Can renewable electricity reduce poverty?

13 January 2014

Energy poverty is a major development issue: nearly 1.3 billion people, close to one-fifth of the world’s population, have no access to electricity. Lack of access to efficient modern energy has a significant impact on economic development and small-scale enterprise, educational opportunities, infant mortality, gender equality and quality of life.

Renewable energy

The global threat posed by climate change means that we also face the pressing need to use less carbon in existing energy systems. Making progress on both energy poverty and decarbonisation requires a sharp increase in renewable electricity production, both on and off-grid.

At IDS, researchers have began building up the evidence base for policy and programmes that combine low-carbon energy investments and poverty reduction, initially reviewing existing evidence on the subject.

The evidence on renewable energy and poverty

In the recently published The Evidence of Benefits for Poor People of Increased Renewable Electricity Capacity: Literature Review IDS Fellow Ana Pueyo, along with a team of colleagues, reviews the evidence that investments in renewable electricity-generating capacity have benefitted poor people. The authors analyse a large and diverse range of literature on whether and how renewable energy can reduce poverty.

The review explains how electricity access can decrease poverty and increase welfare. However this link is not automatic. Ensuring renewable energy benefits people living in poverty rests on four factors:

  • Once electricity is generated, it needs to be reliably fed into the system.
  • This additional supply must be made accessible, and affordable, for poor people.
  • Increased electricity consumption then needs to translate into poverty reduction.
  • Increased electricity supply can indirectly reduce poverty by boosting economic growth.

Renewable energy diagram

The figure above shows the theory examined in the review which explains the causal chain between renewable electricity and reduction of poverty. At each stage (A-D in figure above) the scale of the effect on poverty will be influenced by the factors noted above. If these are not addressed, few improvements may be seen. If they are acknowledged and dealt with appropriately, there will be a much greater likelihood that increasing the supply of electricity will reduce poverty and improve the quality of poor people’s lives.

A guide to research on electricity and poverty reduction

The Pro-poor Electricity Provision Key Issues Guide, authored by IDS Fellow, Stephen Pratt, explores the potential impact that increasing renewable energy capacity could have on poverty in developing countries while simultaneously contributing to low-carbon development strategies.

The guide is divided into four sections:

  1. How does increased on-grid renewable electricity capacity affect the availability and reliability of supply?
  2. To what extent is an increased supply of more reliable electricity likely to be used by the poor?
  3. How does greater electricity consumption affect poverty?
  4. How does increased electricity supply and usage affect economic growth?

Each section contains easy-to-understand summaries of relevant research.

The guide highlights a number of points:

  • As well as the need to build and maintain adequate grid and distribution capacity, there are crucial decisions to be made on which communities to electrify. Public utilities and donors have traditionally concentrated their services on urban elites or households with relatively high average income, located close to existing grids.
  • Even if electricity is available, poor households need to be able to afford connection costs and buy and use sufficient electricity to alleviate their poverty. These were big issues in the 1980s and remain a problem with rural electrification projects today.
  • Electricity consumption can affect poverty in many ways but measuring these impacts has proved extremely challenging. Benefits tend to be difficult to quantify as they are often indirect, and can be distorted by the tendency to increase access to areas that already have relatively good prospects.
  • Increased electricity supply can contribute to economic growth. However, while the supply channels are well understood, evidence on the causal link from increased electricity consumption to economic growth is inconclusive. An important question, when considering whether to prioritise electrification, is the effectiveness of this approach in comparison to other measures to boost growth.

Do you have expertise in this area?

An e-discussion is being organised as part of the project in early March 2013 with leading experts in the field to share learning and experiences on pro-poor electricity provisions and further analyse key themes. If you would like to be part of this e-dialogue, please send your CV to by the 15th February 2014.

This research is part of the UK’s Department for International Development (DFID) Accountable Grant programme.

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Photo Credit: Magharebia