Program on Energy and Sustainable Development Working Paper #63
Despite over a century of investment in electric power systems, there are roughly 1.6 billion people who lack access to electricity service, mainly in rural areas. While there are some open questions regarding the precise cause and effect relationships between rural electrification and human welfare, it is generally considered an important social, economic, and political priority to provide electricity to all.
Rural electrification is a challenging task because it involves delivery of a service to populations that are remote and dispersed and whose consumption is low. This means it is generally more expensive while at the same time the customer base is generally poorer and less able to pay the full cost of service. Combine these factors with utilities that are often poorly managed and have limited finances, and it is often not feasible to expect extension of the grid to unserved rural populations in the near future. Such conditions are also challenging for the development of new renewable energy technology markets.
This paper discusses the role that electricity plays in the development process and its importance in rural areas; the contest between centralized and distributed solutions and their relative competitiveness; the previous experience and research on distributed generation and which business models fare successful; and broader lessons that can be extracted from the work.