Decentralized Renewable Energy to Grow Manufacturing? Evidence from Mini-grids in Nepal

Abstract

Firms in developing countries often identify electricity as a major constraint to operations. Decentralized renewable energy sources could help alleviate these constraints, by providing electricity to locations that are difficult to reach with the centralized electric grid. We investigate whether electrification in Nepal – via microhydro plants and their mini-grids – helped grow the manufacturing sector and thereby induce structural transformation. Mini-grids led to a small but statistically significant increase in manufacturing establishments. Following electrification, females and males were more likely to be employees and less likely to be self-employed. Likewise, usual employment activities shifted from labor in agriculture to salary and wage work. In more remote locations, the impacts of mini-grids on manufacturing establishments and labor were significantly muted.

Zhenxuan Wang

Assistant Professor

My research interests lie at the intersection of environmental and energy economics, climate policy, development economics, and public economics.