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3rd December 2017

Measuring the job creation effect of investment in power

PIDG-supported projects lower electricity costs and add $400m to economy

Over the last year PIDG has helped bring two new power plants online in Senegal, expanding the effective capacity of the national grid by at least 13%. Projects like Senergy 2, a 20MW solar plant backed by Green Africa Power, and Tobene, a 96MW heavy fuel oil plant supported by EAIF, are a crucial part of PIDG’s work to expand access to infrastructure and support economic development in Africa and Asia. In 2016 alone PIDG companies backed 10 grid tied generation projects to a tune of $141m.

Getting a reliable measure of the value of these projects to local economies is challenging. Businesses need electricity to function, grow, and create new jobs and opportunities for people to improve their livelihoods.  But how does a new power plant actually help this happen, and how much growth can a power plant deliver?

PIDG first looked at measuring the job creation effect of power infrastructure it had supported in 2013, tracing the expected benefits of Uganda’s Bugoye hydropower project through cheaper electricity and fewer outages, to the knock-on effects on business productivity. Since this study the DFI community have built up a working model for estimating these impacts.

This year we partnered with the development consultancy Steward Redqueen to assess the value of Tobene and Senergy 2. They found that by adding base load energy that was cheaper to generate than from existing sources, Tobene and Senergy 2 will lower the cost of electricity for consumers by an expected 6%. Lower costs allow firms to use more electricity and increase production. Using World Bank enterprise survey data, it is estimated this will result in economic growth of more than $400 million, creating over 68,000 jobs nationally.

These are, of course, just estimates. The model we have used draws on the best available data, but this has its limitations and we also have to rely on a few careful assumptions. There is an old saying in economics that ‘all models are wrong, but some are useful’. The findings from this research give us an important indication of the scale of impact that power infrastructure can have. This also provides us with the basis for a consistent measure of the potential value of new energy generation projects to local economies.

In the coming year we will apply this model more widely across our focus countries, alongside more impact measurement covering both household use of electricity, and PIDG’s growing portfolio of rural off-grid energy projects.  This will give a clearer picture of PIDG’s development impact, and help light the way to projects that offer the best possible value to low-income countries.   

 Joe Shamash - Evaluations Manager

Senegal TW