The Impacts of Rural Electrification in the Kingdom of Bhutan

Abstract

Since the 1990s, the Kingdom of Bhutan has made significant investments to achieve universal rural electrification (RE), with goals to improve education, health and employment outcomes and reduce fuelwood consumption. While planners expect that improved energy access generally enhances well-being, previous assessments of RE programs find highly varied, context-dependent impacts. To assess the impact of RE in Bhutan, I rely on survey data from three rounds of the Bhutan Living Standards Survey. Applying linear and non-linear regression methods as well as propensity score matching, I find that the RE program led to improvements in education and reduced fuelwood consumption. I find inconclusive evidence of the effects of RE on non-agricultural employment and find no effect on health. I conduct a cost-benefit analysis (CBA) to compare program costs, at both the government and household levels, against estimated benefits. Household level benefits outweigh costs, and the positive net benefits are robust to variation in multiple, estimated parameters. Societal net benefits are slightly negative, but this value is likely a lower bound estimate and is sensitive to parameter variation. Based on these analyses, I conclude that Bhutan’s RE program was a partial success in the time period studied, achieving fuelwood and education related outcomes and improving welfare in rural households.