that the rural electrification program loses money on every new customer. Consumers have little incentive to conserve electricity, and EEPCo has little incentive to provide the necessary operation and maintenance for rural lines. In the future, this will likely cause a decline in the quality of service.

Have simple and effective mechanisms for targeting the poor. In this GPOBA program, targeting was achieved by combining geographic criteria with self-selection methods. The targeting was consistent with the Ethiopian government’s policy of providing equity and broad geographical coverage for its rural electrification access program.

Facilitate house wiring in both standard and substandard housing. One major issue identified in this study was EEPCo’s policy of connecting only those homes made of concrete, which frustrated many poorer households who were ineligible for electricity service. They, in turn, decided to string wires to a neighboring house with a legitimate meter. Most of the problems involving indirect household connections could be avoided by developing standard waterproof ready boards for installation in houses constructed of substandard materials.

Officially connect households with indirect electricity connections. Ethiopia’s electrification rates could be higher if more attention were paid to finding ways to service poor households. Switching from indirect to officially metered connections would mean lower electricity prices for such households; in turn, they would consume and pay for more electricity, which might help to improve the utility’s financial condition.

Provide credit, encourage appliance adoption, and promote intersectoral synergies. The GPOBA scheme could probably be extended beyond wires. Given the expense of putting up poles and transformers and stringing wires, the investment could be optimized by implementing complementary programs that encourage greater use of electricity. This might include ensuring that electric appliances are available for local purchase. Also, many of the world’s most successful rural electrification programs include close cooperation between ministries and agencies that provide other types of development assistance, including education, agriculture, and rural development. Promoting such intersectoral synergies would not only improve the impact of rural electrification; it would also increase the financial benefits for EEPCo due to higher levels of electricity use.

Focus on women-headed households. In most countries, women-headed households are generally among their poorest groups. In the five rural regions of Ethiopia covered by this study, women-headed households comprised just over 15 percent of the population. These households often cannot afford the upfront costs of electricity; at the same time, they are quite responsible about paying their bills. The Power to the People program developed in Lao PDR, which is quite similar to the GPOBA intervention in Ethiopia, had one key difference: It focused efforts on providing assistance to women-headed households (World Bank 2008a, 2011a, 2013b). A key underlying concept was to keep targeted households’ monthly expenditures—for both repayment of the interest-free credit and electricity consumption—at the same level as their expenditures before grid electrification for vastly inferior traditional energy (e.g., batteries, diesel lamps, and candles). It was projected that the monthly savings in household energy expenditure would be enough to allow households to repay the connection cost in three years. A similar gender-focused program for rural Ethiopia could be integrated into EEPCo’s standard operating procedures.

Make meters more readily available to prevent delays in providing customers with service. The survey found that a shortage of electricity meters had led to delays in signing up new customers. This issue could be easily resolved by diversifying the sourcing of meter supplies and allowing them to be imported. Inexpensive and reliable meters are readily available from other countries.

Decentralize and lower the cost of bill collection. Generally, the best practice is to have the electricity company develop low-cost ways to collect bills. This might include making payments possible at local banks or public institutions or through local contacts in the community, such as village leaders; one advantage of the latter option is that village leaders could serve as a contact point between EEPCo and the community for reporting power outages and other distribution problems. More technical options might include the use of load limiters or prepaid meters.

Provide better-quality CFLs or other, more efficient lighting options. The two free CFLs provided under the GPOBA program were not fully appreciated by the GPOBA-participant households. According to the survey and FGDs, the CFLs provided did not work well under the low-voltage conditions found in most villages and towns. Future programs need to include lighting options that function well under periodic low-voltage conditions. Providing more efficient lighting options, such as better-quality CFLs or light-emitting diodes (LEDs), would not only be important for households newly adopting electricity; this could also be part of a broader campaign to promote energy-efficient appliances in rural Ethiopia.

Provide technical assistance and loans for businesses. Many successful rural electrification programs encourage business development by providing new business loans and assistance on how to set up businesses that can take advantage of electricity. This can be done through raising awareness of the possible productive uses of electricity, facilitating credit for small businesses, providing technical assistance on the requirements of running small businesses, and making sure that appliances or tools common to small businesses are available in the community (Brüderle, Attigah, and Bodenbender 2011; Finucane et al. 2012). Households in rural Ethiopia seemed eager to start a new business. According to the impact evaluation survey, they had many new business ideas, ranging from retail shops to beauty salons and cafes. In addition, assistance could be given to promote electricity-driven appliances that would make life easier for people in rural areas. In some countries, promoting the availability of electric appliances accompanies the extension of electricity to new rural communities. Such complementary programs would increase the utility’s revenue stream and have a greater socioeconomic impact in rural communities.

Connect public institutions. Only about half of the public institutions in the villages and towns with new service have adopted electricity. Once a community has electricity, additional funds should be provided for government-financed public institutions to adopt electricity. Public services are generally important for the whole community, especially the poor. With better lighting and communication and office equipment, such public institutions with electricity should be better able to serve rural populations. However, the responsibility of subsidizing the electricity used by public institutions should not be placed on the electric utility company. Rather, the government should consider it as a normal budget cost of providing public services. The electricity used by the public institutions can provide the utility a stable source of revenue for serving rural areas.

 

Source: 

Douglas F. Barnes, R. G. I. D. B., 2016. World Bank: Open knowledge Repository. [Online]
Available at: http://documents.worldbank.org/curated/en/781791487789244953/pdf/112967-WP-P105651-PUBLIC-Beyond-Electricity-Access-Ethiopia-FINAL.pdf
[Accessed Sebtember 2018 2018].

 

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