Productive Use of Energy for Rural Development

INTRODUCTION

There is almost unanimous agreement that energy plays a pivotal role in national development. Generally, there is a high degree of correlation between energy use, economic growth, and level of development. In the context of rural development, the traditional view of the productive use of energy is that it is associated primarily with the provision of motive power for agricultural and industrial or commercial uses. For example, motors are used to grind grain, operate power tools, irrigate farmland, and facilitate many commercial activities. It was believed that the motive power made possible by electricity would result in tremendous productivity gains and economic growth, thus transforming the underdeveloped rural landscape. In other words, the emphasis has been on the direct income-generating uses of energy. The traditional concept of productive uses of energy for rural development needs to be revised for primarily two reasons. First, there is a growing realization that although energy is a necessary condition for rural development, it is insufficient by itself to bring about the desired socioeconomic impact. Second, there is a significant shift in the understanding of what is meant by rural development, especially in the context of the Millennium Development Goals (MDGs) used by the major donors and international development agencies. The MDGs emphasize not just poverty reduction in terms of income, but they also highlight the importance of improved health, universal primary education, women’s empowerment, and gender equality. The very goals of development are to raise incomes of the poor and also to ensure that they are educated and healthy, and treated equally. Thus, an enhanced understanding of what is a productive use of energy must take into account not only the direct impact of energy on raising incomes, but also the indirect impacts that energy can have on education, health, and gender issues.

TRADITIONAL VIEWOF PRODUCTIVE USES OF ENERGY

For rural development, energy was, and in some cases still is, looked at as having two distinct uses: residential and productive. Residential uses of energy are expected to positively impact the rural quality of life or improve rural living standards (1, 2). The productive use of energy in rural areas is expected to result in increased rural productivity, greater economic growth, and a rise in rural employment, which would not only raise incomes but also reduce the migration of the rural poor to urban areas. With respect to agricultural production, electricity would be used principally to provide motive power for agriculture-based industries and would power farm machinery, such as water pumps, fodder choppers, threshers, grinders, and dryers. Thiswould result in the modernization of agricultural production. Electricitywould bring an increase in irrigation, which in turn would result in an increase in the amount of required labor. The generous output of these modernized farms would provide inputs to large commercial enterprises such as rural cooperative sugar factories. Another example includes the use of electricity as a source of driveshaft power and lighting, which is suitable for rural industries, for example, machine shops. In the past, a common belief was that once a rural region was provided with electrical service and access to modern energy, rural industries would expand and the quality of rural products would improve. Over the long run, the availability of modern energy services would provide significant indirect social benefits such as greater equity and improved quality of life. In short, if energy was used for productive applications, itwould transform an underdeveloped agrarian economy. Not surprisingly, the process has proved to be more complicated (3–5). One example of this is India. India has a long history of supporting rural electrification for productive uses, in recognition of the potential benefits for the country in terms of poverty alleviation and food self-sufficiency. A major component of India’s rural electrification program since the late 1960s has been to promote electricity for irrigation pumping by heavily subsidizing agricultural electricity rates (6, p. 13). Since then, 13 million pump sets have been put in use for irrigation by Indian farmers. Partly owing to the high prices of other pumping alternatives such as diesel, and partly owing to the constrained capacity of the State Electricity Boards, today there are substantial waiting lists for irrigation pump-set connections in most Indian states. Thus, this program in India has been relatively successful in promoting productive uses—particularly in the form of irrigation. However, electricity use by households has not kept pace with its use for irrigation pumping, and it is estimated that only about 44% of rural households actually have electricity in their homes. Bangladesh, by contrast, has witnessed a more balanced approach toward rural electrification. The rural electrification program in Bangladesh stressed both residential as well as productive uses of energy and has met with reasonable success (7, 8). Lack of adequate electricity for households has important gender implications as well. Because agriculture and cultivation are usually male domains (with homes being female domains), the traditional definition of productive use of energy has an inherent gender bias (9). This bias is evident in the rural marketplace as well. Even in rural areas where households have access to electricity, markets stock leisure items such as televisions and radios but not labor-reducing modern cooking appliances for women. Because men serve as the decision makers in households, the market tends to cater to their needs over women’s (10). In Indonesia, a survey of a relatively wealthy rice-growing region found that the rate of growth of pump sets was low and that most irrigation continues to be successfully accomplished through traditional, gravity-fed methods. Furthermore, the price of kerosene and diesel in Indonesia was heavily subsidized, making it less attractive for those farmers who used diesel pumps to switch to electricity. Thus, experience suggests that there are many different ways to promote productive uses of energy. This has important consequences not only in shaping the program but also in producing the types of benefits needed for rural areas.

EMERGING VIEWOF PRODUCTIVE USES OF ENERGY

The view that the productive use of energy for rural development is primarily one of motive power is now changing. There are several reasons for this change. First, some recent studies have documented that lighting for rural nonfarm businesses actually improves productivity and provides additional income for rural people (11). Secondly, there is growing evidence that electricity use in rural homes is related to an improvement in education levels (12). And, because there is a welldocumented relationship between lifetime earnings and education, a use of energy that positively impacts education can be considered productive (13). For instance, one study that stresses the value of human capital in development states, “The main engine of growth is the accumulation of human capital—or knowledge—and the main source of differences in living standards among nations is a difference in human capital. Physical capital plays an essential but decidedly subsidiary role” (14).Finally, access to modern energy services can lead to improvements in health. Although there are very few studies examining the relationship between electricity and health, there is a growing body of literature on indoor air pollution and its impact on both morbidity and mortality (15, 16). And because people who are unhealthy cannot work as much as people who are healthy, surely improved health will lead to higher incomes. Thus, the uses of energy in homes or businesses, which can have a positive impact on social development in many contexts, are also productive. In June 2002, the Global Environment Facility (GEF) and the Food and Agricultural Organization (FAO) held an expert workshop on the productive uses of renewable energy (17). The fact that the traditional concept of productive uses as motive power for farms is under scrutiny was revealed as the assembled international experts grappled with developing a working definition of productive uses. In the end they settled on the following definition: “In the context of providing modern energy services in rural areas, a productive use of energy is one that involves the application of energy derived mainly from renewable resources to create goods and/or services either directly or indirectly for the production of income or value” (17). It should be noted that the above definition is specifically for renewable energy; however, it can apply to energy derived from all sources. The workshop participants admitted that the meaning of productive uses of energy in the context of human development is difficult to establish. They felt that a use of energy that is instrumental in bringing about an increase in income is clearly a productive use. They also felt that the use of energy for increasing education and/or life expectancy is also a productive use; however, the impact that energy can have on these two is an indirect one. They argued that educated and healthy people will possess greater potential for income generation than a comparatively unhealthy and uneducated people. Thus, uses of energy to enhance education and life expectancy should be considered productive uses. However, some argue that applications of energy for home lighting and entertainment cannot be considered as productive applications, because even though they improve the quality of life, their linkages to the Human Development Index are less obvious and almost impossible to quantify. In a reviewof renewable energy markets Martinot et al. (18) use a definition similar to the one developed by the GEF/FAO workshop. Both not only include the uses of energy that have a positive impact on income generation, but also include the uses of energy for indirect social benefits such as education and health. Finally,K. Kapadia, in an unpublishedWorld Bank paper (19), cites three primary reasons for the emphasis on productive uses of energy: maximization of the economic and social benefits, catalyzed by access to energy; facilitation of the Millennium Development Goals; and improving the economic sustainability of rural electrification projects and renewable energy markets. Although all of the above-mentioned reasons for choosing the definition of productive uses are extremely pertinent, they preclude a broader understanding of what is meant by development. Amartya Sen (20) stresses the importance of thinking of development as the process of expanding the real freedoms that people enjoy. Specifically, he notes that the growth of individual incomes is important “as means to expanding the freedoms enjoyed by the members of the society.” In addition, he provides a wide list of freedoms, e.g., political freedom, opportunities to receive basic education, opportunities to receive health care, and freedom to participate in the labor market. It is often asked, he says, whether these freedoms are indeed conducive to development. This question, however, unfortunately misses the point that these very freedoms represent what development aims to achieve. In the context of energy, many of the uses of energy that are seen as consumptive (e.g., home lighting or television) in fact may be uses that help achieve the goal of freedom allowed by development. For instance, television viewing is considered traditionally as a consumptive or unproductive use of electricity. However, a recent study in Bangladesh revealed that women in households with electricity were much more aware about gender equality issues than women in households without electricity. Furthermore, these women cited the television as their chief source of information for gender equality-related knowledge (7). In the discussion above on the definition of productive uses of energy, energy projects that have a positive impact on education and health are included because improved health and education increase people’s incomes. A broader understanding of development would suggest that improved health and education are goals and ends in themselves. This is not to suggest that an emphasis on income generation is misplaced. However, if the only productive uses of energy are those that facilitate income generation, then any use of energy which does not must therefore be an unproductive use. Although energy professionals and specialists may understand that “productive uses of energy” is mere substitute nomenclature for “income-generating uses of energy” and does not in any way pass a value judgment on the “unproductive uses of energy,” some may mistakenly believe that only energy projects that increase income are valuable. Thus, it may be worthwhile to consider revising the nomenclature for income-generating uses of energy from “productive uses of energy” to what they really are, namely, “income-generating uses of energy.” Quantifying the impact of energy services on human development is not easy. However, a lack of quantitative data does not suggest the absence of a relationship but rather the need for further analysis and research. The next section discusses the impact that modern energy services can have on achieving the development goals in rural areas of developing countries.

LINKING OF ENERGY WITH DEVELOPMENT GOALS

The energy sector has a significant and productive role to play in achieving the goals related to income and poverty, education, health, and gender issues. More than half of the world’s population and more than 70% of the world’s poor are found in rural areas (21). Energy access can have a substantial positive impact on rural growth and livelihoods. In terms of economic development, it provides the basis for improving productivity by facilitating income generating activities and improving the business climate. In terms of human development, the energy sector can assist in reducing child mortality, maternal mortality, and other diseases by facilitating better health services. It can also encourage the development of higher literacy rates, gender equality, and women’s empowerment. It is not surprising that a number of statistics show a very strong association between increasing commercial energy consumption and human welfare. The MDGs (22) adopted by the UN member states commit the international community to human development and are key to sustaining social and economic progress in all countries. These goals are now almost universally accepted as a framework for measuring developmental progress. The MDGs seek to (23) eradicate poverty and hunger; achieve universal primary education; promote gender equality; empower women; reduce childhood mortality; improve maternal health; combat HIV/AIDS, malaria and other diseases; ensure environmental sustainability; and develop a global partnership for development. TheUNMillennium Project, which offers a practical plan to achieve the MDGs, has also recognized the importance of energy services. It has mentioned the provision of electricity for all schools and hospitals as one of the quick-win interventions that can be implemented immediately and has the potential to bring vital gains in well-being to millions of people (24). Table 1 is a modified version of Kapadia’s diagram, which depicts the association between energy and the MDGs (19).

Energy and Poverty

Energy services can help reduce poverty and raise incomes in a variety of ways. The traditional thinking about the productive uses of energy considers only the impacts on farm incomes by substituting machines for animal and human labor. However, energy services impact incomes in other ways too, such as saving time and resources, indirect benefits due to lighting and communication, and numerous other positive impacts on the nonfarm business environment. An expanded definition of the productive uses of energy would provide a greater emphasis on these benefits of energy. Electric-powered farm equipment has tremendous benefits for rural farm incomes. As discussed above, farm machinery, such as water pumps, fodder choppers, threshers, grinders, and dryers, increase average yields per acre, improve cropping intensities, are more dependable, increase cost efficiency and productivity, decrease labor time consumed, increase areas for cultivation, and result in higher crop growth. Several studies have documented these benefits (25, 26). One such study in India (25) demonstrates that the addition of an electricpumpto a typical farm without electricity can result in an approximate income gain of about 11 thousand rupees (Rs) annually. This compares quite favorably to the farmers’ electricity expenses (excluding electric pump capital expenditures), which average between 2 and 3 thousand rupees per year. Given existing agricultural subsidies, an irrigation pump appears to be a good investment for most small, medium, and large farmers with available groundwater resources. As indicated in Table 2, the same may not be true for marginal farmers, who gain only about 5600 Rs, as this sum may not cover capital costs. Therefore, it is quite reasonable that most of the farmers in this group have not yet invested in irrigation. Apart from raising farm incomes, modern energy services can improve the more informal aspects of rural incomes by reducing much of the necessary daily drudgery that pervades the lives of the rural poor. For example, the rural poor spend a considerable amount of time each day collecting fuelwood, dung, and water. Because biofuels are a poor source of energy (particularly for an activity such as cooking), they consequently have to be collected in large quantities. If the rural poor had access to improved stoves and modern cooking fuels, this time could be spent on income-generating, educational or other activities. On the extreme end of the spectrum, studies in South Indian villages have revealed that families spend 2–6 hours each day collecting 10 kilograms of wood over distances of 4–8 kilometers (27). A survey in the Himalayas (27) found that although the hilly areas of Nepal provided an abundant supply of fuelwood,women still had to spend more than an hour each day collecting biomass (28, 29). The survey also revealed that the amount of time they were able to spend on agricultural activitieswas reduced likewise (compared to other people who were not dependent on these fuels). Surveys in Africa have shown similar results (30). Some evidence from India suggests that even if households continue to cook using biomass fuels, lighting enables timesaving food preparation (31). Table 3 illustrates the amount of time and effort families spend gathering fuelwood each day.

Time is not the only precious resource that is wasted by the rural poor owing to a lack of modern cooking fuels. Using dung and crop residues as a fuel reduces the amount available for use as a fertilizer for growing crops, thus reducing income from crops. The dung used as fuel in India would be worth US$800 million per year if it were used as fertilizer (32, 33). Also, the importance of lighting and the many benefits that it provides is oftentimes ignored. Without lighting, livelihood activities cannot be continued beyond daylight hours, thereby reducing the total number of productive hours available. If the rural poor had access to lighting, they could work in the evenings and nights. For example, some poor Indian households that operate small cottage industries increased their income by 10 Rs per day using light to extend their productive hours after nightfall (34). In Indonesia (35), solar home systems provided lighting, which not only had a direct impact on income-generating activities such as office and store hours but also on activities related to household chores. Another often overlooked impact is the facilitation of information and communication technologies. Rural energy services allow farm and nonfarm sectors access to modern communication, enabling them to receive accurate and current market prices. Lack of adequate information hurts sound business decision making and lowers income. For example, telephones in rural Thailand have enabled farmers to check prices in Bangkok regularly, significantly increasing their profits (34). Also, in India, the “e-choupal” initiative has succeeded in providing farmers with access to Internet-enabled computers, which helps them obtain current information on market prices and good farming practices and allows them to order agricultural inputs. This initiative has resulted in improvements to the quality of their produce and also ensures that they receive better prices for their produce (36). All of the above-mentioned benefits of improved energy services result in an improved business environment for small farm and nonfarm businesses. An example of the links between productivity and electricity is provided by a recent study in the Philippines, which found that small home businesses were more active in areas with electricity and made a greater contribution to family income than those in areas without electricity (see Table 4). Overall, 25% of households with electricity operated a home business, compared to about 15% of the households without electricity (12). The businesses with electricity, furthermore, were more productive than those without electricity. Most of these businesses were small general stores. Bundling the delivery of electricity with other services or coordinating rural electrification with other development programs has been shown to magnify its effect on income (37). A household survey in India, for instance, revealed that while both education and electricity can result in higher nonfarm income, when the two services are delivered together the effect is amplified by as much as 2.3 times (or 25,000 Rs of annual household income) (6). The traditional definition of productive uses of energy does not take into account these types of synergies.

Education

Modern energy services can have a positive impact on the time children spend at school and also improve the quality of the schools and the teaching. Electricity also provides lighting for rural homes, which increases the number of hours children have to study. In fact, children in rural areas are often unable to go to school because they must perform household chores and/or income-earning activities. For example, collecting cooking fuel can be an important component of a child’s daily household chores; and if children are in school, they are unable to assist the household in this activity. Similarly, children may be involved in certain income-generating activities. This income could be vital to the economics of the households, thus acting as a disincentive for the parents to send their children to school. As discussed above, lack of access to modern cooking fuels in rural areas forces villagers, often girls, to spend considerable amounts of time collecting firewood. If there is access to modern cooking fuels or better stoves (38, 39), then children need not spend hours every day collecting firewood and can take courses at school instead. In Morocco, road improvements made butane more affordable. This reduced the need for girls to collect firewood, giving them more free time and opening up new opportunities for education, work, and other activities (34). A comprehensive survey in India was able to quantify the complex relationship between electricity and education (25). Although the positive influence of rural electrification on education is fairly well established, it was found that one of the main benefits of electricity is a very high amount of quality light compared to that provided by kerosene. This high quality light in the evening creates an atmosphere in which reading is possible for adults and children, who can more easily pursue their studies.