The effects of renewable energy-based village grid electrification on poverty reduction in remote areas: The case of Indonesia☆

This study attempts to investigate the potential role of renewable energy-based rural electrification to reduce poverty in remote non-grid villages and outermost islands, through the use of the renewable energy-based village-grids (RVGs) program in Indonesia. As the geographical characteristics of such areas are often the main inhibiting factors for electricity supply, this study assesses whether renewable-based off-grid electrification is able to reduce the number of poor and vulnerable people in the remote villages and through what intermediary mechanism it may play its role. Using a difference-in-differences (DID) approach, this study analyzes the effect of renewable energy-based plants in 217 remote villages in Indonesia by comparing outcomes for treated and untreated villages within one sub-district where the remote villages are located. The results show that the program has significantly reduced the number of poor and vulnerable people in the treated village by 91 people. Furthermore, this study also finds that the program was able to significantly increase the number of small-scale industries in the treated village by three units, suggesting that small-scale industries could potentially be the intermediate mechanism through which electricity has a positive effect on poverty alleviation. These results highlight the importance of an off-grid renewable energy-based electrification roll-out in reducing poverty in remote areas and outer islands of Indonesia. (c) 2021 International Energy Initiative. Published by Elsevier Inc. All rights reserved.