Off-grid in Nepal: Heterogeneity in Electricity Services and Enterprise Development

Policymakers promote both large-scale grid expansion and small-scale off-grid renewables alike as a methods of attaining electrification in developing countries. Yet the electricity services provided by these sources often differ; the grid provides unreliable electricity services, whereas off-grid sources provide reliable albeit low quantities of service. This heterogeneity likely contributes to differential creation of local businesses and enterprises. Yet little evidence exists on extensive margin impacts of electrification on enterprise development, let alone heterogeneities in impacts across grid and off-grid sources. We implement a quasi-experimental analysis exploiting eligibility requirements for government subsidies in Nepal to quantify the impacts of two rural electrification programs: one electrifying via off-grid micro-hydro plants and the other through the centralized grid expansion.