New CATF analysis reveals hidden electricity costs are stalling growth for African businesses
Cotonou, BENIN – New research from Clean Air Task Force shows that unreliable electricity and the high costs of backup solutions are driving a significant share of African businesses into financial distress. Using Benin as a case study, the analysis finds that backup systems like generators and voltage stabilizers make up nearly half of total electricity costs for businesses, yet these hidden costs remain absent from traditional energy affordability metrics.
“For too long, energy access and affordability conversations have ignored whether the electricity powering both homes and businesses is actually reliable,” said Prudence Dato, Lead Energy Economist at CATF. “What we’re seeing in Benin is that businesses may be connected to the grid, but they’re paying a heavy premium just to keep the lights on. Our findings fill a gap in the literature and make clear that without measuring these hidden costs, energy policy will continue to misdiagnose the problem and misdirect solutions.”
Using data from a nationally representative survey of over 1,000 grid-connected businesses operating in both informal and formal sectors in Benin, the study introduces a new metrics for assessing electricity burden in developing countries, capturing the often-overlooked costs businesses incur due to unreliable electricity. It finds that 44% of firms’ total electricity spending goes toward defensive measures like generators, voltage stabilizers, and other energy alternatives such as kerosene, biomass, candles. When these costs are factored in, the share of businesses classified as electricity burdened increases from 55% to 60%.
“Benin’s experience is not unique,” said Brian Mukhaya, Program Manager at CATF. “Across Sub-Saharan Africa, businesses face some of the world’s highest electricity prices while contending with the most frequent power outages. To keep running in this environment, businesses are forced to invest in their own ad hoc energy solutions, which diverts capital away from hiring, upgrading equipment, and eventually growing their operations, making them less competitive.”
Key recommendations for policymakers and researchers include:
- Revising electricity burden metrics and policies to include the cost of defensive measures and backup systems.
- Establishing systems for continuous monitoring of electricity costs, usage patterns, and defensive strategy expenses across various business types to inform future policy interventions.
- Prioritizing power system reliability through grid investments and planning in high-impact economic areas.
- Designing targeted financial support for the informal sector and other vulnerable business groups.
“Too often, businesses are left to fend for themselves in the face of unreliable electricity,” said Michael Adu Okyere, Regional Manager at CATF. “That’s not just a technical failure—it’s an economic one. We call on policymakers and development institutions to update their energy affordability metrics to reflect this reality and to direct resources to improving grid quality and targeting relief toward the most impacted businesses.”
Read the full report here or read the executive summary in English or French.
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About Clean Air Task Force
Clean Air Task Force (CATF) is a global nonprofit organization working to safeguard against the worst impacts of climate change by catalyzing the rapid development and deployment of low-carbon energy and other climate-protecting technologies. With more than 25 years of internationally recognized expertise on climate policy and a fierce commitment to exploring all potential solutions, CATF is a pragmatic, non-ideological advocacy group with the bold ideas needed to address climate change. CATF has offices in Boston, Washington D.C., and Brussels, with staff working virtually around the world. Visit catf.us and follow @cleanaircatf.
