This report is a collaboration between Smart Power India (SPI), a subsidiary of The Rockefeller Foundation and the Initiative for Sustainable Energy Policy (ISEP), at the Johns Hopkins School of Advanced International Studies. The report distills learnings on electricity access and customer demand. One of the unique contributions of this report is the insight on baseline electricity demand at a village level, including the use of electricity for productive purposes. The findings in this report are based on primary data collected from customer surveys of over 10,000 rural households and 2,000 rural enterprises across four Indian states – Bihar, Uttar Pradesh, Odisha and Rajasthan. This report also provides insights into customer experiences under different electricity delivery models – public sector distribution companies (DISCOMs), solar mini-grids, and private distribution franchises.
Key Findings
Electricity Sources Used by Rural Customers
- Grid-electrification coverage and adoption is high among rural households with the electric grid emerging as the primary source of electricity and lighting for many.
- However, gaps are prevalent with the rural micro-enterprises. In the study area, only 65% of enterprises had grid-electricity connections. While the share of connected rural enterprises is over 90% in Odisha and Rajasthan, it is lower than 60% in Uttar Pradesh and Bihar.
- Non-grid sources such as solar home systems, rechargeable batteries, mini-grids, and diesel generators form an important part of the rural electricity mix. Sixteen percent of households and 40% of enterprises use non-grid sources.
Barriers to Electricity Adoption
- Most households without grid-electricity cite affordability as a key barrier. While households are economically disadvantaged, concerns about affordability are a manifestation of the gaps in electricity meter coverage and billing efficiency, because of which customers have to bear inflated
electricity bills. - With the rural enterprises, affordability concerns are associated with high connection costs and the availability of alternatives that give customers the flexibility to get reliable electricity.
- An uncertain power supply and the long duration of power cuts can also deter potential customers from adopting electric grid-connections. One in two grid-users faces a power cut of at least 8 hours daily. Besides the inconvenience, an unreliable electricity supply forces a customer to bear additional expenses on power back-ups.
Drivers of Customer Satisfaction
- Only 60% of electric grid-users are satisfied with the DISCOMs’ services. Such high levels of dissatisfaction should be a cause for concern as it links them to negative perceptions of electricity service. An inter-state comparison confirms that states, such as Odisha—with better service parameters like longer supply hours, better meter coverage and regular billing—have a higher share of satisfied customers.
- Service reliability and adequacy drive customer satisfaction more than the perception of affordability.
- Insights from the experiences of mini-grid customers suggest that a high-quality, reliable, and customized electricity service can help improve customer satisfaction. Over 80% of mini-grid users display satisfaction with their connections, despite citing affordability challenges.
Rural Electricity Demand and its Drivers
- Average electricity demand of surveyed rural households is 39 kWh per month, which is half of the national average for residential consumption. This demand is being serviced by different sources of electricity with customers often stacking multiple sources. The electricity demand of electric grid-users is higher at 51 kWh per month.
- Average electricity demand of rural enterprises is also low at 39.5 kWh per month. Enterprise electricity demand varies with commercial activity as well as the scale of operation. Several enterprises with high electricity demand use diesel generators, reflecting the latent demand for electricity.
- An average village has a total electricity demand of 1,826 kWh per day, with about 52% contributed by households, 7% by enterprises, and the remainder by agriculture. Various sources of electricity, including diesel generators, serve this electricity demand.
- Low consumption in rural areas is due to fewer appliances in use. Most of the electrified rural households use electricity for lighting and air circulation, but less than half use it for entertainment and less than a fifth use it for medium to high-power appliances such as a refrigerators, irons, and mixer-grinders.
- Apart from socioeconomic characteristics, a key predictor of rural electricity demand is hours of supply. Access to reliable and longer hours of electricity supply is correlated to higher adoption of grid-electricity.
Implications and Actions
- DISCOMs should expand the focus of their electrification efforts beyond households, to include rural enterprises engaged in non-farm activities. These are the potential paying customers with a steady demand for quality electricity supply. Some of these enterprises with high electricity demand use expensive sources, such as diesel generators and that is revenue lost for electricity utilities.
- To make grid-electricity attractive for rural customers, electric utilities need to ensure universal meter coverage and timely billing and payment collection. This can ease concerns about the affordability of grid-electricity and ensure sustained electricity use for customers with limited needs and
capacity to pay. - Electricity service providers need to adopt a customer-first approach and work toward improving customer satisfaction levels. Towards this end, electricity service providers need to improve the reliability and quality of their supply.
- Given the role of non-grid solutions in facilitating electricity access, there is a parallel need for continued policy support for such solutions. They could supplement as well as complement the efforts for the electric grid-based rural electrification.
- Electricity demand in villages might increase with reliable supply and enabling of new productive use activities. Policies need to support adoption of medium to high-power appliances in rural areas, which could help to stimulate demand.