A comparative analysis of economic activities spurred by two different types of electricity distribution

Background, challenges and context

Since 2003, the Government of Nepal (GoN) has been providing rural communities with access to electricity, forming Community Rural Electrification Entities (CREE) through the Community Rural Electrification programme.

Nepal Electricity Authority (NEA) adopts two models of electrification a) through CREE and b) through Distribution and Consumer Service (DCS). Studies have shown that community electrification has reduced pilferage and lowered operational costs for NEA, while delivering quality services to rural consumers.

Furthermore, when compared to conventional utility managed electrification, the operational efficiency of the community-based version is high – which might enable enterprises to develop. As well as increasing the number of enterprises and jobs overall, it is thought that by being less bureaucratic and more accessible to users, CREE managed distribution systems encourage enterprises owned by women, historically excluded groups and individuals from disadvantaged social backgrounds.

Research overview and objectives

The research project will compare economic activities spurred by electricity distributed by CREE vs DCS, analysing which has better outcomes. It asks three main questions:

• What differences are there, if any, in the number of enterprises enabled to start up or expand by access to electricity between areas electrified by CREEs vs DCS?

• What differences are there, if any, in the types and sizes of enterprises enabled by access to electricity between CREE and DCS supplied areas, as well as their ownership and management?

• Which factors might be responsible for any documented differences in either quantity or quality of enterprises enabled by access to electricity through the two modalities?

The research approach comprises structured questionnaires, observation, focus group discussions, key informant interviews, consultation with sectoral experts and case studies. Ten communities (five CREE electrified and five DCS electrified) will be selected for comparative analysis in discussion with NACEUN and NEA. Pairs of communities (one each from CREE and NACEUN) will be selected based on geographic, infrastructure, socio-economic, and cultural criteria.

The expected outputs of the research are:

• Comparison among CREE and DCS managed electrification in terms of how they impact the establishment and growth of electricity-based enterprises in the areas they serve

• Insights into which aspects of CREE and DCS management contribute to documented differences in the utilisation of electricity for productive uses, types of enterprises, and owners of enterprises

• Recommendations on rural electrification and accompanying investments, which can result in a higher number of enterprises with greater benefits to women and disadvantaged populations

The research will help to fill a knowledge gap and will help to guide the GoN in policy formulation on suitable models for rural electrification. It will provide evidence to policy makers and development partners – informing future investments in the electrification models and approaches that are most likely to contribute to economic growth in rural areas and support livelihood development.

Local partner

National Association of Community Electricity Users Nepal (NACEUN) – an umbrella organisation of community rural electrification entities (CREE)