The Value of Electricity Reliability: Evidence from a Natural Experiment in Senegal

Abstract: Policymakers invest heavily in expanding electricity access in low-income countries, yet existing estimates of the welfare impacts of electrification are mixed. I exploit the staggered rollout of large-scale reliability projects in Senegal, combined with a difference-in-differences design, to provide the first revealed-preference estimates of the welfare gains from grid improvements for both firms and households.

I assemble high-frequency administrative data by digitizing the universe of station-level outage logs and combining them with all national billing records and nationally representative household surveys.

I show that the projects reduced outage duration by 40%, increased electricity consumption and appliance adoption by 10%, expanded grid connections, and shifted time use toward labor market activities, especially for women and rural workers.

Mapping the reduced-form effects into a structural demand model, I quantify welfare gains for both existing and newly connected clients. Reliability improvements increase willingness-to-pay for an additional hour of supply by about 15%, with larger gains during peak hours, and generate internal rates of return above 50%.

These results help reconcile the literature by showing that the benefits of electrification hinge critically on the reliability of the grid.