Estimating the value of off-grid electricity benefits for rural households: Evidence from rural Sumba, Indonesia

Abstract

Abstract Background Off-grid renewable electricity generation and distribution has become a cost effective way to supply electricity in rural areas remote from the grid system. However, in addition to the risk of not being able to pay for full cost tariffs, beneficiaries may not have the skills or time for the institutional and technical requirements to operate and maintain the technology. This might lead to sub-optimal functioning of off-grid renewable power plants and potentially to damage and abandonment. This raises the question of whether off-grid electricity benefits outweigh the effort and costs experienced by rural communities.Results We conducted a cost-benefit analysis of off-grid electricity in rural Sumba Island, Indonesia, which has been a focal area for implementation of off-grid electricity systems under the Indonesian government 'Iconic Island' programme. The research found a positive benefit-cost ratio when both market and non-market values were estimated suggesting that electricity is advantageous for rural households even without supporting interventions.Conclusions In conclusion we highlight the significance of non-market benefits of electricity. We argue that estimating the value of perceived benefits of electricity is pivotal for making decisions about intervention and formulating investment strategies for establishment of off-grid electricity systems.