Understanding Segmentation in Rural Electricity Markets: Evidence from India

55 Pages Posted: 2 Mar 2020

See all articles by Daniel Robert Thomas

Daniel Robert Thomas

Columbia University

Shalu Agrawal

Council on Energy, Environment and Water

Harish S.P.

College of William & Mary

Aseem Mahajan

Harvard University

Johannes Urpelainen

Johns Hopkins SAIS

Date Written: February 3, 2020


How can demand for electricity be estimated without fine-grained usage data? Employing an original and large dataset, we develop a novel method for determining drivers of demand without electricity meter data. We first segment Indian consumers by their willingness to pay for electricity service, their level of usage, and their satisfaction with lighting, and then use cluster membership as a dependent variable in order to determine which household-level factors predict electricity usage. Our approach employs machine-learning and more traditional regression techniques to determine the optimal number of segments, generate the segments, and determine the predictors of segment membership. The dataset consists of more than 10,000 households in more than 200 villages in the states of Bihar, Odisha, Rajasthan, and Uttar Pradesh. We find that the rural Indian electricity market can be segmented into three clusters based on households' willingness to pay, satisfaction with lighting, and appliance wattage. The clusters consist of potential customers, low-demand customers, and high-use customers. We then determine the predictors of membership in these clusters. We show that different types of consumers can be identified along easily observable measures. Moreover, we show that there are clear groups of consumers that vary along their satisfaction, willingness to pay, and existing appliance usage.

Keywords: Electricity, Energy, Demand, India, Clustering, Segmentation, Rural Development

Suggested Citation

Thomas, Daniel Robert and Agrawal, Shalu and S.P., Harish and Mahajan, Aseem and Urpelainen, Johannes, Understanding Segmentation in Rural Electricity Markets: Evidence from India (February 3, 2020). Energy Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3531197

Daniel Robert Thomas

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Shalu Agrawal

Council on Energy, Environment and Water ( email )

Thapar House
124 Janpath
New Delhi, 110001

Harish S.P.

College of William & Mary ( email )

Government Dept, College of William & Mary
Post Office Box 8795
Williamsburg, VA 23186
United States

Aseem Mahajan

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

Johannes Urpelainen (Contact Author)

Johns Hopkins SAIS ( email )

1740 Massachusetts Avenue, NW
Washington, DC 20036-1984
United States

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