System-dynamics modelling of the electricity-development nexus in rural electrification based on a Tanzanian case study

Highlights

• We employ System-dynamics to investigate the rural electricity-development nexus

• We develop a simulation model for long-term projections of rural electricity demand in Tanzania

• Calibration shows a mathematical good fit between data and model results

• We find that the electricity-development nexus is driven by both endogenous and exogenous dynamics

• A modelling framework is provided for further policy testing on the electricity-development nexus

Abstract

The rural electrification-based literature reports a limited knowledge of the long-term socio-economic changes that electricity access can bring in remote contexts and the consequent feedback on electricity demand. Such lack of understanding causes an inefficient allocation of economic resources for rural energy projects and inappropriate sizing processes. We model the multifaceted dimensions of the rural electricity-development nexus by formulating a system-dynamics model based on a Tanzanian case-study and using 13-years of data for calibrating it. The modelled structure provides the first quantitative step in the research committed to develop an appropriate modelling framework for deriving policy insights regarding the electricity-development nexus and the evolution of electricity demand for rural areas of developing countries. The simulation results show and highlight the dynamics behind the structural behaviour of some socio-economic system variables (e.g. income and IGAs growth), the exogenous determinants (e.g. accessibility of the rural village), and the complementary activities (e.g. micro-credit at electricity access) that allow electricity access to foster local socio-economic changes, which in turn supports the growth of electricity demand. Our findings allow increasing the understanding on the complex electricity-development nexus and providing a novel modelling framework for projecting the electricity demand for rural settings.

Introduction

With the Sustainable Development Goal 7 “Ensure access to affordable, reliable, sustainable and modern energy for all” (SDG7), the Agenda 2030 set by the United Nation in 2015 recognises the importance of the nexus between energy and sustainable development in all its economic, social and environmental dimensions. By 2030, the goal aims at ensuring access to electricity and clean fuels and cooking technologies to all the global population. Focusing on the electricity carrier, the International Energy Agency estimates that still 1 billion people lack access to electricity in developing countries (International Energy Agency, 2018). Rural electrification is expected to largely contribute to the achievement of electricity access goals, since people still living without electricity will live predominantly in rural areas (International Energy Agency, 2017). In this framework, the need to develop sustainable and appropriate approaches to electricity planning clearly emerges. In rural energy planning, the assessment of long-term electricity demand and the relation with local socio-economic improvements are the most critical and complicated steps. Indeed, wrong projections of electricity demand could negatively impact on local livelihood and socio-economic opportunities and cause an inappropriate sizing of local energy solutions, leading to supply shortages or cost recovery failure, as argued by (Riva, Gardumi, Tognollo, & Colombo, 2019), Cabral et al. (Cabraal et al., 1996a, Cabraal et al., 1996b), Kivaisi (Kivaisi, 2000). From the literature, it emerges a lack of understanding and research on this issue, which entails a little attention and consideration of the long-term evolution of electricity demand within rural electrification-based studies and models. One of the reasons is due the fact that the socio-economic complexities behind the evolution of the electricity demand in rural areas are far from being completely analysed, discussed and characterised.

A second reason which prevents a proper understanding and assessment of the long-term dynamics that determine the evolution of electricity demand in rural areas is the lack of appropriate quantitative models for characterising and formulating the electricity-development nexus. With this term, we mean the potential socio-economic changes that access to electricity and use bring about in rural contexts, and the reverse impact that such potential socio-economic improvements may have on increasing electricity consumption. The characterisation of this nexus is a challenging task, since “the dynamics of growth and electrification are complex, involving many underlying [socio-economic] forces” ((Khandker, Barnes, & Samad, 2013), pg. 666). The presence of these complexities suggests that simple black-box regression models or predefined sets of relations of cause and effect are not appropriate to model the energy-development nexus and the dynamics behind the evolutions of electricity demand. Rather, models for projecting energy demand should involve detailed multidisciplinary analysis, which takes a wide range of factors into account (Sterman, 1988). Thus, being able to provide an appropriate modelling framework for formulating the dynamics behind such electricity-development nexus can lead to more reliable electricity demand projections and reliable planning strategies for rural electrification.

These issues are linked with and subjected to many complexities, namely the low understanding of the socio-economic structure of local rural communities (structural uncertainty), the multifaced and multidimensional factors characterise the system (structural uncertainty), and the unknown impact and relevance of such factors on the electricity consumption, and vice versa (parameter uncertainty).

The considerations above set potential new challenges for the energy access- and energy modelling-related research, that is: (i) to assess the fundamental dynamics, variables, and exogenous policies that characterise the electricity-development nexus and (ii) generate long-term projections of electricity use to support rural electrification. This work represents the first stage for achieving these challenges, and its specific objective is to formulate and calibrate a simulation model based on a real case study, in order to provide a robust modelling framework for carrying out further policy testing activities on the electricity-development nexus and generate long-term projections of rural electricity demand.

The outline of this paper is as follows: Background – electricity demand and socio-economic changes section introduces the state-of-the art of the research on the electricity-development nexus and demand modelling for rural contexts of developing countries, and well as the novelty of the work and the rationale and methodology employed. Methodology section reports the system-dynamics modelling process, namely the conceptualisation of the problem and the boundaries of the analysis, the formulation of the model, its calibration with actual data and the uncertainty analysis. Results and discussion section reports the results and discussion. Conclusion and further work section draws the conclusions and indication for future research work to overcome the limitations of the approach.