Energy-Saving Effects of Progressive Pricing and Free CFL Bulb Distribution Program: Evidence from Ethiopia

Abstract

Abstract In Africa, about 70 percent of the total population still lives without electricity. Significant resources are needed to meet the gap. Demand-side management is crucial to curb the increasing demand even in developing countries. A traditional approach is to raise prices, but promoting energy-efficient products such as compact fluorescent lamp (CFL) bulbs is also a win-win proposition. While end-users can reduce their spending, power utilities can avoid costly investments in new generation capacity. This paper estimates the effects of progressive pricing as well as CFL distribution program in Ethiopia. It is found that the increasing block tariff structure reduced the demand: the price elasticity is estimated at 0.29. This is particularly useful to influence large-volume users, who are presumably the rich. The CFL program is also found effective to contain the electricity demand. The estimated impact is about 45 kWh per customer. This is significant energy savings particularly for low-volume users.