RACE Metric

Problem

The access rate, the principal way progress against energy poverty is tracked, does not address the cost of electricity. At the same time, simple tariff comparisons do not capture system reliability or any of the costs associated with backup power during outages.

Relevance

Electricity is a major cost for many businesses. And for firms that are energy intensive (e.g., manufacturing) or require stable 24/7 power (e.g., information technology), the cost of backup self-generation can be substantial. In Nigeria, for example, 100% of large firms report needing diesel generators. If firms are expected to create jobs and raise productivity, comparable metrics are needed for the true cost of power.

Our Approach

A Hub working group proposed the creation of a new metric, the Reliability-Adjusted Cost of Electricity. RACE estimates the 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 to create incentives to balance lower-cost generation with investments in reliability.