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Impact of Renewable Energy Mini-Grids on Rural Economies and Livelihoods

Pariphan Uawithya — Former Director, Power & Climate, The Rockefeller Foundation

About 300 million people in India, most of them in rural areas, live without reliable electricity. Without electricity, people’s livelihood options are limited, access to basic services is restricted, and quality of life is adversely affected.  There is a consensus that rural electrification has the potential to transform rural communities.

At the same time, however, governments and other funders recognize that reaching rural communities through expansion of the national grid can be costly and slow – and is sometimes not feasible.

In response, The Rockefeller Foundation developed the $75 million Smart Power for Rural Development (SPRD) initiative. SPRD offers a complementary model to the delivery of rural electricity using decentralized mini-grids based on renewable energy sources. The initiative seeks to accelerate rural development and, in turn, improve the lives of the poor and marginalized. Through its subsidiary, Smart Power India, The Rockefeller Foundation has supported seven energy companies to expand electricity service in rural villages across Uttar Pradesh, Bihar, and Jharkhand, India.  Over the past two years, the initiative has brought power to over 40,000 people, most of whom are poor and from socially excluded groups.

SPRD is reaching those thought previously unreachable, unlocking economic potential, and improving people’s quality of life.

To understand whether and how these mini-grids are affecting lives, the Foundation integrated robust data collection and analysis into SPRD through a monitoring and evaluation grantee, Sambodhi. The data shows that SPRD is reaching those thought previously unreachable, unlocking economic potential, and improving people’s quality of life. The key to this success lies in the quality and reliable supply of electricity made available to communities.

About 55 percent of SPRD household customers are using LED light bulbs for the first time. Among micro-enterprise customers, the availability of electricity has increased the number, type, and scale of businesses, resulting in measurable gains.

Applying a GDP+ approach – an innovative method pioneered by Sambodhi to quantify the broad benefits of the initiative in per capita GDP terms – the Foundation has found that SPRD has contributed to an $18.50 net change in GDP+.  Of this, $15 is based on a valuation of social benefits, including additional leisure time, and $3 is from an increase in per capita GDP.

Some of that economic growth has been spurred by the mechanization, expansion, and creation of new businesses that required sufficient and reliable electricity previously unavailable to the villagers. Nearly 11 percent of SPRD-connected micro-enterprises have expanded their businesses by adding refrigerators, or other electrical devices, and about 7 percent of micro-enterprises are new – having emerged as a result of available energy. On average, SPRD micro-enterprise clients saw monthly revenues increase by 12 percent.

Equally promising are the social impacts of the electricity, which include improved health, safety, and study conditions, as well as increased mobility after dark. Women, in particular, report an improved sense of safety from better nighttime lighting both in the home and on the street. This is especially meaningful in Uttar Pradesh and Bihar, which have among the highest rates of violence against women in India.

While there has been a modest increase in average revenue of 12% for micro-enterprises and livelihood options due to the establishment of mini-grids, The Foundation and Smart Power India will scale up micro-enterprise development support to enable the expansion and creation of new businesses that use electricity for productive purposes, such as garment centers, cold storage units, and rice hullers.

For more information about the impact that access to electricity through SPRD is having, we encourage you to read the impact report.

This piece was originally published in June 2017. The post was edited to reflect the more current figure of 300 million people from the previous number of 237 million. 

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