Energy Institute at Haas
Catherine Wolfram: Unpacking Energy Use in the Developing World
Catherine Wolfram, co-director of the Energy Institute at Haas and professor in the Economic Analysis and Policy Group at Berkeley-Haas, works in the field of energy economics, a relatively new subfield of economics that has risen to prominence largely due to climate change.
Lately, Wolfram has been working on energy use in the developing world, an example of her inclination to identify important issues that need greater attention. The fact that there are still vast parts of the world where there is no commercial energy source (such as electricity or natural gas) intrigues and interests Wolfram. She spends her days thinking about the major development challenge of how to get energy sources to these households, while considering the environmental challenges that go along with connection.
“At some level, we believe that electricity is part of the modern world—connecting to the internet, refrigerating food, cooling your room, lighting the house so kids can study, etc.,” says Wolfram. “But because current electricity and energy infrastructures are very fossil fuel-intensive, expanding energy services into these communities has huge environmental challenges. How do we lift the incomes and well-beings of the world poor while simultaneously meeting environmental challenges?”
One project Wolfram is working on is in Kenya, where at least 80 percent of the population is within a kilometer of a transformer (electric grid), but only 20 percent of the population is connected. Wolfram is interested in trying to figure out how to increase the connection rate so that people can reap the potential benefits of electrification.
The problem, according to Wolfram, is that the electric company charges $400 for a grid connection, half of the average national income. “It’s a classic chicken and egg problem,” says Wolfram. “How do you get the first few people to connect so the incremental costs can be driven down?” Wolfram and others aim to solve the problem by applying different economic mechanisms such as direct subsidies, financing, or group discounts if people can get others to sign up.
Wolfram also hopes to measure the impact of electrification and to quantify how people use electricity—do they start new businesses, buy TVs, purchase appliances—as well as to think about the environmental implications.
“We really need to understand what people are doing with the electricity and where the biggest bang for the energy efficiency investment should be,” says Wolfram. “Should we be putting a lot of money into LED light bulbs because that’s what people will light their houses with, or putting money into making refrigerators more energy efficient? We need to understand those tradeoffs and issues.”
As part of the work in Kenya, Wolfram is trying to forge a relationship with an agency within the Kenyan government called the Rural Electrification Agency, as well as with the World Bank, and the US Agency for International Development. “It’s useful for us to hear from these organizations what the barriers are and the important drivers are,” she says.
Wolfram is also working on a similar project in India, looking at the development impacts of electrification and how to bring electricity to villages with as small an impact on the environment as possible. There, she is working with Gram Power, a startup that installs solar microgrids in rural Indian villages.
Wolfram and her team are working with Gram Power to collect and analyze data on power usage by customers and to evaluate incentives designed to encourage the adoption of energy-efficient appliances.
“By partnering with Gram Power, we’ll have access to rich data on household electricity usage in the developing world,” says Wolfram. “Never before have we been able to see how newly connected households use power, so we’ll be able to learn more about how it changes their lives and what works best to induce efficient consumption.”
Lucas Davis, Associate Professor in Economics in the Haas Economic Analysis and Policy Group, says: “Catherine is intensely curious and is really good at seeing connections between literatures, ideas, and areas of research. She’s just very smart. She has already done seminal work on UK and US electricity markets and her broad interests have brought her to focus on low- and middle-income countries and I see it as her maturation as a researcher.”
Beyond Wolfram’s research in Kenya and India, she is also co-director of the Energy Institute at Haas, along with Professor Severin Borenstein, E.T. Grether Professor of Business Administration and Public Policy in the Economic Analysis and Policy Group.
“The objective of the Energy Institute is to foster serious, rigorous, economic research on energy and environmental markets,” says Wolfram. “We want to communicate our results to policy makers and have a two-way dialog to understand the important issues that policy makers are making, the constraints they see, and what questions they think would be interesting to answer.”
The Energy Institute also has an important curricular component. “We see a high demand from students to have courses on energy and environmental markets and to work on energy projects,” says Wolfram. “There are about 20 percent of students amongst the first year students who have expressed an interest in energy. It’s also an area that draws on Haas’ natural strengths—we have a relationship with Lawrence Berkeley Lab and they are world leaders on energy efficiency and renewable energy. The Berkeley College of Engineering is also world-renowned and has done a lot of work on biofuels and other energy topics.”
Wolfram elaborates: “A lot of economists like me are motivated by climate change and environmental issues. Likewise, a lot of students come to Haas wanting to study cleantech because society is not sustainable. These interests are consistent with Berkeley-Haas’ defining principle of ‘Beyond Yourself.’ We don’t get your typical MBA students.”
Beyond the Energy Institute, Wolfram works with several other faculty members on the E2e Project that was founded in January 2013 with a grant from The Alfred P. Sloan Foundation. The E2e Project is a joint initiative of the Energy Institute at Haas and the Center for Energy and Environmental Policy Research (CEEPR) at MIT. The goal is to understand the energy efficiency gap (the improvement potential of energy efficiency). The team believes that a cross-university, cross-field center can make progress on this issue.
Davis says, “Catherine has consistently worked on very policy-relevant topics. Her work is terrifically relevant to critical world issues and is still absolutely academically rigorous. Her work on electrification around the world and E2e is work that has massive public policy interest right now. She has been very flexible. She is not trying to hit the same hammer on the same nail.”
As Wolfram looks at the new Institute for Business & Social Impact, she is excited, as it reminds her of the reason she originally came to Haas in 2000. “I came to Haas because there were two or three other professors who were working on topics that I was also interested in. And since then, we’ve been able to recruit more people, not only at Haas but also at the Goldman School of Public Policy and the Department of Agricultural and Resource Economics.”
She adds: “If you look at other universities, they might have two people who are energy and environmental economists but at Berkeley, we have seven. Success begets success—people want to come visit us and talk to us, which makes it even more of an exciting research environment.”
Wolfram counts herself “lucky” to have gotten into the field of energy economics right when it was taking off and before it was even considered a subfield of economics. The recognition of the economics subfield of environmental and energy economics in 2006 by the National Bureau of Economic Research, indicated the rise and prominence of a field focused on the costs and benefits of alternative environmental policies to deal with air pollution, water quality, toxic substances, solid waste, and global warming.
Wolfram believes that The Institute for Business & Social Impact will continue to promote Haas’ strengths in the areas of energy and the environment. “I think the Institute is consistent with Haas and Berkeley’s long-standing culture,” she adds. “The sum will certainly be greater than its parts.”