Electricity Enlightens Development Only to Some Extent

Mahmut Karayel
04 Mar 2020

ELECTRICITY ENLIGHTENS DEVELOPMENT ONLY TO SOME EXTENT

High electricity consumption can be considered as a measure of development. In developed places people have appliances at home, go to night sports events, streets and highways are lighted, offices and shopping malls are air conditioned and manufacturing of goods and services and information technology consume electricity. On the other hand, as defined by the United Nations, human development is more closely associated with a long and healthy life, a good education, and income level that provides for a decent lifestyle.

  • How does electricity consumption relate to HDI (human development index)?
  • Can we get some insight about each country? Electricity consumption by country is only available until 2014.

I estimated the consumption in 2018 country by country, from the trends specific to each country, using Alta Bering analytics software, EPO (see forecasts for sample countries below).

Forecasting

I then compared this with the HDI index for 2018. Using Alta Bering EPO again, I segmented the scatter plot into three segments, Highly Developed, Moderately Developed and Low Developed. The segments are shown in different colors, and the relationship is plotted as a scatter plot in the graph below.

HDI is calculated as the geometric mean of three simple indices, all between 0.0 and 1.0

Picture 2
Segmentation

There is a positive relationship, but it certainly is not linear. At first sight there does not seem to be a high correlation (linear relationship). When we apply the correlation to three segments, then we see that Electricity usage is more correlated with HDI for Low Developed places, and meaningfully correlated with Moderately Developed places. However, there is almost no relationship, in fact maybe a slight negative relationship in highly developed places.

Low HDI Moderate HDI High HDI
Correlation Between KWh and HDI 72.6% 67.8% -0.9%

At low levels of HDI, a small increase in electricity consumption increases HDI index by a significant margin. Whereas after a certain point additional electricity consumption does not relate well to HDI. This makes sense. After all when electricity is available in the country, its first use is for lighting, which helps with education, then home appliances which helps with health and higher standard of living. Then comes the industrial and service sector use. This usage helps increase Gross Domestic Income, which is the third component of HDI. But after a while, the additional electricity is used in recreation and leisure, like high school soccer practice at night and casino life in Vegas.

Data Used in This Article

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