Determining the social and economic benefits of basic energy access in rural India


Published 19.07.17

A programme providing rural Indian communities with basic access to electricity did not have broader social or economic impacts in these communities

Over one billion people live in homes without electricity (IEA 2016). Rural electrification in particular remains a pressing concern for many governments, especially in South Asia and sub-Saharan Africa. A lack of household electricity means households cannot study or work under bright artificial lights, use electric fans for relief from often relentless heat, or use basic appliances such as televisions or refrigerators. At the international level, the United Nations Sustainable Development Goals embrace universal energy access as a priority.

We can all agree that electricity is an absolute necessity for a modern society, but many developing economies cannot provide their people with a reliable, affordable supply of electricity, 24 hours a day, seven days a week. While a completely reliable supply of unlimited power is obviously a good thing, the benefits of providing rural households and communities with a less-than-ideal supply of electricity remain unclear. When rural households only get some power for a few hours every day, the benefits might be limited.

While quasi-experimental studies have found that a reliable supply of electricity can generate social and economic benefits, from women’s participation in labour markets (Dinkelman 2011) to overall labour productivity (Lipscomb et al. 2013), a recent assessment (Burlig and Preonas 2016) of India’s flagship rural electrification programme, the Rajiv Gandhi Grameen Vidyutikaran Yojana, showed that the scheme has not contributed to economic development in villages.

Even less is known about the benefits of off-grid electrification, such as solar home systems or community microgrids. Most available studies are observational, and thus neither designed nor suitable for estimating the social or economic effects. The paucity of experimental or quasi-experimental evidence on the benefits of off-grid electrification is unfortunate, as rapid improvements in renewable energy technology continue to enhance the competitiveness of off-grid alternatives to grid extension. When the quality of grid electricity is poor, off-grid electrification has a lot of appeal, not just as a temporary stopgap measure, but as a viable alternative.

The study: Benefits of community microgrids

To begin filling the evidence gap, we conducted the first randomised controlled trial – a field experiment – on the benefits of community microgrids in non-electrified rural communities in India (Aklin et al. 2017). We collaborated with an Indian solar microgrid company, Mera Gao Power (MGP), to assess the impact of basic energy access from a very small microgrid. Previously non-electrified households in the Barabanki District of the state of Uttar Pradesh in India were offered, for 100 Indian rupees (about $1.5) a month, two LED lights and a mobile charger powered by a small solar panel and a battery. The study was recently published in the open-access journal Science Advances.

The results: No broader benefits of community micro-grids

The results on the benefits of the basic energy access that MGP offered were decidedly mixed. On the one hand, households’ access to a minimal level of solar power did reduce kerosene expenditure on the private market, as households replaced some of their kerosene lamps with solar-powered LED lights. The reductions were substantial: where MGP installed solar microgrids, monthly kerosene expenditure decreased by almost 50 rupees (about 45%) relative to the control group. These reductions were achieved without government subsidies and at a low capital cost.

On the other hand, we did not find evidence of broader benefits – the kind of rural transformation that the most passionate advocates of distributed energy generation would hope to see. Savings or household expenditure did not increase, and households did not create new businesses or livelihoods. Children did not begin using lighting for study, and women neither worked more nor felt safer going outside at night. We did not measure outcomes such as children’s study hours or health benefits from reduced indoor air pollution, but across the outcomes we studied the evidence for positive change was scant. The MGP intervention offered a useful substitute for kerosene, but it did not generate more fundamental changes.

Possible explanations and the way forward

These results raise many new questions about the role of off-grid solar power in development. One possible reason for the lack of broader socioeconomic effects is that the villages under study faced many other barriers to economic growth and social empowerment. They were served by bad roads, their schools were of low quality, and aspiring entrepreneurs would have found it difficult to get a loan for their business. If the MGP intervention had been combined with other development interventions, we might have seen better results.

Another possible explanation is that the level of energy access that MGP offered was minimal. A larger system could have produced greater benefits by allowing households to use electric appliances and machinery. A very large system might have even powered a water pump for irrigation. While such systems would have been much more expensive than MGP’s solution, the returns to offering more power could have been substantial. The question here is whether rural households are willing and able to pay for the substantial loads of power that larger systems can offer.

We also found that India’s kerosene subsidies put companies like MGP at a disadvantage. Buying kerosene from the government’s shops in rural India is so inexpensive that households continued doing so even after subscribing to the MGP service.

If India replaced kerosene subsidies with a policy that allowed households to use their money more flexibly, companies like MGP could grow much faster and offer larger groups of people with improved light, as kerosene lamps cannot compete with LED lights in amount and quality. Allowing households to choose a solar technology subsidy, or perhaps just giving them money to spend on whatever they prefer, could be a game-changer for the off-grid lighting market in rural India.

Research on off-grid electrification is at the very early stages. Moreover, the combination of technological progress and business model innovation is rapidly changing the field. Randomised controlled trials offer a reliable way to test the merits and disadvantages of different off-grid interventions, and we are optimistic about the ability of future experimental studies to guide policy formulation and business models.

Editor’s Note: This article is based on an IGC project.

Photo credit: Anna da Costa.


Aklin, M, P Bayer, S P Harish and J Urpelainen (2017), “Does basic energy access generate socioeconomic benefits? A field experiment with off-grid solar power in India”, Science Advances 3(5).

Burlig, F and L Preonas (2016), "Out of the Darkness and into the Light? Development Effects of Rural Electrification in India”, Energy Institute at Haas Working Paper No. 268, University of California, Berkeley.

Dinkelman, T (2011), "The effects of rural electrification on employment: New evidence from South Africa", The American Economic Review 101(7): 3078-3108.

International Energy Agency (2016), World Energy Outlook, Paris

Lipscomb, M, A M Mobarak and T Barham (2013), "Development effects of electrification: Evidence from the topographic placement of hydropower plants in Brazil", American Economic Journal: Applied Economics 5(2): 200-231.