Difference between revisions of "Productive Use of Electricity"
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<div><span>Productive use of electricity is the basis for long-term sustainable economic development intended by rural electrification programs. The following article will focus on a working definition of the term ‘productive use of electricity’, explore the reasoning for the promotion of productive uses through governments or donor agencies and give an overview on potential interventions to support productive uses. </span></div> | <div><span>Productive use of electricity is the basis for long-term sustainable economic development intended by rural electrification programs. The following article will focus on a working definition of the term ‘productive use of electricity’, explore the reasoning for the promotion of productive uses through governments or donor agencies and give an overview on potential interventions to support productive uses. </span></div> | ||
= Defining Productive Use of Electricity = | = Defining Productive Use of Electricity = | ||
| − | <div><span>In the general discussion there have been several attempts to come up with a clear definition of the term ‘productive use’. While in some cases productive use is mainly defined through income generating activities that are directly positively affected by the use of electricity, others draw a much broader definition by including the use of electric energy for education and health or other welfare related activities.</span></div><div><span>A World Bank paper by Kamal Kapadia | + | <div><span>In the general discussion there have been several attempts to come up with a clear definition of the term ‘productive use’. While in some cases productive use is mainly defined through income generating activities that are directly positively affected by the use of electricity, others draw a much broader definition by including the use of electric energy for education and health or other welfare related activities.</span></div><div><span>A World Bank paper by Kamal Kapadia e.g. employs a broad definition of productive uses of energy as activities “that involve the utilization of energy – both electric, and non-electric energy in the forms of heat, or mechanical energy - for activities that enhance income and welfare. [In rural contexts] these activities are typically in the sectors of agriculture, rural enterprise, health and education.”<ref name="Kapadia">KAPADIA, K. (2004): Productive Uses of Renewable Energy: A Review of Four Bank-GEF Projects. January 2004 draft version. Washington, D.C.</ref></span></div><div><span>Jose Etcheverry takes a similar approach by classing as productive use projects in rural contexts those that “aim at enhancing income generation opportunities and productivity in rural areas […] to improve quality of life and increase local resilience and self-reliance”, with education and health mentioned among the key sectors for productive use of energy in rural contexts.<ref name="Etcheverry">ETCHEVERRY, J. (2003): Renewable Energy for Productive Uses: Strategies to Enhance Environmental Protection and the Quality of Rural Life. Toronto.</ref></span></div><div><span>By contrast, Ron White's paper presented at a GEF-FAO Workshop on Productive Uses of Renewable Energy (2003: 33) suggests a more narrow definition of productive use of energy, taking into account only uses of energy that render outcomes that can be measured in monetary terms: “[activities that ] involve the application of energy […]to create goods and/or services either directly or indirectly for the production of income or value. The production of income or value is understood to be achieved by selling products or services at greater than their cost of production, resulting in an increase in the net income of the enterprise or the entrepreneur.</span>" <span><ref name="White">WHITE, R. (2003): GEF-FAO Workshop on Productive Uses of Renewable Energy – Synthesis and Report. Washington, D.C.</ref></span></div> |
= Why Support Productive Use of Electricity? = | = Why Support Productive Use of Electricity? = | ||
<div><span>In a 1995 review of the World Bank’s rural electrification projects in Asia, the Bank’s Operations Evaluation Department concluded that the “economic returns of rural electrification projects have been considerably lower than expected and a wide range of expected indirect and external benefits have not materialized”<ref name="World Bank">World Bank (1995): Rural Electrification: a hard look at costs and benefits. Operations Evaluation Department, Precis Number: 90. Washington, D.C.</ref>. One reason for this fact is that most rural electrification initiatives in the past have mainly focused on household and community needs for lighting. Placing rural electrification as part of a broader development approach, however, entails allocating a much higher priority on strategies for using energy for productive uses<ref name="Etcheverry" />.</span></div><div><span>The GEF-FAO Workshop on Productive Uses of Renewable Energy in 2002 therefore recommended going beyond home lighting applications: “Many rural renewable energy development projects have primarily focused on household lighting using solar home systems (SHS). While such systems provide important social benefits and also may facilitate homebased income generating activities, there are a wide variety of productive-use benefits that can only be captured through applications other than home lighting. These other applications have been neglected in historical development practice”<ref name="White" />.</span></div><div><span>A recent paper by ESMAP argues that the most efficient way to deliver effective and lasting impacts when designing a rural electrification scheme is to ensure that such programs provide a direct impact on livelihoods and revenue generation, in addition to the more conventional impacts on standards of living. Increasing revenue generation can be accomplished by improving productivity of an existing production process and by creating new lines of activities that will generate employment and local demand<ref name="ESMAP">Energy Sector Management Assistance Program (ESMAP) (2008): Maximizing the Productive Uses of Electricity to Increase the Impact of Rural Electrification Programs. Washington, D.C.</ref>.</span></div><div><span>The main reasons for demanding increased promotion of productive uses in energy projects</span> <span>are<ref name="Kapadia" />:</span></div> | <div><span>In a 1995 review of the World Bank’s rural electrification projects in Asia, the Bank’s Operations Evaluation Department concluded that the “economic returns of rural electrification projects have been considerably lower than expected and a wide range of expected indirect and external benefits have not materialized”<ref name="World Bank">World Bank (1995): Rural Electrification: a hard look at costs and benefits. Operations Evaluation Department, Precis Number: 90. Washington, D.C.</ref>. One reason for this fact is that most rural electrification initiatives in the past have mainly focused on household and community needs for lighting. Placing rural electrification as part of a broader development approach, however, entails allocating a much higher priority on strategies for using energy for productive uses<ref name="Etcheverry" />.</span></div><div><span>The GEF-FAO Workshop on Productive Uses of Renewable Energy in 2002 therefore recommended going beyond home lighting applications: “Many rural renewable energy development projects have primarily focused on household lighting using solar home systems (SHS). While such systems provide important social benefits and also may facilitate homebased income generating activities, there are a wide variety of productive-use benefits that can only be captured through applications other than home lighting. These other applications have been neglected in historical development practice”<ref name="White" />.</span></div><div><span>A recent paper by ESMAP argues that the most efficient way to deliver effective and lasting impacts when designing a rural electrification scheme is to ensure that such programs provide a direct impact on livelihoods and revenue generation, in addition to the more conventional impacts on standards of living. Increasing revenue generation can be accomplished by improving productivity of an existing production process and by creating new lines of activities that will generate employment and local demand<ref name="ESMAP">Energy Sector Management Assistance Program (ESMAP) (2008): Maximizing the Productive Uses of Electricity to Increase the Impact of Rural Electrification Programs. Washington, D.C.</ref>.</span></div><div><span>The main reasons for demanding increased promotion of productive uses in energy projects</span> <span>are<ref name="Kapadia" />:</span></div> | ||
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*micro credit, | *micro credit, | ||
*<span>Business Development Services (BDS) and training,</span> | *<span>Business Development Services (BDS) and training,</span> | ||
| − | *<span>infrastructure, or</span> <span><span>improved market access<ref>ALLERDICE, A. &amp;amp;amp;amp;amp;amp;amp;amp;amp;amp; J.H. ROGERS (2000): Renewable Energy for Microenterprise. Golden.</ref><ref>VEIT, S. (2006): GTZ Experience with Productive Use of Rural Energy. Eschborn.</ref>.</span></span> | + | *<span>infrastructure, or</span> <span><span>improved market access<ref>ALLERDICE, A. &amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp; J.H. ROGERS (2000): Renewable Energy for Microenterprise. Golden.</ref><ref>VEIT, S. (2006): GTZ Experience with Productive Use of Rural Energy. Eschborn.</ref>.</span></span> |
<div><span>Previous experience has shown that activities to promote productive use necessarily seem to involve non-energy sector agencies or organizations to implement respective business development, financing and infrastructure services<ref name="Kapadia" />.</span></div> | <div><span>Previous experience has shown that activities to promote productive use necessarily seem to involve non-energy sector agencies or organizations to implement respective business development, financing and infrastructure services<ref name="Kapadia" />.</span></div> | ||
= Further Reading = | = Further Reading = | ||
Revision as of 16:14, 27 August 2010
Productive use of electricity is the basis for long-term sustainable economic development intended by rural electrification programs. The following article will focus on a working definition of the term ‘productive use of electricity’, explore the reasoning for the promotion of productive uses through governments or donor agencies and give an overview on potential interventions to support productive uses.
Defining Productive Use of Electricity
In the general discussion there have been several attempts to come up with a clear definition of the term ‘productive use’. While in some cases productive use is mainly defined through income generating activities that are directly positively affected by the use of electricity, others draw a much broader definition by including the use of electric energy for education and health or other welfare related activities.
A World Bank paper by Kamal Kapadia e.g. employs a broad definition of productive uses of energy as activities “that involve the utilization of energy – both electric, and non-electric energy in the forms of heat, or mechanical energy - for activities that enhance income and welfare. [In rural contexts] these activities are typically in the sectors of agriculture, rural enterprise, health and education.”[1]
Jose Etcheverry takes a similar approach by classing as productive use projects in rural contexts those that “aim at enhancing income generation opportunities and productivity in rural areas […] to improve quality of life and increase local resilience and self-reliance”, with education and health mentioned among the key sectors for productive use of energy in rural contexts.[2]
By contrast, Ron White's paper presented at a GEF-FAO Workshop on Productive Uses of Renewable Energy (2003: 33) suggests a more narrow definition of productive use of energy, taking into account only uses of energy that render outcomes that can be measured in monetary terms: “[activities that ] involve the application of energy […]to create goods and/or services either directly or indirectly for the production of income or value. The production of income or value is understood to be achieved by selling products or services at greater than their cost of production, resulting in an increase in the net income of the enterprise or the entrepreneur." [3]
Why Support Productive Use of Electricity?
In a 1995 review of the World Bank’s rural electrification projects in Asia, the Bank’s Operations Evaluation Department concluded that the “economic returns of rural electrification projects have been considerably lower than expected and a wide range of expected indirect and external benefits have not materialized”[4]. One reason for this fact is that most rural electrification initiatives in the past have mainly focused on household and community needs for lighting. Placing rural electrification as part of a broader development approach, however, entails allocating a much higher priority on strategies for using energy for productive uses[2].
The GEF-FAO Workshop on Productive Uses of Renewable Energy in 2002 therefore recommended going beyond home lighting applications: “Many rural renewable energy development projects have primarily focused on household lighting using solar home systems (SHS). While such systems provide important social benefits and also may facilitate homebased income generating activities, there are a wide variety of productive-use benefits that can only be captured through applications other than home lighting. These other applications have been neglected in historical development practice”[3].
A recent paper by ESMAP argues that the most efficient way to deliver effective and lasting impacts when designing a rural electrification scheme is to ensure that such programs provide a direct impact on livelihoods and revenue generation, in addition to the more conventional impacts on standards of living. Increasing revenue generation can be accomplished by improving productivity of an existing production process and by creating new lines of activities that will generate employment and local demand[5].
The main reasons for demanding increased promotion of productive uses in energy projects are[1]:
- Productive use can maximize the economic and social benefits of energy access. Energy projects with productive use components are more likely to lead to rural economic development than projects that simply focus on the provision of electricity, or other forms of energy.
- Energy that is used productively can facilitate the achievements of the Millennium Development Goals. Incorporating a ‘productive use’ focus into energy projects makes them more likely to help achieve the Millennium Development Goals.
- Rural electrification projects with a productive use component are more likely to achieve economic sustainability. This is for two distinct reasons:
- Obtaining financing for Renewable Energy Technologies (RET) may be easier as rural financing agencies might be more willing to provide lending to households that use the provided energy to increase their income.
- As people’s incomes rise through the productive use of energy, their demand for energy services is likely to rise too. This creates attractive market conditions for RET dealers and vendors.
How to Support Productive Use of Electricity?
Experience from past rural electrification programs has shown that the provision of electricity alone does not necessarily lead to its productive application. There are several reasons why electricity may not be used for productive purposes or small business development. Fishbein[6] summarizes the most important preconditions for productive applications of electric energy in developing countries:
- Knowledge and skill by small and micro-business, households and farmers on how to use new-found electrical and motive power for profitable enterprise.
- Technical and financial management capacity of small and micro-business, households and farmers, including availability of credit and micro-credit to finance productive tools and equipment.
- A policy and institutional environment conducive to business development, willingness to promote decentralized services, etc.
- Access to markets for additional or new products produced or services offered as a result of new electrical, heat or motive power
- Availability of a minimum of other complementary infrastructure services, such as transport, water supply and ICT services.
Where one or several of these factors are nonexistent, productive use of electricity may be hampered significantly. Programs promoting the productive application of electricity are concentrating on providing the preconditions mentioned above by implementing activities such as providing
- productive technologies,
- micro credit,
- Business Development Services (BDS) and training,
- infrastructure, or improved market access[7][8].
Previous experience has shown that activities to promote productive use necessarily seem to involve non-energy sector agencies or organizations to implement respective business development, financing and infrastructure services[1].
Further Reading
References
- ↑ 1.0 1.1 1.2 KAPADIA, K. (2004): Productive Uses of Renewable Energy: A Review of Four Bank-GEF Projects. January 2004 draft version. Washington, D.C.
- ↑ 2.0 2.1 ETCHEVERRY, J. (2003): Renewable Energy for Productive Uses: Strategies to Enhance Environmental Protection and the Quality of Rural Life. Toronto.
- ↑ 3.0 3.1 WHITE, R. (2003): GEF-FAO Workshop on Productive Uses of Renewable Energy – Synthesis and Report. Washington, D.C.
- ↑ World Bank (1995): Rural Electrification: a hard look at costs and benefits. Operations Evaluation Department, Precis Number: 90. Washington, D.C.
- ↑ Energy Sector Management Assistance Program (ESMAP) (2008): Maximizing the Productive Uses of Electricity to Increase the Impact of Rural Electrification Programs. Washington, D.C.
- ↑ FISHBEIN, R.E. (2003): Survey of Productive Uses of Electricity in Rural Areas. Washington, D.C.
- ↑ ALLERDICE, A. &amp;amp;amp;amp;amp;amp;amp;amp;amp;amp; J.H. ROGERS (2000): Renewable Energy for Microenterprise. Golden.
- ↑ VEIT, S. (2006): GTZ Experience with Productive Use of Rural Energy. Eschborn.
