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CLOSE THIS BOOKVillage Electrification (SKAT, 1992, 128 p.)
Part 1: Determined entrepreneurs, sustainable development
VIEW THE DOCUMENT(introduction...)
VIEW THE DOCUMENT1. Planning for private sector involvement
VIEW THE DOCUMENT2. A very brief history of electrification
VIEW THE DOCUMENT3. A look at current events
VIEW THE DOCUMENT4. Aspects of successful rural electrification

Village Electrification (SKAT, 1992, 128 p.)

Part 1: Determined entrepreneurs, sustainable development

John P. GRIERSON, Swiss Centre for Development Cooperation in Technology and Management (SKAT), St. Gallen, Switzerland

1. Planning for private sector involvement

The challenge of planning for and providing village electrification has not been satisfactorily met. In developing countries all aspects of rural life from food processing to factories, from enterprise to entertainment, suffer from the lack of available, reliable electricity. Though modest progress has been made there is but little evidence of well established, sustainable systems serving rural areas. All too often 'successful' village electrification is based upon political priorities that justify subsidies - and provide exemptions from the demanding economic, ecological and social criteria of sustainable development.

Even in these cases 'successful' has seldom meant long term, much less sustainable. Following the normal pattern most rural electrification schemes have ceased operations within a few years of handover. Far from demonstrating sustainable development most have failed to demonstrate even institutional and operational sustainability much beyond the period of official sponsorship and technical assistance. Subsequent analysis reveals the following causes:

1) Mismatch between plant capacity and energy demand;
2) Inappropriate equipment;
3) Lack of trained personnel;
4) No provision for repair and maintenance;
5) Failure to identify the local energy market; and
6) Limited private sector involvement.

The response of the development community and national electricity authorities has been to: 1) Emphasize plant rehabilitation; 2) Address rural electrification needs by expanding the national high tension grid; and 3) Encourage private sector involvement in all aspects of generation, transmission and delivery. These trends have evolved within a larger context of increasing environmental concern, emphasis on sustainable development, and pressure to use renewable energy resources. Thus, while the role of the market is increasingly recognized, this is often accompanied by pressure to use economically less viable renewable energy options, and by the need to operate within the complex parameters of"sustainable rural development". There has been, on the one hand, a shift in thinking away from addressing the challenge of village electrification with centrally planned, and state supplied and selected technologies and towards that of bringing market forces to bear on the problem. However, there is a counterbalancing trend towards elaborate interventionist planning models, ostensibly in the interests of ensuring sustainable development.

Paradoxically, the sustainable development concept which should logically encourage the development of local capacity, local contribution and local accountability may result in the reverse. The sustainable development concept is in danger of becoming a new justification for centrally administered and directed comprehensive energy planning. There is an emerging approach to sustainable energy planning being mooted which offers much rhetoric in favour of "decentralization" and "micro-level" while in reality retaining all the classic elements of central administration and control. This approach is exemplified by the new 1990 United Nations Food and Agricultural Organization's (FAO) "Environment and Energy Paper".

'The central feature of the new approach is the preparation and implementation of area-based decentralized energy plans for meeting energy needs for subsistence and development at the least cost to the economy and the environment, and linking the micro-level plans with national economic planning and development programmes, including those for the energy, agriculture and rural development sectors.'

'A New Approach to Energy Planning for Sustainable Rural Development',p. 5, FAO/ESCAP/UNDP, 1990

The 'newness' is for the most part reflected in the proposed concentration of bureaucratic resources on the demand determination and regulatory roles, and on the degree of attention (and resources) given to 'comprehensive integrated rural energy planning'. While in principal supporting a greater role for market mechanisms the FAO proposal dismisses previous attempts to reach the 'market potential in rural areas' as 'dismal failures' due to 'lack of proper
local assessment and planning and linkages with rural development programmes'.' The FAO finds that the market's weakness - and implied unsuitability - results from its lack of bureaucratic guidance and linkages. The remedy proposed is to expand the plan formulation and intervention processes. Sustainable development is offered as the new justification for this old and ailing practice.

The view that all-pervasive integrated planning is a development requisite will surely be faced with many challenges from the ranks of the development administrators. It is no less important for rural energy planners and practitioners to add their voice to the chorus if rural electrification is not to lose another development decade.

Certainly there is a need for rural energy evolution within the context of local, national, even regional planning. Just as certainly the massive - and scarce - manpower, organizational and software resources consumed during a comprehensive planning process, cannot be justified if replicability and sustainability are among the evaluation criteria. There is certainly some question whether a comprehensive needs-determination approach would be effective even if the planning resources were commonly and economically available. There are many voices arguing against overly ambitious planning models. To cite
but one summary of views:

'This trend towards more sophisticated analysis and detailed planning for rural development ... "leads away from reality, from what is feasible, ... and encourages the design of ideal models which are not only unattainable but also liable to impair rather than improve performance".

This tendency on the pan of planners to be unrealistic and impractical is further compounded, in the case of electricity planning, by a frequent tendency to be wrong: 'Major difficulties arise in the extension of service to low income areas in villages ... on account of low economies of scale and low density of demand. There is, however, a tendency to understate the extent and growth of demand ... '. The argument made here is not against the planning process. On the contrary, the argument is in favour of planning models that recognize market realities and incorporate market strengths.

Electrification planning, and particularly the regulatory framework which follows and which gives authority to plans, has all too often served to obstruct rather than promote progress. This is not a new phenomena, but one that is becoming more visible and important as the responsibility for aspects of delivery is increasingly passed to the market. The challenge facing rural electrification practitioners and planners - is to structure the planning process to encourage market participation. To do otherwise is to squander a sustainable local resource, and to ignore the lessons of 100 years of electrification history.

2. A very brief history of electrification

The early history of successful electrification is largely one of determined entrepreneurs identifying local needs (often in urban areas) and creating or adapting technology to supply those needs. Electricity supply to the public started in 1858 in the United Kingdom, and thereafter spread quickly throughout Europe and to the United States. The early history is the story of entrepreneurs famous and obscure: Gramme, Wallace, Edison, Siemens, Ferranti, and a host of others. All were designing and adapting technology - machines - all were responding to a perceived, if not comprehensively analyzed, demand. All were supported by readily available local light engineering capacity. Still famous manufacturers such as Siemens supplied the basic machinery which was subsequently modified and adapted by many obscure and unsung engineers - and non-engineers in small garages and dingy workshops.

In 1883 an enterprise was started in the West End of London which, though originally intended as a local private lighting installation, ultimately developed into a public electricity supply of great technical and engineering interest. The Grosvenor Gallery Company gave such satisfaction that requests for supply increased dramatically. Soon dem and exceeded technical capacity to supply and a young engineer, Ferranti, was called in. His modifications and additions to the existing Siemens technology soon resulted in a rapidly expanding and technically manageable supply of wide public interest. The entrepreneurs, hand-inhand with the engineers, soon expanded on the Grosvenor Gallery success story. Arc lamps in series followed; Edison refined and marketed the transmission technology for "feeders' and 'mains'; gas lighting came under increasing pressure due to innovations in electricity supply; the Holbom Viaduct became the first public steam power station in the world; Messrs. Siemens Bros & Co. achieved another first with a hydro-electric station at Godalming on the River Wey.

The early evolution of electrification was driven by determined, if often thought irrational, entrepreneurs. Their demand-analysis was far from comprehensive and often, as today, no doubt wrong. It did, however, prove sufficient to inspire their determination and to identify the eventual direction of success, and it did prove flexible. The early energy entrepreneurs were often engineers and even when not they always had engineering support - local technological capacity - available. They were not, at the outset, guided by plans nor obstructed by regulations. They did not have to bear the administrative costs and bureaucratic burdens that inevitably follow the planning process. They had many advantages that the budding energy entrepreneurs of today would envy.

To be sure the early energy entrepreneurs did not long enjoy the unfettered freedom to follow markets with innovative, adaptive technology. The imposition of restrictive legislation, followed by an immediate reduction in investment in the electricity industry, appears early in the history of electrification. In the United Kingdom a Parliamentary Select Committee began deliberations in 1879 'and heard evidence from many eminent scientists and engineers (who) expressed the hope that there would be no restrictive legislation which would in any way interfere with development.'. The Select Committee agreed and made their recommendations accordingly, but 'in 1 8X2, just when large sums were being poured into the newly formed companies ... the first Electric Lighting Act was passed which proved to be a serious deterrent to development. Two years after passing the Act a hundred and twenty applications had been made and seventy three granted, but not one case existed of the supply of electricity having been commenced. A well-intentioned plan brought progress to a halt. Soon, to be sure, the influence of science and enterprise was brought to bear, the act was eventually amended, and private investors, innovative engineers and determined entrepreneurs once again got on with the process of electrification. And this process has been repeated in endless cycles in every country since.

3. A look at current events

In spite of an incremental shift in favour of markets, entrepreneurs and innovation the current phase of the innovation-regulation cycle still finds the engineers and entrepreneurs on the defensive. In developing countries they do not yet have a firm enterprise base nor strong technical capacity. The early electricity engineering firms and enterprises had established a foothold; had tested modified and refined technologies; and had found and responded to market niches, before they faced the challenges of bureaucracy. Their struggle was to keep the market viable. Today's entrepreneurs are struggling just to be allowed to test the markets' viability. The challenge 100 years ago was to prevent barriers being erected. The challenge today is to bring them down and to replace them with structures meant to incorporate not constrain market forces. Small victories are much celebrated. The current energy development literature awards accolades for the most modest progress:

'In Nepal ... improved mills are being used to generate electricity ... at 27 percent per installed kilowatt of the capital cost of government-run larger hydro plants. The government has greatly assisted the spread of mill innovation by licensing the private sale of electricity ... '.

Ganesh Ram Shrestha and Kiran Man Singh, 'Improved Ghattas in Nepal', Appropriate Technology, December, 1989

Licensing- which is to say allowing, permitting. Permitting, under still restrictive conditions, a practice forbidden in law and fact prior to this celebrated 'new' approach to energy planning. In a country with a GNP of perhaps $150.00, where the national grid reaches perhaps 5% of the rural population, and with one of lowest life expectancies in the world it is thought to be significant progress that national planning authorities now present only a considerable bureaucratic barrier-to-entry (with all the attendance costs, informal and formal that this implies in south Asia) rather than an outright ban. This, to emphasize the obvious, is a barrier-to-entry restraining private initiative from attempting to bring to some of the worlds' remotest, poorest, most environmentally stressed and disease burdened areas a renewable energy resource that might:

'Save the cost of traditional sources of heating and light, such as firewood, dung and kerosene help the development of local industry ... revolutionalize social life in the evenings, and has even been invoked as a means of population control ... its effects on education are potentially very strong. Certainly the advantages of electrification are easily seen by comparing those villages with, and those without, power,'

G. A. Bridger and J. T. Winpenny, Planning Development Projects, p. 79, ODA, 1983

Progress to date notwithstanding the pendulum still has far to swing in favour of innovation and enterprise if the market is to offer even a small portion of its potential contribution. Progress is evident; in entrepreneurial innovation and evolution as well as in bureaucratic barrier reduction. Shresta and Singh go on to note that the government of Nepal offered private licensees 'subsidies and credit'. And in the years since, that approach, though not without its criticisms, is thought to have worked. Surprisingly, the criticisms do little to question the wisdom of a poverty stricken nation erecting expensive barriers to entry and then, again expensively, subsidizing those who manage to penetrate them. Notwithstanding this oddity, there are success stories. In Nepal there are now at least ten schemes that supply electricity full time and dozens of schemes producing electricity in the evenings. Privatization seems to be working; the government increased its level of subsidy fourfold in 1991 to acknowledge this, and there is talk of expanding private licensing as part of a massive planned project to achieve national village electrification. There are now nine independent Nepali companies specializing in building and installing micro-hydro plants. Local technological capacity has been enhanced to the point where it can respond to current levels of local demand. There is evidence of development in that much of the local demand for rural electricity is being supplied by local enterprise, itself underpinned by local technological capacity. The market, though much manipulated, is at least keeping up with innovation in rural electrification technology. The signs of sustainability are encouraging.

At least they were until recently. Planning enthusiasm is threatening to arrest the swing of the pendulum. All too predictably there is a proposal being considered to expand 'privatized' electricity on a massive scale. The means proposed for this are donor funded subsidies and externally supplied development projects - a comprehensively planned 'private sector' electrification project. There is more than a little concern about the effect this will have on rural energy development and local energy entrepreneurs:

'Instead of being a business opportunity to the nine Nepali companies ... this project threatens to destroy them ... by importing equipment offered as "aid". This poisoned pill may ... Iead to disaster. Being unable to compete with "free" foreign machines the Nepali micro-hydro industry will wither away taking with it the expertise needed to maintain and repair the equipment. Only If NGOs and donor governments act responsibility will Nepal's micro-hydro industry grow, build up a skilled work force, and offer a sustainable solution to the energy shortage (emphasis added)'.

Mark Waltham, 'Micro-hydro for Rural Energy in Nepal', Intermediate Technology, December, 1991

A planning success that for all its defects can be credited with creating a 'local technological capacity' in rural electrification is now feared, within a very short cycle of two years, to become the instrument of that technological capacity's extinction.

The mistake in not so much the planning process itself, but in the almost inevitable tendency of such processes to constrain rather than encourage markets and entrepreneurs. In Nepal, as in many other places, the planning approach is demonstrating sadly little comprehension of the workings of the market mechanisms they so fervently pledge to support.

In an era of increasing concern for sustainable development the inevitability of 'plans' must be accepted. Yet, it does not follow from this that plans must inevitably fail to stimulate and encourage the local technological capacity and local entrepreneurs that offer the best hope for rural energy sustainability. A good plan can and should provide a development framework that co-opts market efficiencies and allocates resources to enhancing market based local capacity. This can extend to allowing the market to function largely unfettered - to remove barriers to entry and direct scarce administrative resources to more productive tasks. Successful examples abound; one need look no further than Alaska, the largest and one of the richest of the 50 American States, to find rural electricity being supplied commercially by small local entrepreneurs. The capacity to create, virtually cost free, such possibilities is an opportunity developing countries have largely declined to exploit.

The history of electrification, from early European events to current Asian, African and even Alaskan anecdotes, offers many lessons that can be applied to planning for sustainable village electrification.

4. Aspects of successful rural electrification


4.1 Sustainability

The first and foremost lesson is a modern one: that rural electrification is very much a matter of sustainable rural development. There can be little argument that sustainable village electrification belongs well within the parameters of the sustainable development concept. Accepting this means accepting that village electrification must take place within, and largely subject to, a complicated process of planning and regulation. This will certainly constrain the ability of the market to respond, much to the chagrin of those who maintain that the market is always the best answer. More to the point it challenges those involved in village electrification to use the planning process to identify and enhance market strengths and recognize market weaknesses while planning for both within the larger context of sustainable development.

4.2 Growth or Development?

The second lesson is that development is the goal and that growth alone is not an acceptable substitute.

'Growth alone can be achieved with other people's money, labour, management and technology. Development of a nation's capacity to use its own resources to meet its own needs is another matter. This reality is illustrated by the oil producing countries of the Middle East that have achieved spectacular growth by selling off a non-renewable resource, but depend on others for everything, from managers and engineers to labourers. Only by the most narrow definition could one maintain that they are "developed"'.

David C. Korten, 'International Assistance: A Problem Posing as a Solution', IRED-Forum, No. 41, Oct-Dec 1991, p. 71

Development, summarizing Korten is 'a nation's capacity to use its own resources to meet its own needs'. The process of development necessarily means enhancing this capacity.

4.3 Local Technological Capacity

A national energy policy which includes village electrification will need to be supported by efforts to enhance the 'local technological capacity' in demand assessment, power generation and transmission, tariff determination, and management. Often, and especially in the case of off-grid rural facilities, the energy plan should allow for, and if necessary help develop, the required local technological capacities of local entrepreneurs. Those charged with supply responsibilities, utilities as well energy entrepreneurs, need the local technological capacity to continuously assess demand and respond accordingly. However, while planning and management capacities are important, local engineering capacity is paramount.

Enhancing critical local technological capacities is the key to village electrification within the context of sustainable development. The most important is the capacity to assess, select, absorb, modify and eventually create technology - to be masters of the necessary machines. Technology cannot merely be 'consumed' in the interests of growth, it must be absorbed locally and mastered in the interests of development. It is this capacity to absorb, to manipulate, modify, and eventually replace with local innovation that no nation can hope to develop without. The process cannot be substituted for in critical technologies, nor can it be sub-divided and delegated. Half-a-loaf will never be enough. Assessment and selection cannot be delegated to a foreign agency or a national planning authority with absorption being left to local manufacturers and users. This lesson is not unique to rural electrification. Paul Starkey, in assessing agricultural implement development, found that one of the 'fundamental lessons' was: 'the dangers of aid agencies, international centres and national programmes using their considerable influence and resources to promote ...inadequately evaluated technologies.' Inadequately evaluated by the users, those who must absorb them; in this case the manufacturers, maintenance agencies, utilities and energy entrepreneurs involved in rural electrification.

'Experience from many organizations has led to the conclusion that, if an organization or country does not have the capacity to operate, maintain, and service a new technology package, it should not acquire it no matter how attractive it might be.' These is precisely the danger threatening the micro-hydro industry in Nepal. The planners, responsible for selection, have found a new technology package that the users can neither absorb nor compete with. A mistake such as this cannot be made if the planning process placed technology assessment, selection and absorption decision responsibility much closer to where it belongs, with the mill owners and manufacturers who must absorb the technology. Sustainable village electrification means, in the first instance, that local industrial markets and manufacturers machine makers - must have the collective skills for technology absorption and creation. No planning model can substitute for parts of this process. A good planning model will upgrade system capability by directing assistance to enhancing the local technological capacity of the entrepreneurs struggling to master the machinery of rural electrification.

4.4 Mastering the Machine

Mastering the Machine is the title of Ian Smillie's lively history of Appropriate Technology. The title itself, in three short words, describes the only possible short-eut to sustainable national development in any hard technology. Mastering the machine means developing the engineering ability to modify and create technology, to go beyond producing parts and to begin producing machines. And to build machines based not on trial-and-error or luck but on an understanding of technology and science. 'Very late starters' is one of many terms used to describe those nations who have yet to make much progress in self-sustaining industrialization. Most are in Africa, and unlike Asia and Latin America, most have an extremely weak light engineering sector. Few countries in Africa have even adequate local technological capacity in machine engineering. Few developing countries have any expectation of reaching most villages with the national grid. Local technological capacity must be able to address problems such as this. But what precisely are the Local Technological Capacities that must be enhanced if machines are to mastered?

No less a figure than the Nobel Prize winner, Muhammed Abdus Salam has pondered the problem.

'One should say it clearly and emphatically that classical Low Technology is like Basic Sciences it must be developed by any nation wishing to industrialize - particularly the design and fabrication part of it.' There are five sub-areas of 'Classic Low Technology: (1) Bulk Chemicals; (2) Iron, Steel and Other Metals Fabrication; (3) Design and Fabrication in Indigenous Industries; (4) Petroleum Technologies; and (5) Power Generation and Transmission ... Here no new scientific principles remain to be discovered.

However, developmental work relating to design adaptation and modification is important. Thoroughness (in all aspects in manufacture and after-services) ... design ... quality ... cost ... competitiveness ... are all-important. These are just the areas where developing countries should NOT be deficient - though, unfortunately, they are.

They are the principal areas of Local Technological Capacity that should be enhanced if energy entrepreneurs are to master the machines of village electrification.

4.5 Machine Makers: The Role of Engineering Enterprise

Clearly, a problem that has in the very recent past been overwhelmingly addressed by plan-led solutions is struggling to come to terms with alternative or modified approaches. While not being encouraged by some sense that the state-of-the-art has progressed no further than the FAO proposal, there are encouraging signs emerging elsewhere. Moses Kiggundu, looking at the organizational ownership aspects of the technology transfer process and the extent to which they facilitate or prohibit the development of local technological capacities and effective utilization of technology assessed several studies from Africa and elsewhere. He found that the 'results seem to suggest that the indigenous private sector may have a more important role to play in promoting effective transfer of technology and developing the local technological capacity than has been realized by most developing countries. "'

The lesson for rural energy planning is that the private sector and very specifically the private machine manufacturing light engineering sector, is a key actor in the complex process of rural electrification. Learning this lesson involves no more than rediscovering the past. Early electrification was certainly a local, community based phenomena - one almost exclusively dependent upon determined private machine modifiers and manufacturers. Local entrepreneurs underpinned by local engineering enterprises were, collectively, the growth engine of early electrification. This lesson needs to be coopted a thousandfold into village electrification projects world-wide.

The goal is not merely to incorporate the economic efficiency of locally based resources, skills and initiative in the interests of growth. The goal is development - mastering machines, creating, along with rural electrical facilities, local technological capacity to search for, choose, modify and eventually develop locally appropriate technologies. The recognition of the importance of this is part and parcel of recognizing the necessary contribution of the machine makers - and understanding the contribution of the market to sustainability.

'The short-term advantage of being able to produce with imported technology may turn out to be a long term disadvantage due to continuing incapacity to create one's own equipment. There is no doubt that the capacity to repair, copy, improve and redesign a machine is greatly increased if there are mechanical workshops. The most efficient training centre is a machinery producing factory, even if its products are not yet as sophisticated as the imported machinery.

Again, the stress is on developing local technological capacity, very specifically that local technological capacity found in the light engineering machine making sector.

Collectively these lessons identify a specific focus for the needed capacities, and indicate the nature of the needed capacities themselves. The focus is energy entrepreneurs - the machine manufacturers. The capacities include demand determination, machine making skills and the managerial skills to combine these capacities profitably.

The overlapping modem histories of appropriate technology and enterprise promotion reveal the need for a cautionary word. Technology evolution is a complicated and challenging process as is enterprise creation. Ian Smillie wisely warms that 'great caution must be exercised in mixing enterprise creation and new technologies ... fragile vehicles can carry only so much freight ... a project that is overloaded with too many objectives is more likely to fail than one with limited objectives.' The danger is much greater when technology is being transferred in rather then evolved locally. Established light engineering firms are more likely to successfully absorb the ability to assess, select and modify technology, and to make new machines, than newly created enterprises. Energy utilities and entrepreneurs supported by established local engineering capacity in energy equipment manufacture and maintenance are more likely to succeed than those simply 'consuming' imported technologies that are unsupportable locally. This caution reinforces the essential lesson: local energy utilities and entrepreneurs are best supported by established local technological capacity in machine manufacture. Certainly, it is a slower process than technology importation, but it is a more certain process of development.

4.6 Profits: The Price of Progress

Rural electrification is widely deemed to have exceptional social value and considerable environmental benefit. While these warrant considerable efforts to expand rural facilities, and may justify the external subsidies or internal cross-subsidies needed to accommodate the special economic problems of such investments, they are not of themselves sufficient to motivate rural energy entrepreneurs. Rural energy entrepreneurs are seeking commercially viable investments. If, as we have accepted, the market is to play a major role in rural energy delivery it must also be accepted that the essential motivation of the market is commercial profit. Successful rural energy planning must accommodate and consolidate many interests. The energy entrepreneurs must accept that social goals help create their markets, and that environmental goals can compel the use of less economically viable technologies. Correspondingly, and no less importantly, those with social and environmental responsibilities must accept that the power of the market comes with a price - and the price is profits for the entrepreneurs and economic viability for the utilities. Compromises, even sacrifices, may be necessary to find a balanced formula for rural electrification.

An early area of compromise and sacrifice is certain to be in determining target localities for village electrification. Having determined the direction and nature of support needed the question immediately arises: which villages have priority? Peri-urban bedroom communities?; rural market centres?; sites well suited for the available technology?; disadvantaged communities? The debate will be endless, and never satisfactorily resolved. The danger is that the energy entrepreneurs will be marginalized during the debate. If so, and if the compromise choice offers neither engineering possibility nor profit potential, they will simply exercise their option not to participate. The plan will have precluded the potential to bring to bear the power of the market, and at best settled for growth in lieu of development.

While the social development potential of rural electrification is accepted as given the economic development potential is less well understood. This is particularly important for both private energy entrepreneurs seeking profits and planners seeking economic development. Rural electrification does not appear to create economic activity: 'The experience of micro-hydro tends to lend support to the conclusion that "rather than rural electrification programmes causing increased wealth, economic dynamism, improved literacy, and other aspects of development, it may be that it is precisely in areas with such characteristics (already) that programmes are likely to succeed".

The cumulative evidence suggests two lessons: (1) rural electrification localities must be selected based on a minimum availability of commercial consumers; and (2) rural electrification can complement and transform rural economic activity but probably cannot initiate it.

This implies that the eve customers, those consuming an output volume and load factor sufficient to justify the investment, are likely to be productive sector clients paying commercial rates. While debate is most certainly not closed there is ample evidence to suggest that rural electrification should not be targeted below 'areas of low income and productivity ... generally the larger villages ... with farms, irrigation, and agro-industries ... where there is generally a strong response from both households and businesses. Where electricity serves productive purposes, and where enough domestic consumers are in the "less poor" category, prices can be set to reflect costs ...'. Having said that, however, Turvey concludes by noting that 'with the exception of extremely poor areas ... consumer willingness to pay is an adequate monetary measure of economic benefits, and a good basis for pricing and investment decision'. It is logical to begin with the assumption that, in developing countries, villages with some productive activity will prove most viable. It is considered a rule-of-thumb for hydro-based schemes, with their relatively high capital investment and correspondingly high investment pay-back burden, to require a 'core' of commercial rate consumers. Ultimately, the decision to test these assumptions must be made by the rural energy entrepreneurs themselves; planners and practitioners both will learn from their experiences.

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