Policy Studies Institute findings expected to inform efforts to expand energy access and efficiency in Ethiopia

As part of the EEG project on impacts and drivers of policies for electricity access in Ethiopia, being led by Policy Studies Institute (PSI), the research team analysed the impact of electricity tariff reform on households’ electricity consumption, households’ valuation of power outages in urban Ethiopia, and pre-paid meters and household electricity use behaviours in Addis Ababa. The findings are expected to inform interventions that would enhance the Ethiopian government’s efforts to expand access to electricity, address inefficiency in energy consumption, and contribute to the socioeconomic development of the country.
 
The key messages and recommendations from three policy briefs are: 

  • Electricity consumption decreased in Ethiopia by a small amount after the introduction of tariff reform, but this effect did not persist. Electricity consumption in the overall sample appeared unchanged in the post-reform period.
  • The increased price was not large enough to significantly reduce electricity consumption among all customers.
  • Households did not appear to substitute other fuels such as charcoal for electricity following the tariff increase.
  • Electricity price increases can be coupled with the rollout of prepaid meters.
  • Modest gradual tariff increases, such as those deployed in Ethiopia, facilitate governments’ efforts to raise electricity supplier revenues without substantially reducing households’ electricity consumption.
  • Households strongly value greater electricity reliability and are willing to pay for it. This suggests that policy makers should work to allow utilities to raise electricity tariffs when they invest in such improvements.
  • Households in Ethiopia are willing to pay approximately 13-16% of the average monthly electricity bill (or 33-42 times the average electricity tariff per kWh) to avoid a three-hour power reduction.
  • Households are willing to pay 11 birr (US$ 0.4) for a one-unit reduction in the number of outages and 53 birr (US$ 1.8) to avoid a daytime or night-time outage relative to morning outages. Moreover, households prefer a day prior outage notification to a week prior notification, with a willingness to pay of 23 birr (US$ 0.8).
  • There is a continued need to identify better ways to target pro-poor electricity subsidies.
  • Ethiopian Electric Utility (EEU) needs to continue expanding the use of pre-paid meters and educating customers about their advantages.
  • Pre-paid meter customers have significantly lower electricity consumption compared to post-paid users, and greater satisfaction with utility services.
  • Pre-paid meter technology also has a positive, but modest and statistically insignificant impact on total appliance ownership.
  • The impacts of pre-paid meters are heterogeneous across customers; those who are more educated, who have higher incomes, and who do not share meters tend to reduce electricity use more.
  • EEU needs to expand the dissemination of pre-paid meters and the replacement of existing post-paid meters.