Light and Livelihood -- A bright outlook for employment in the transition from fuel-based lighting to off-grid electrical alternatives

The United Nations Environment Programme's en.Lighten initiative commissioned me to explore the potential effects on employment as electric off-grid lighting technologies that promise to displace lighting fuels.  The final product has just been released.  Following is a brief summary of the report, which can be downloaded in full here.

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In the transition from kerosene to improved lighting strategies, it is important to consider the net effects of job loss for kerosene sellers and job creation associated with new technologies.

The specter of fuel-based lighting involves not only insufficient illumination and an inferior quality of light so critical for commerce, health, and social interaction but it also imposes an economic burden that contributes to the causes of poverty. While challenging to achieve, a transition to off-grid electric-based solutions offers many direct benefits. Potential barriers must be anticipated, understood and mitigated. Among these, policy makers and stakeholders must consider how a transition to improved lighting could affect employment. This report examines the potential implications of changes in the off-grid lighting market for both job loss and job creation within the Economic Community of West African States (ECOWAS), where 178 million people today lack access to the electric grid [1].

Kerosene, a popular lighting fuel, represents a vanishingly small segment of the overall petroleum market and associated employment in West Africa.

In the production and distribution supply chain, only four of 15 ECOWAS member states—Cote d’Ivoire, Ghana, Nigeria, and Senegal—produce kerosene domestically. Thus, very few petroleum production jobs would be influenced by changes in domestic demand for kerosene. For those domestic producers or refiners, kerosene represents an exceedingly small share of their total petroleum product output. Based on model estimates presented in this study, kerosene production and refining throughout ECOWAS would account for approximately 100 jobs.  Most candles appear to be made overseas, and so their manufacture does not contribute to employment in ECOWAS.

The employment situation for fuel distribution and retail sales merits closer attention.

For people who sell kerosene, candles, or other lighting fuels as a secondary source of income, for example, in petrol stations or shops offering a wide variety of goods, there is no firm evidence that past significant fluctuations in demand have had measurable employment impacts. However, the employment status for informal micro-enterprises (often individuals) that sell only lighting fuels is more vulnerable. This study estimates that this segment of the market supports the equivalent of about 20,000 full-time jobs throughout ECOWAS, out of a total population of 300 million, or, approximately one full-time equivalent kerosene retailer per 10,000 people living off the grid. (The value will be higher in regions that have a greater reliance on kerosene for lighting.) Kerosene sellers often obtain very low profit margins, and are frequently faced with adversities such as scarcity and price volatility. We did not find evidence of significant job losses arising from fuel shortages or price spikes.

The use of fuel-based lighting contributes to low-quality jobs and workplace inefficiencies that reduce prosperity.

There are various adverse secondary effects of fuel-based lighitng use on livelihoods. Lighting costs are an economic burden to off-grid enterprises (whether home-based or in formal workplaces): these costs absorb up to 50% of revenues in the worst cases. An added cost to off-grid enterprises is the compromised quality of the working environment due to poor and inadequate illumination, and the effect that has on products or services. Conversely, at a macro-economic level, savings from reduced lighting costs are recirculated in the economy, supporting more jobs. Reducing use of imported lighting fuels improves a country’s balance of trade, retaining more wealth within the national economy, which, if spent domestically fuels the economy, increasing employment. Lastly, adverse health and safety effects of fuel combustion for illumination can result in lost work and employment.

30-times more jobs (and better jobs) will be created through off-grid, solar-LED lighting than will be lost by kerosene sellers.

The advent of rechargeable lanterns, often based on solar and light emitting diode (LED) light sources, provides affordable lighting alternatives for off-grid populations. Companies producing, distributing, and retailing these products produce new forms of livelihood. Extrapolating the results of surveys conducted for this study of firms selling such products, 15,000 jobs have already been created in sub-Saharan African markets. The ultimate potential jobs-to-population ratio is 30 jobs per 10,000 people living off the grid, which corresponds to the eventual creation of 500,000 new lighting-related jobs throughout the ECOWAS community. Grid-independent LED lanterns thus create approximately 30 times more jobs per unit of energy delivered than does fuel-based lighting. The quality and decency of these jobs offer significant improvements to workers as well, and there are precedents for kerosene sellers being retrained to sell LED lanterns.

The key opportunity for policymakers in ECOWAS and in other regions is to maximize the pace of job creation associated with new technologies and businesses that can replace inefficient and polluting lighting fuels, while proactively minimizing any disruption as the transition proceeds. Policymakers have at their disposal many tools to limit dislocation of livelihoods. While direct subsidy of new technologies is a risky practice (and subsidies already skew the market in favor of supply-side technologies over energy savings) and can be disruptive to free-market forces that are already strong in this sector, other approaches could prove valuable. These include stimuli for domestic manufacturing or assembly of products (already occurring to a limited degree in some ECOWAS countries); supporting the creation of peripheral businesses and services such as training, recycling, financing, and carbon trading; removing market barriers that slow uptake of improved lighting equipment; and equipping a workforce to engage in the manufacture and sale of new domestic or imported technologies.

As occurred a century ago in the industrialized world, the transition away from kerosene and other fuel-based lighting in developing countries is now irreversibly underway. Jobs are being created in order to make, distribute, sell, and service the new technologies. When complete, the transition will have created far more employment than it displaces, while improving the availability, quantity and quality of light in workplaces, enhancing worker safety and productivity, and conserving the money earned by all workers who use fuel-based forms of lighting at home, thus contributing further to poverty alleviation and inclusive green growth.

Read the full report here.


[1] The ECOWAS countries include: Benin, Burkina Faso, Cape Verde, Ivory Coast, The Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo.

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Comment by Gunnar Wegner on February 27, 2015 at 12:47am

Hi Evan,

thanks for the clarification! It might be interesting to go back in three and six year's time and see actual developments.

Gunnar

Comment by Evan Mills on February 26, 2015 at 11:30pm

Hi Gunnar,

The numbers are intended to be comparable, i.e, full-time-equivalent jobs on both sides.  Keep in mind that I'm estimating all associated jobs throughout the entire value chain, from manufacturing through retail and after-market service. This includes "back-office" jobs like importation, distribution, marketing, design, finance, etc.  These are based on my interviews of a range of companies in the market today and how many full-time employees they have across various aspects of their business.  One could argue that as the industry grows they will achieve economies of scale and eventually need fewer employees to get the same work done, but I haven't attempted any forecast along those lines.

Comment by Gunnar Wegner on February 26, 2015 at 6:02am

Hi Evan,

thanks for sharing this report, and sorry for the late reply.
This is a very important field of research! However, are the figures really comparable? The 20,000 jobs for kerosene are full-time equivalent jobs; but the 500,000 jobs for solar energy are not full-time equivalent jobs if I read the report correctly.
The interesting thing would be to try and convert these into each other. A quick guess: The 12,000 people workforce of Grameen installs 1,000 systems a day. Now, it's not that 12 people would be required to install one SHS in one day. It's more likely to be in the order of two technicians for one day. (Or, one technician for two days, including travel.) That would mean that Grameen's installers spent 1/6 of their time on SHS. That would bring the 500,000 part-time jobs down to about 80,000 full-time jobs. Still impressive, but not as big. This would also translate into not 30, but 5 full-time jobs per 10,000 inhabitants. That would make more sense to me: each would have on average 2,000 potential customers or 400 households, assuming a household size of five. That would imply selling about 1-2 systems per day, every day, over the period of three years that you mentioned. That estimate is in the middle of the figures you report on p. 16: between 100-6,000 lanterns per year per employee.
What's your opinion on this? Did I misunderstand something?
Gunnar
Comment by Salvatore Chester on January 14, 2015 at 3:33am

All the best!

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