Description

This study evaluated the impact of two ADB-funded rural electrification projects in Bhutan: the Sustainable Rural Electrification Project and the Rural Electrification and Network Expansion Project. The study aimed to (i) evaluate the performance of the two projects based on relevance, effectiveness, efficiency, impact, and likely sustainability; and (ii) conduct a rigorous quantitative evaluation of the projects impact, focusing on three broad areas influencing quality of life (economic, social, and environmental) and their sustainability. The conceptual foundation of the study is based on literature review and interviews with key stakeholders and quasi-experimental method is employed for impact evaluation. It also identifies key lessons and offers recommendations for considerations by ADB management in enhancing development effectiveness of rural electrification in Bhutan

Key findings

The impact evaluation study revealed the following results and findings are consistent with similar studies in other developing countries:

• The overall performance of the two rural electrification projects in Bhutan is rated successful based on relevance of design, effectiveness in implementation and achievement of outputs, efficiency of operations, and likely sustainability.
• Residents of electrified households enjoy a better quality of life in terms of economic, environmental and social outcomes compared to those in the unelectrified households.
• Impacts from electrification are quantifiable, visible, and positive. However, most impacts are modest in magnitude due to low household consumption of electricity, which is largely limited to lighting, rice cooking, and water boiling.
• Economic benefits from electrification are emerging slowly and will take time to translate into substantial impacts. Uptake of electricity use for income generation will depend on other enabling environments. At present, this is limited to weaving in central and western Bhutan and poultry production in southern Bhutan.
• In comparison to unelectrified households, electrified households (i) derive proportionately more income, (ii) encounter less smoke-induced health ailments, (iii) experience fewer number of missed workdays due to illness, (iv) better education of children, (v) less time spent in collecting fuelwood, and (vi) enjoy better access to information.
• Gender benefits from electrification are emerging and women in electrified households are playing more significant roles in household decisions, particularly for children's education and health of household members, compared to those in unelectrifed households.
• Project impacts are likely to be sustainable, subject to continued subsidy of rural electrification from electricity export earnings. It is envisaged that the fundamentals of cross-subsidization will not change in the near future as Bhutan has committed to increasing power generation for the export market. Domestic demand for electricity is likely to grow with modernization and urbanization.

Lessons

• Rigorous impact evaluation informs policymakers about attribution of outcomes and impacts more systematically.
• Country ownership is crucial to project success, reflected by government's mandate, development prioritization, vision for harnessing potential natural resources in a sustainable manner, and an effective coordination mechanism with development partners.
• In addition to expanding coverage, extra efforts are needed to boost domestic demand for electricity and enhance safety and efficiency in electricity use.
• The existing regulatory framework needs to be strengthened to ensure that energy-efficient appliances and equipments are used by households and businesses.
• When rural people directly realize benefits from rural electrification, they are willing to pay more.
• The consumption of fuelwood is not likely to decline without an enabling alternative environment and disincentive to felling trees. Viable alternatives to fuelwood for cooking and heating need to be explored.
• The use of electricity for income-generating activities has been limited, but the potential to increase household income is high. Electricity can also be used to improve agricultural productivity.
• As highlighted in other impact evaluation studies, baseline data are crucial for properly evaluating the impact of any development intervention, including rural electrification. With proper advance planning and systematic recording, much richer databases could have been created and used for impact evaluation using a double-difference method.

Recommendations

Building on success so far, stimulate and manage household and community demand for electricity. ADB could assist the government in (a) implementing and developing action plans for safety standards, ensuring clean and efficient energy use, and strengthening existing regulatory framework; and (b) linking electricity with income-generating activities such as food processing, irrigation services, and eco-friendly micro and small enterprises.

Ensure the sustainability of project benefits. Sustainability of project benefits hinges on cross-subsidization of rural electrification by power export. ADB could assist the government in (a) conducting a detailed electricity demand study based on willingness to pay and affordability analysis for electricity and alternate energy sources, and determining a sound and efficient basis for setting electricity tariffs and fees for felling trees, and (b) testing viability of alternate energy sources for cooking and other household use in isolated or remote areas, thereby reducing dependency on fuelwood.

Encourage monitoring of project outcome and impacts over time. The study provides a number of socioeconomic and environmental indicators to evaluate project outcome and impact and the status of these indicators as of 2010. ADB could assist the government in monitoring progress in economic, environmental, and social impacts of rural electrification over time using these indicators as baseline or benchmark.