On the energy sources of Mozambican households and the demand-supply curves for domestic electricity in the northern electrical grid in Mozambique
Date
2009
Authors
Arthur, Maria de Fatima Serra Ribeiro, author
Willson, Bryan D., advisor
Bond, Craig A., advisor
Duff, William S., committee member
Troxell, Wade O., committee member
Kling, Robert W., committee member
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Abstract
The development of electrical infrastructure to supply rural households is considered economically unfeasible because of the high cost of capital investment required to expand the distribution grids. Although domestic electricity consumption in many developing regions is small when compared to the requirements of some emerging agroindustries, the social benefits are significant, such that many donor agencies agree to finance grid extensions based on poorly projected social benefits of electrification. However, there is evidence that households with electrical connections do not increase their electricity consumption above the bare minimum, allegedly because electricity is more expensive and possibly because of insufficient funds to invest in electrical appliances. The controversy is then whether or not electrification can support household development (and poverty alleviation) and vice-versa, can domestic consumption support the costs of electrification investments. The current work is composed of a theoretical model and two empirical models, developed in order to answer the following specific questions: 1) To what extent the ownership of assets is determinant to the adoption of high-grade energy sources in the domestic settings of poor families? 2) What is the price of electricity that sustains the supply costs and still promotes increased energy consumption in Mozambican households? To answer these questions the study formulated an inter-temporal utility maximization problem by which households can determine the limits of investment for energy consumption and for income generation that is required to evolve out of poverty in a sustainable manner. Next, the study calculated the elasticities of demand for the various domestic sources used by Mozambican households, surveyed in 2002/3 at the national level, enabling the construction of demand curves for these sources. The study also derived empirical loss equations for the northern transmission electrical grid (Linha Centro-Norte, LCN) in Mozambique, and constructed the supply curves for the distribution networks connected to the substations of the system. Based on the household data, the likelihood of adopting electricity as a domestic source was analyzed and results show that wealth is a major determining factor, confirming the findings of the theoretical and empirical household models. Finally, the study constructed the supply and demand plots, from which the sustainable price of electricity supplied to domestic consumers can be estimated and welfare evaluations made. Results indicate that households can evolve consuming electricity if credit for investment is made available and the income base is enlarged. Furthermore, it is demonstrated that current electricity prices are within budget of households and that electricity is competitive with biomass sources and kerosene in the domestic setting.
Description
Department Head: Allan Thomson Kirkpatrick.