Note: This is a joint blog post with Meir Alkon (Princeton University) and S.P. Harish (New York University).

Can the poor afford modern energy? In India, the answer is yes. When electricity and liquid fuels are available, Indian households are ready to put relatively high proportions of their expenditure towards these sources of energy. This high willingness to pay suggests that improving access to modern energy can generate large benefits for the population.

As access to modern fuels improves in the developing world, affordability becomes an increasingly important issue. Even if households can access abundant quantities of energy, they may not be able to afford this newly available energy. Access to modern fuels does not guarantee that households will reap benefits from improved lighting, electric appliances, mechanical power, or cleaner cooking.

Survey research suggests that the cost of energy is a major burden for households in many developing countries. In Bangladesh, over 40% of households spend more than 10% of their total income on energy (gated content). In India, the problem is even worse, as the average household spends 13% of its income on energy (ungated pre-print).

To understand patterns and drivers of energy affordability, our new study (forthcoming, Energy for Sustainable Development; ungated pre-print) analyzes changes in household energy expenditures over time, using nationally representative data from India. Combining household surveys between the years 1987 and 2010, we described and predicted the affordability of household energy across the country.

The findings show that high energy expenditures have many causes. At the state level, pricing reforms of energy – in particular, electricity – seem to impose a heavy burden of increased energy expenditure on households. While urban households have steadily reduced their energy expenditure relative to total disposable income, we observe no such positive change among rural households.

At the household level, modern energy access is a key driver of energy expenditures. As households gained access to electricity or liquid fuels for cooking, their expenditures increased by almost 50 percent.

On the other hand, rising incomes do not appear to explain growing energy expenditures. In fact, household energy expenditures are negatively correlated with other expenditures, though the correlation is very weak.

This result suggests that households consider energy a highly valuable commodity. They are willing to spend significant amounts of money on energy, despite limited disposable income. Even very poor households are willing to forgo other goods and services if modern energy is available to them.

If access to modern energy is highly valued across the Indian population, then the policy implication is that the government should prioritize access over reducing energy prices. People’s high willingness to pay for modern energy suggests that the lack of access remains the key issue. This is not to suggest that energy prices do not matter or that poor Indian households would always continue to pay a high proportion of their income towards their energy needs. What our study shows is that, across both rural and urban households, energy access remains a much more critical issue compared to its cost.

When poor households lack access to electricity and liquid fuels for cooking, the socio-economic cost is high. Thus, the goal of universalizing modern energy access in countries without such universal access remains an important policy priority.

Note: This post is written together with Patrick Bayer (School of Social and Political Sciences, University of Glasgow). Follow him on Twitter at @pol_economist.

In July 2016, the German government decided to abolish the country’s feed-in tariff (FIT) for renewable electricity generation. Instead, the government now plans to auction contracts for renewable electricity deployment to the lowest bidders.

The FIT is a policy that basically forces electric utilities to buy renewable electricity from generators for a premium price. Since 1990, the German FIT had played a key role in making the country a pioneer in the use of renewable energy. Why did Germany replace the FIT after almost three decades of unparalleled growth in renewable electricity generation?

As a policy, the FIT has many virtues in the early stages of renewable electricity generation. It reduces uncertainty for electricity producers as the FIT guarantees a fixed, above-market price for a defined time period, such as ten years.

The German law also gives priority to renewable electricity, thus granting grid access to renewable producers. This design protects independent small-scale producers by preventing electric utilities from closing the electricity market. Politically, this feature is key to understanding the FIT’s popularity: it creates benefits to a large number of small generators.

No wonder, then, that the FIT has been the most critical driver behind Germany’s aggressive growth in renewables. In fact, renewable electricity generation since 1990 increased by a factor of ten, with renewables now accounting for almost a third in the country’s electricity mix.

However, the cost of the FIT policy increases over time, as the cost of generating renewable electricity declines. This development typically shows in increased electricity prices for household customers. As a result of the FIT, average retail prices have soared, at least over the last decade. Residential consumers are charged about 35 cents/kWh compared to about 13 cents/kWh in the United States, making Germany the country of some of the highest electricity prices in Europe.

Germany’s decision to drop the FIT policy and to become an auctioneer is thus an attempt to control the rate and cost of growth in renewable electricity generation. Auctioning not only promises to reduce the cost of renewable electricity generation, but it also gives policymakers more flexibility in achieving their goals.

The German government can now create “deployment corridors” by setting renewable energy production targets for different technologies. In turn, the “breathing caps” adjust the premium for renewables depending on how well actually installed capacities match targets.

The move into auctions also shows political acumen. Now that renewable electricity generation is much cheaper than just a decade ago, rapid growth in the sector is no longer the overriding priority. Now the question is whether Germany can keep increasing the share of renewables in the power sector without continued increases in electricity prices and other problems, such as outages.

Indeed, the German FIT had recently drawn a lot of fire. Critics of the FIT point to the continued use of polluting coal in Germany, as renewables have reduced the use of natural gas and nuclear power. Others note that electricity has now become a “luxury good” in Germany, no longer affordable to the poor.

Now that cost-effectiveness of renewable production is becoming more and more important relative to mere growth, tailoring cash incentives towards the government’s strategic expansion plans is key to success. Auctions enable continued growth in renewables at a low cost relative to the FIT, while giving the government more control over technologies and types of renewables. In this sense, auctions promise to be a useful tool in Germany’s pursuit of a “new normal” in renewable electricity production.

In applauding the Merkel government’s policy choice, we do not want to belittle the challenges of designing auctions. It remains to be seen if – and how much – the German auctions reduce the cost of renewable capacity installation and whether the disappearance of the certainty provided by the FIT creates problems.

A particular challenge for Germany is that auctions are not suited for supporting the growth of small-scale, distributed renewable electricity generation. Because small producers cannot compete on cost basis with major players or do the complicated paperwork in bidding, different policies are needed to support this segment. The goal here must be to continue to support distributed electricity generation in the country of Bürgerenergie – citizen energy. The German government recognizes these issues. For example, small installations still benefit from an FIT up to a certain limit.

To sum it all up, the German government is again leading the way in renewable energy policy. Auctions are the future for renewable energy now that the sector has left growing pains behind. However, much depends on the design of auctions and finding the right complementary policies for small-scale, distributed renewable electricity generation.

India’s progress in electrifying rural areas – first villages, and then households – has been impressive. According to the 2011 Census of India, the rural electrification rate had increased to 55% from just 44% in 2001. Since then, national electrification programs have made further progress. An original survey that I conducted in collaboration with the Council on Energy, Environment and Water (CEEW), for example, shows that household electrification rates have grown fast in six large, northern states of India.

Given rapid progress in rural electrification, the next challenge for India is to improve the quality of electricity service. In our survey, we found that people are by and large dissatisfied with their electricity service because of problems such as limited hours of supply. This video produced by CEEW nicely illustrates the realities of electricity access in states like Bihar and Uttar Pradesh.

As household electrification rates increase, the quality of electricity service becomes more and more important. In India, (mostly state-owned) electricity distribution companies are responsible for this service. Because politicians force these companies to offer inexpensive electricity to rural consumer and agricultural users, these companies often make a loss from supplying electricity to rural areas. The problem is made worse by pervasive electricity theft. As Harish and Tongia show with data from the state of Karnataka, distribution companies thus provide little power to rural customers at peak time, instead supplying industrial and urban customers who pay a higher tariff.

In this setting, improving the quality of rural electricity service is a chicken-and-egg problem. Rural customers are understandably unwilling to pay higher tariffs for bad service, but distribution companies cannot afford to improve the service without higher tariffs.

One of my research areas for the future is to find new solutions to this problem. I am doing field experiments, public opinion surveys, and interviews with politicians and electric utility managers to assess interventions that are both politically feasible and promise significant improvements in the situation. Now is the time to study such interventions, as rural electrification rates are rapidly improving not just in India, but across the world. All this begins with a trip to rural Uttar Pradesh in the second half of June — stay tuned for updates!

I spent most of this month in India, with almost a week in Delhi (more on adventures with Varanasi holy men and in Kerala tea plantations later).

The topic that dominated the public debate in the city during my visit was the city government’s “odd-even scheme,” under which even (odd) numbered cars were only allowed to hit the road on even-numbered dates. The scheme was a pilot that lasted only for two weeks. Each and every Delhite that I met had something to say about the scheme, and it was certainly good fun to try to spot non-compliant vehicles on the road.

Intended to deal with Delhi’s appalling air pollution problem and chronic traffic jams, the odd-even scheme is basically the first policy in Delhi – and maybe in any major Indian city, for that matter – to try to deal with the rapid worsening of air quality. Many a researcher has weighed in on whether the scheme worked.

One analysis by researchers at the University of Chicago and Harvard University found a 18-percent reduction relative to the baseline of surrounding researchers (for geeks: a difference-in-differences design). Another analysis by the Council on Energy, Environment and Water, using a different design and data, found little evidence of benefits.

While these evaluations are useful, I think they are not focused on the most important impact of the odd-even scheme. This is the first time in India’s history that media, policymakers, and citizens are talking seriously about solutions to India’s urban air pollution and traffic problems.

The Delhi government’s scheme is important, first and foremost, because it creates an opening for a debate on long-term solutions to India’s urban problems. Solutions such as congestion charges, improved public transportation, and automobile taxation – along with measures focused on power plants and other sources of air pollution – are now on the table, and advocates of effective policy to protect public health and urban environments have an opportunity to make an important contribution to India’s development.

Whether or not the odd-even scheme “worked” in the sense of marginal reduction in air pollution, I would consider it a clear success in a political sense, and that’s what India needs right now.

 

Over the past three decades, the governance of electricity generation has undergone a number of important reforms. In many countries, governments have moved away from the traditional state monopoly of generation, transmission, and distribution of power. In restructured electricity sectors, independent regulators and competitive markets play a much greater role than in the post.

These power sector reforms have provoked heated debates, not least about their effects on renewable energy policy. From Navroz Dubash to Naomi Klein, various authors have expressed concern about the possibility that deregulation may undermine environmental policy. Others, however, have noted that deregulation may create opportunities for clean electricity generation because “green” customers can choose their supplier.

In a recent article published in The Review of Policy Research, we examine the relationship between deregulation and renewable energy policy in U.S. states. During the past three decades, several U.S. states have deregulated their electricity sectors. At the same time, renewable energy policies have also mushroomed.

We begin by showing that state governments’ propensity to adopt renewable energy policies does not depend on past decisions to deregulate the power sector. Across a wide range of statistical models, we find that past decisions to deregulate are not at all associated with renewable energy policy. States decide on investments into renewable energy on other grounds, and the arguments of neither the proponents nor the detractors of deregulation are supported by the data.

However, electricity deregulation does shape renewable energy policy through a different channel. In statistical analysis and case studies of Texas and California, we find that when state governments enact legislation for electricity deregulation, they use renewable energy policy as a strategy to expand the advocacy coalition in favor of the reform. In both Texas and California, state governments enacted policies such as renewable energy funds and portfolio standards to create enough support for electricity deregulation.

These findings show that electricity deregulation, which I see as vital for improving power supply in the developing world, are not a threat to renewables. Quite to the contrary, the need to enact legislative reforms creates a window of opportunity for renewable energy policy. Environmentalists and other proponents of renewable energy should embrace these opportunities and participate in policy debates to realize the dual benefits of power sector reform and ambitious renewable energy policy.

According to the 2014 World Energy Outlook, a lack of electricity access persists in many developing countries. More than one billion people, most of whom live in rural areas, still do not have even a basic electricity connection. With rapidly decreasing prices of solar panels, however, interesting in off-grid electrification has grown rapidly.

In an off-grid electricity system, power is generated locally and then distributed to households. Available systems range from simple solar lanterns to solar home systems and community micro-grids that power entire villages. From Bangladesh to Kenya and Tanzania, sales of solar technology are growing rapidly.

In a recent paper (published version; ungated pre-publication version) published in Clean Technologies and Environmental Policies, paper Semee Yoon (Yonsei University) and I explore the challenges to the business model.

In a project funded by the Earth Institute at Columbia University, we partner with an Indian solar technology business, Boond Engineering and Development, to set up an “energy center” in rural Uttar Pradesh. The energy center serves as a hub for sales and maintenance of solar home systems sold to families with bank loans provided by India’s public rural banks. The bank loans came with a 40% capital subsidy for solar home systems provided by the Government of India.

During the first six months of the project, the center sold 99 systems worth approximately 35,000 dollars — 7 times the initial cost of setting up the center. With the exception of the election month of May 2014, when campaigning by politicians disrupted operations, the center was continuously profitable. In this regard, the project was clearly a success.

At the same time, the project revealed some challenges. First, most of the systems sold were 100-watt systems that cost about 400 dollars. These are not the kinds of systems that the very poorest would purchase to alleviate their energy poverty; rather they are systems for the rural middle class living in non-electrified or poorly electrified areas. Indeed, some of the customers had a grid electricity connection but found a solar home system a useful secondary source during blackouts and other problems.

Second, the success of the scheme relied heavily on the combination of bank loans and subsidies. When the Modi government came into power, rural banks stopped providing the loan-subsidy packages, as the new government’s focus was on large-scale solar projects for the electric grid. The unpredictability of government policy is a major obstacle to the growth of distributed solar markets in India.

In our view, the primary policy lessons from the project are the following. First, the government should focus on improving access to credit for solar home system purchasers, as this constraint appears to slow down the growth of business. Second, the government should channel resources into ensuring that off-grid electricity projects also reach the poorest. Based on our field experiences, off-grid electrification can play an important role in filling the gaps left by India’s massive grid extension drive, but the current policy environment is ideal neither for business growth nor for reaching the people who need improved energy access the most.

Environment and energy are key themes across the social sciences. Rapid economic and population growth generate major global problems, such as climate change, and mitigating them depends on a sophisticated understanding of behavioral obstacles to sustainable societies. Because environmental and energy policies are formulated in political processes, political science must play a central role in informing policy formulation.

Over this past semester, I have taught a graduate seminar on the political economy of energy and environment here at Columbia University (syllabus). Having finished grading the final projects, this is a good time to look back and reflect on lessons learned.

Let’s begin with some background on the class. Of the eight students enrolled in the seminar, three were political science PhD students and give were sustainable development PhD students. The class achieved a perfect gender balance, with four male and four female students. Students hailed from the Americas, Asia, and Europe. Issues with small sample size notwithstanding, this diversity is great news for the field — the study of environmental politics has traditionally been dominated by white males.

Overall, I was impressed with the quality of the student projects. The final project was a proposal for a major study, and students proposed a wide range of empirically ambitious designs. I was particularly delighted to see that the proposals covered a wide range of topics (public opinion, technology adoption, international security, and electoral politics being prominent themes) but insisted on credible research designs.

Environmental politics as a field has suffered significantly from weak research designs, but the next generation seems to be ready to solve this problem. If all goes well, this will trigger a virtuous cycle and scholarship on environmental politics begins to play a much greater role in the leading journals in political science. Environmental economics has already made such a breakthrough over the past decade, and environmental political science is on the verge of a transformation.

While this is an exciting time to study environment and energy in political science, a major difficulty in teaching a doctoral seminar on the topic is the paucity of progressive research agendas around core theories. Some areas of environmental and energy politics, such as the trade-environment nexus and the tragedy of the commons, are undergoing progressive theory development. Others, such as climate policy and energy access, are clearly behind and the literature mostly consists of isolated case studies and thought pieces. For the next iteration of the class, I plan to put much more emphasis on identifying theoretical and empirically rigorous research that can be considered to contribute to progressive theory-building in the spirit of normal science.

Another challenge for teaching the topic is interdisciplinarity. The Columbia sustainable development PhD program, for example, heavily emphasizes economics. The political science students were more familiar with canonical political science works in other areas, whereas the sustainable development students had a firmer grasp of the environmental economics literature. This is a major practical difficulty because academe today is heavily biased against interdisciplinary research and instead rewards major contributions to specific disciplinary agendas. Another important consideration for me is to find ways to support rigorous and ambitious research both in political science and economics. Political economy as a unifying framework is suited for this purpose in principle, but I am myself much more familiar with the conventions in political science than with the conventions in economics – and academic debates are all about fluency in disciplinary language.

Overall, there is much reason for excitement and enthusiasm. The political economy of environment and energy offers huge potential both in terms of academic contributions and practical relevance. It is a data-rich environment with lots of low-hanging fruit. With improved graduate training, healthy obsession over research design, and some community building to improve the referee pool, the future is bright for the field. Come join us!

Besides a global treaty based on decentralized action, the Paris climate negotiations saw the announcement of a public-private coalition for doubling clean energy R&D. As a White House press release puts it,

“On the first day of the conference, President Obama joined other world leaders to launch Mission Innovation, a landmark commitment to accelerate public and private global clean energy innovation, and dramatically expand the new technologies that will define a clean, affordable, and reliable global power mix.  Twenty countries representing around 80% of global clean energy research and development (R&D) funding base committed to double their R&D investments over five years.  In addition, a coalition of 28 global investors led by Bill Gates committed to support early-stage breakthrough energy technologies in countries that have joined Mission Innovation.”

Why is this important? Today’s energy technologies are cleaner than ever before, but they are not yet good enough to produce ambitious decarbonization in a world of rapidly growing energy demand.

Solar and wind power are rapidly increasing their share of electricity generation, but intermittency remains a major obstacle to rapid expansion. Better transmission and storage technologies would help to address the problem.

Nuclear power is haunted by safety and waste disposal concerns, its capital costs are very high, and its recent track of deployment disappointing. New technology could address these concerns.

Similar arguments apply to offshore wind, tidal power, advanced biofuels, and energy efficiency.

Perhaps even more important, clean energy has made very little progress in replacing oil in transportation. Electric vehicles have potential on this front, but much technological progress is needed to realize this potential.

Unfortunately, energy R&D today is badly neglected by governments and private companies alike. Compared to the technologies we need for a global low-carbon future, governments and private investors are failing to deliver. In 2014, global R&D investment was below $12 billion — only 1/2 of what it was in 1980.

There are a few possible explanations for this troubling lack of investment in invention and innovation. Private companies ignore energy R&D because the expected profits are limited. Even though improved energy technology would be very useful for the society, the private returns to gradual improvements in clean energy technology are not attractive.

Governments ignore energy R&D because there are few political gains on the horizon. Energy breakthroughs are rare, and most research produces incremental gains at best. At the same time, the case of Solyndra shows that even modest investments by governments are easily politicized when they fail to deliver. R&D does not bring success in elections, yet it may backfire if something goes wrong — and in research, something always goes wrong.

The clean energy R&D announcement is important because it helps governments and private investors escape the low-investment trap. Indeed, international commitments to increase clean energy R&D are a no-brainer. They allow governments and entrepreneurs to reap reputational benefits from their contributions and, through pooling of resources, increased probability of success.

Why did it take the world so long to arrive at such commitments? One culprit is “techno-nationalism” – governments hesitate to share innovations with perceived competitors (published article; ungated working paper version).

Another is the false perception that R&D crowds out deployment. In reality, R&D is so inexpensive compared to deployment that major increases in R&D would not slow down deployment even in the short run. Even a true believer who has complete confidence in a renewable energy revolution has little reason to worry about R&D.

The clean energy R&D commitment is one part of a general trend toward smarter, more strategic international climate policy. Other similar trends include improved renewable energy policy, growing interest in carbon pricing, and the movement to dismantle fossil fuel subsidies. Let’s agree to support efforts to increase clean energy R&D and hold governments and businesses accountable for the laudable Paris commitments.

Rural energy poverty is increasingly recognized as a major obstacle to sustainable economic development. The United Nations Sustainable Energy for All initiative has played an important role in the international policy effort, and, to the delight of many social scientists, Sustainable Development Goal #7 reads “Ensure access to affordable, reliable, sustainable and modern energy for all”. The reality, however, remains that one-fifth of the world population does not have electricity at home and almost one-half of the same population uses traditional biomass for cooking.

In collaboration with Council on Energy, Environment and Water (CEEW), an ultra-productive and influential research institution located in New Delhi, I and two other academics (Michaël Aklin,Chao-yo Cheng) have recently finished a major data collection effort. We surveyed 8,568 households across six large states of north India for access to electricity and modern cooking fuels, subjective perceptions of the situation, and policy preferences. The study was funded by the Shakti Sustainable Energy Foundation and the fieldwork done by Morsel India. What a great experience! The study offers a comprehensive analysis of the rural energy access situation across the states and can be read here in full:

http://ceew.in/pdf/CEEW-ACCESS-Report-29Sep15.pdf

The study has received attention at the highest levels of government in India. Here the energy minister of India, Piyush Goyal, launches the study with the (CEEW) team lead by Abhishek Jain:

photo

To our understanding, it is the most comprehensive energy access survey out there.

And the best part? On August 1, 2016, the entire dataset will be freely available for anyone to use. A clean, ready-to-use dataset with full documentation will be made easily available on a website.

PS. Watch out for academic output, too — we have a series of (pretty awesome, I think) research papers in the works, and we hope to launch the first batch soon!

Political scientists recognize environmental and energy topics as critical issues that their discipline must address, but the field’s ability to generate new research on these topics has been disappointing. This partly reflects the high barriers to entry to a field that requires technical understanding. But the more important problem is that the number of political scientists in major departments who (i) conduct rigorous, cutting-edge research in the field and (ii) train graduate students to do the same is very small. Don’t believe me? Go through the political science or government faculty roster of Harvard, Stanford, Yale, Princeton, Berkeley, Michigan, Chicago, Columbia, UCLA, UCSD, Cornell, and NYU (if I forgot to add your favorite department, please forgive me). Then do the same for course offerings at the doctoral level. It is not an encouraging sight for anyone concerned about the future of our planet and species.

As a marginal contribution toward solving the problem, I will teach a research seminar on the political economy of environmental and energy policy here at Columbia U during the fall semester. The goal of the class is to introduce students to what I consider the most relevant “classics” and the very best recent research. I deliberately focus on mainstream, positive political economy because this approach holds the most promise for generating relevant, reliable, and replicable knowledge. If the class is successful, then the students taking it will be prepared to do their own work in the field.

The syllabus can be found here. If anyone has thoughts on other readings, materials, or approaches that I should consider, I would love to hear from you!