Mini grids and enterprise development: A study of aspirational change and business outcomes among rural enterprise owners in India
Introduction
The current global policy emphasis on sustainable energy for all is empirically well supported by the strong link between access to energy and developmental outcomes. Access to electricity is positively associated with household income, expenditure, health and educational outcomes (Bonan, Pareglio, & Tavoni, 2017; Kanagawa & Nakata, 2008; Khandker, Barnes, & Samad, 2009), increased productivity for rural enterprises (Kirubi, Jacobson, Kammen, & Mills, 2009), reduced kerosene expenditure (Aklin, Patrick, Harish, & Urpelainen, 2017), gender equality and women's empowerment (Cabraal, Barnes, & Agarwal, 2005; Winther, Matinga, Ulsrud, & Standal, 2017), and better local employment opportunities and information access (Ulsrud, Winther, Palit, & Rohracher, 2015; Koijman-van Dijk & Clancy, 2010). In sum, electricity access is expected to generate positive impacts across social, financial, human, physical and natural dimensions of human development (Henao, Cherni, Jaramillo, & Dyner, 2012).
A subset of the literature focuses on enhancing livelihood generating activities, or the provision of electricity for enterprise development (Kirubi et al., 2009; Sharma, Palit, & Krithika, 2016; Koijman-van Dijk & Clancy, 2010; Ulsrud et al., 2015; Kaygusuz, 2011; Peters, Harsdorff, & Ziegler, 2009; Fishbein & Sanghvi, 2003; Cook, 2011). The rationale being, that enterprises gain productivity advantages from electricity, therefore increasing revenue and employing more people, resulting in an overall economic growth (Bhattacharyya, 2012; Chaurey, Ranganathan, & Mohanty, 2004; Rao, 2013). This paper focuses on the enterprise development component of rural electrification programs in India.
Through an original survey of 229 enterprises supported by a decentralized solar electricity program, this paper aims to answer the following research questions. First, does access to reliable electricity result in changes in the aspirations of enterprise owners to grow their business? And second, does access to longer duration of reliable electricity impact key business outcomes for enterprises? We find that enterprises in our sample increasingly adopt productive load appliances over the period of our study. Second, we observe a change in aspirational demand for electricity among our sample of enterprise owners. And finally, we find that higher duration of reliable electricity is positively associated with increased number of hours of operation and customer footfall, but not with an increase in enterprises' revenue.
The paper is organized as follows. We review the literature on electricity access with a focus on productive enterprises and present our research questions in the Literature review section. In the third section , we provide a brief background on the electricity access initiative studied in this paper. The Methodology adopted for the paper is presented in the fourth section, followed by Results and Discussion in fifth and sixth sections.
Section snippets
Literature review
A reliable and regular electricity supply is key to fulfilling increasing energy demand among households. Improved energy access has a direct bearing on the overall energy consumption (Pachauri, 2007). With improved energy consumption, households or individuals progress on the ‘energy ladder’ and gradually move to cleaner and convenient fuels (Reddy & Sudhakara Reddy, 1994; Alam, Sathaye, & Barnes, 1998). At the household level, improved lighting provided by a minimum amount of electricity
Background: description of the Smart Power Initiative: an energy access program to enhance productive use of electricity
This study is based on the Smart Power Initiative launched by the Rockefeller Foundation. By 2018, the initiative supported eight energy service companies (ESCOs) to develop renewable energy mini-grids in 120 villages across three Indian states: Bihar, Uttar Pradesh and Jharkhand. The capacity of the mini grids ranges from 19 kW to 67 kW, depending upon the local requirement as well as the business potential of the sites. Around 63% of the sites have a designated anchor load (usually a telecom
Data collection
We utilize a mixed methods approach consisting of survey questionnaires and semi-structured interviews with customers of electricity from the mini-grids. Questionnaires were deployed for a stratified sample of 284 enterprises including both productive and lighting loads. The sample was randomly selected within each category of lighting and productive loads for the first survey.1
Results
The results are divided into two sections. We first discuss before-after comparisons with respect to the a) reliance on the mini-grid as a primary source of electricity, b) shift from lighting to productive loads over time and c) increase in aspirational demand. Next, we discuss the results of three regressions to examine the role reliable electricity has on selected business performance indicators.
Discussion
Our analysis on the impact of reliable electricity offers the following key insights on enterprise development.
First, we observe that aspirations of enterprise owners have changed after getting connected to a more reliable source of electricity through the mini-grid. Through a before-after analysis we have shown that 95% enterprises in our sample shifted towards using the mini-grid as their primary source of electricity from 84% in 2016. Moreover, the adoption of more productive loads has
Conclusion: limitations and further work
We have used a sample of 229 enterprises to demonstrate how a) enterprises shift to using mini-grids as their primary source of electricity; b) enterprises incorporate a larger number of productive loads over time; c) there is an increase in aspirations among enterprise owners and d) longer duration of reliable electricity supply has a positive impact on hours of operation and customer footfall but not revenue, controlling for enterprise level characteristics such as initial investment,
Declaration of competing interest
We declare that we have no conflicts of interest in the publication of this manuscript. We are engaged with the Smart Power Initiative of the Rockefeller Foundation as monitoring and evaluation consultants. We do not have any professional or financial relationships with the ESCOs, or entrepreneurs involved in this program. We have reported our results highlighting both positive and negative outcomes of electrification to contribute to the literature on mini grids.
Acknowledgements
We acknowledge the support of the Rockefeller Foundation and in particular, Mr. Pariphan Uawithya, Director at the Rockefeller Foundation and Ms. Shawna Hoffman, Director at the Rockefeller Foundation. We are engaged with this program as monitoring and evaluation consultants. We do not have any professional or financial relationships with the ESCOs, or entrepreneurs involved in this program.
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