A new approach for evaluation of the economic impact of decentralized electrification projects

This paper proposes a new methodology for evaluating off-grid electrification projects, based upon Nighttime Light (NTL) observations, obtained by a combination of Defense Meteorological Satellite Program (DMSP) data and Visible Infrared Imaging Radiometer Suite (VIIRS) data. The methodology consists of comparing NTL data before and after the implementation of the projects. The projects are selected from FERDI’s Collaborative Smart Mapping of Mini-grid Action (CoSMMA) analysis, which documents existing project evaluations reported in published papers. Such reported evaluations are of uneven quality, with few evaluations which meet scientific standards. Our results suggest that our new methodology can contribute to fill this gap. For each project, we compute the NTL deviation with respect to its counterfactual, which provides us a proxy for the off-grid electricity-induced rate of NTL growth. Our main finding is that DMSP data identify success for 68% of projects implemented in localities where NTL was observable before implementation of the project. In localities where no NTL was detected before implementation, the success rate is 16%. Taking the median of the rate of growth of NTL of successful projects, and the NTL elasticity with respect to real GDP per capita to be equal to 2.5 in poor countries, we obtain an estimate of the rate of (local) growth of real GDP per capita of 14% for short periods (3 years) and medium periods (6 years) of observation. We implement several robustness checks on our methodology. Changing the size of pixel observations from pixels of 3km x 3km to pixels of 9km x 9km does not change our conclusions. Applying the same methodology to more precise VIIRS data available from 2013 to projects implemented between 2015 and 2017 does not change the conclusion. Comparing our results with proximate success assessments obtained from a triangulation of evaluations available in CoSMMA also does not change our conclusions.