Project: El Salvador Rural Electrification Evaluation-Based CBA

Lighting the Way: MCC’s Rural Electrification Project in El Salvador Delivers Economic and Health Gains

An independent analysis by Limestone Analytics shows MCC’s investment in rural electrification generated strong returns for thousands of Salvadoran households.

As part of its compact with the Government of El Salvador, the Millennium Challenge Corporation (MCC) invested in a Rural Electrification Sub-Activity to expand energy access to underserved communities. From 2007 to 2012, MCC funded the extension of electricity grids and the deployment of off-grid solar systems, aiming to connect nearly 35,000 households in the Northern Zone.

To assess the long-term impact of this investment, Limestone Analytics conducted an evaluation-based cost-benefit analysis (ECBA) using evaluation data and other sources of information. The study found a 15.3% economic rate of return (ERR), surpassing MCC’s 10% threshold.

Key benefits of the Rural Electrification Sub-Activity included:

• Higher incomes among connected households
• Improved health due to reduced indoor air pollution
• Energy savings through reduced spending on kerosene for lighting
• Lower greenhouse gas emissions thanks to cleaner household energy use

The ECBA also accounted for environmental costs and updated assumptions on solar battery lifespan, resulting in a more precise picture of long-term value. On-grid connections drove the majority of benefits, while off-grid solar systems showed more modest returns due to limited usage and battery replacement issues.

This study demonstrates that rural electrification projects, grounded in evidence and careful design, can yield robust economic and health benefits. It also underscores the importance of integrating environmental impact and real-world usage patterns into cost-benefit models.

Link to MCC publication page: https://mcc.icpsr.umich.edu/evaluations/index.php/catalog/26672