New database release: RACE measures how unreliability drives true power costs
Last fall, the Energy for Growth Hub proposed a new metric, reliability-adjusted cost of electricity or RACE, to…
The Issue
Energy poverty is principally tracked by the electricity access rate, but this does not address the primary concerns of business: cost and reliability. We need to understand the true economic costs of unreliable electricity on companies, productivity, and jobs.
Relevance
In countries where electricity is unreliable, businesses shoulder huge additional costs above normal tariffs to secure backup power, usually with expensive and dirty diesel generators. This burden harms entrepreneurs and hurts competitiveness.
Our Approach
A Hub working group proposes the creation of a new metric, the Reliability-Adjusted Cost of Electricity.
RACE estimates the true cost faced by private firms for reliable electricity by taking industrial tariffs for grid power and adding the additional cost of backup generation, weighted for how often grid power is unavailable. RACE can be used to:
- establish benchmarks against peers and competitors,
- set performance targets, and
- create incentives to balance lower-cost generation with investments in reliability.
If firms are expected to create jobs and raise productivity, comparable metrics are needed for the true cost of power.
Reliability-Adjusted Cost of Electricity for sub-Saharan African countries.
