D+C Newsletter

Dear visitors,

do You know our newsletter? It’ll keep you briefed on what we publish. Please register, and you will get it every month.

Thanks and best wishes,
the editorial team


infrastructure and the poor

Getting things right

Wasserkraftwerk in Indonesien.

Wasserkraftwerk in Indonesien.

Even though off-grid solutions are often the only sensible option for providing electricity to people in remote rural areas, experience shows that such small-scale schemes often fail. This is particularly so when electrification is based on innovative renewable options. Development agencies could improve their track record in this field by paying more attention to several common pitfalls. [ By Georg Philipp Caspary ]

Rural electrification is an important developmental goal for many countries. One of the main reasons is that the rural-urban electrification gap frequently coincides with a gap in human development. For instance, in Brazil the regions with the lowest degree of electricity access are also those with the lowest level of human development, which goes some way to prove that electricity access and standards of well-being are closely linked.

Another important reason for rural electrification being particularly important is that gaps in electricity access often lie along certain fault lines – notably, ethnic ones. In Latin America, for instance, indigenous communities must often still do without electricity access. This is the case in remote areas of the Andes as well as in southern Mexican states of Oaxaca and Chiapas. Obviously, this state of affairs reinforces the marginalisation of the people concerned.

Many communities currently without access to electricity are small, live widely dispersed and reside in remote settlements. Therefore, it tends to be very expensive to bridge the electrification gap via grid extension. Both the costs of transmissions and services would simply be too high. Accordingly, off-grid electrification is often the only economically viable solution, with each village or even household being provided with an electricity-generation system of its own. A number of multilateral institutions, including the World Bank, are promoting this approach, and so are some bilateral agencies.

In the past, off-grid systems were typically based on diesel as the fuel of choice. Recently, that has been changing because of increasing concern about harmful emissions at the local and even global levels. Donor agencies such as the Global Environmental Facility have begun to make funds available for cleaner energy sources. As a result, renewable sources (solar, wind and small-scale hydro) are increasingly used for off-grid electrification.

Whether it makes economic sense to extend the grid or bank on off-grid solutions depends on several factors. The World Bank (2006) lists the following:
- the total number of households to be served,
- the expected electricity consumption per household,
- fuel costs (particularly for conventional fuels),
- renewable resource availability (wherever there are such options), and
- long-term grid-extension plans of providers/utilities.

Frequent snags

The advantages of off-grid solutions are obvious in remote areas. Nonetheless, the medium- to long-term success of off-grid electrification has been mixed. Too often, they do not reach the intended lifetime. Frequently, systems become damaged or are abandoned due to a lack of appropriate maintenance.

Sometimes, however, off-grid systems have become self-sustaining over the medium or even long run. Obviously, it is helpful if there is enough demand for spare parts for small local markets to develop. In a similar sense, individuals will find it profitable to become repair technicians if such work is actually in demand. For both spare parts and repair personnel to become available, electrification programmes need appropriate technical guidelines and specifications at all levels. In other words, national governance of the sector matters quite a bit.

So far, project design often remains inappropriate. Given the normally limited local capacities, the technology in use should be simple. Innovative solutions present daunting challenges. All too often, renewable approaches to off-grid electrification fail because there is a lack of experience in how to handle the facilities even on part of the companies involved. Development agencies that wish to avoid this pitfall must make sure that appropriate capacities are built in the target region.

Rural electrification efforts, whether grid or off-grid, need to be driven by local demand. If the local people show no interest in the systems, they will neither aquire the necessary skills nor come up with the funding. Of course, costs must be carefully considered, as poor people cannot be expected to invest large sums. However, good maintenance of off-grid facilities is more likely if villagers understand that it helps to keep costs down. Moreover, development agencies should bear in mind that both technical capacities and the willingness to pay are likely to rise once communities understand the advantages of reliable electrification, including more comfortable lifestyles and, for small businesses, higher productivity.

Development agencies must calculate carefully the target group’s willingness and ability to pay as well as what it takes to build local capacities. To improve their own data, it makes sense for those in charge of electrification programmes to help the local people assess in quantitative terms what they are likely to save (or gain) thanks to the new infrastructure. Of course, that approach will also help public authorities to gauge the need for subsidies.

Not second-best

So far, many rural electrification projects have failed to achieve a strong sense of local ownership. Such lack of ownership makes off-grid systems prone to vandalism or theft, as has been the case in Mexico’s rural electrification programmes Pronasol and Progresa.
A common reason for this phenomenon is that communities perceive off-grid solutions to be only second best, and would prefer the grid to be extended to their villages. Therefore, it is vital to strengthen local confidence in off-grid systems. Doing so is particularly relevant for renewable and other innovative technologies that the local communities are unfamiliar with.

It is possible to convince people of off-grid solutions not being second-best, if the advantages are clearly spelled out. That is particularly so whenever renewable resources are cheap and locally available. Moreover, development agencies should hold open discussions about all options. If they want to succeed, they must tackle the wide-spread fear that the introduction of an off-grid solution means that a community will never get access to the grid.

Sometimes, it may even be necessary to state clearly that for communities living in remote and dispersed settlements grid-access will never become a viable option. Where that is the case, communities do not have a choice between off-grid electricity and grid access, but only the choice between off-grid electricity and none at all. Politicians may shy from saying so, fearing for their election chances; but it would indeed be irresponsible to invest in grid-extension if the costs are to high. If one wants to win the trust of a given community, such facts should be elaborated in public.

Funding matters

Another common pitfall for renewable off-grid approaches is late or badly-timed disbursement of funds. Half-finished and low-quality components are prone to breaking down, resulting in a loss of faith among the community. One reason for financial stress is that, in developing countries, off-grid solutions are normally installed by small companies. These firms are operating in poor and remote markets and, accordingly, running great risks. The smaller companies are, the faster they run out of cash. Moreover, the companies concerned often do not have access to credit at favourable terms. Therefore, it is crucial that funds are disbursed timely.

On the other hand, good results are sometimes achieved with ex-post subsidies, which are only disbursed once a project is running well. The Global Partnership on Output-based Aid funds and designs such efforts. Initial experience shows that tying subsidies to proven performance can reduce costs and improve performance (GPOBA 2005). In the most sophisticated approaches, this goes well beyond payments for actual systems installed or even consumer satisfaction. For instance, the disbursement of subsidies may depend on local market indicators that prove that there is an adequate supply of spare parts.

Of course, long-term sustainability of any rural electrification effort depends on appropriate service-delivery models. Management must be sound at the central-government level as well as among local and regional authorities. Operators and technical specialists must handle implementation, monitoring and support. Unless all this is based on sound economic calculations, no electrification programme will be sustainable in the long run.

Monitoring and evaluation are important issues in their own right. Development agencies need to keep an eye on the installation of systems and the initial phases of service delivery. Otherwise, they can neither adapt programmes to local circumstances nor correct failures early on. Ex-post evaluation, moreover, serves to learn from experience and thus improve performance in future.

Sadly, even some development professionals consider it a waste to spend money on monitoring and evaluation. After all, this money does not directly serve the project goal of providing electric power to a rural community. However, it is of course relevant to assess experiences and make sure that new off-grid electrification schemes perform better than those of the past. No doubt, longer lifespans are desirable.

Wherever possible, rural electrification programmes should allow private-sector involvement, as it helps to boost funding as well as technical expertise. Private- sector involvement, however, is not a panacea. That is particularly so if the financial returns of rural electrification are too little to attract investors – and, as noted above, that is typically the case in remote rural areas. Accordingly, public-sector action will be necessary.

Beyond access

In many cases, it will also make sense to work with non-governmental organisations. Involving them is not so much about economic or technical issues. Rather, they are often in a position to tackle other crucial matters. For instance, they may have a solid network among the target community, enabling them to dispel distrust and doubt. On the other hand, they are likely to come up with creative ideas on how to use electricity in meaningful ways.

Electricity access in itself is of little use, after all. Development agencies should bear in mind that no one values access per se. What people need and want are the applications and services that run with electric power.

If they want to succeed, managers of electrification programmes should stress this issue from the outset. They need to promote the productive uses of electricity in the target areas. Private-sector firms and NGOs may prove important partners in this context. It is essential to not only provide funds and technical expertise, but to also give local communities a sense of purpose. If the people understand how electricity can boost, for instance, health care and educational opportunities, electrification schemes will be more likely to succeed.


Electrification is central to improving lives in rural areas of developing countries. However, the record of rural electrification programmes is often unsatisfying. To improve results, several measures should be taken. They include
- technical training for communities involved,
- capacity-building and possibly financial assistance to firms,
- accurate assessments of local willingness and capacity to pay (as well as the size of consumption subsidies needed),
- promotion of local ownership,
- introduction of reliable cost-recovery mechanisms,
- sound technical guidelines and specifications,
- private-sector involvement,
- NGO involvement, and finally
- performance monitoring (possibly tied to performance-based subsidies).