Electricity Supply and Firm Productivity in Developing Economies

Reliable and affordable electricity is a key determinant of firm performance in developing economies, where grid instability, outages and high costs often constrain industrial and service sectors. Electricity supply influences production schedules, asset utilisation and maintenance planning, while power interruptions directly erode output, increase operating costs and discourage investment. Firms respond through self-generation, backup systems and altered working hours, but these measures raise unit costs and dampen competitiveness. In many countries, energy shortfalls compound broader infrastructural and financial challenges, slowing productivity growth and constraining small and medium-sized enterprises in particular. Recent analyses emphasise the need to move beyond simple access metrics to consider power quality, reliability and affordability together with multidimensional poverty indicators. Such an integrated perspective reveals how uneven supply undermines business capabilities, hampers innovation and limits employment growth. At the same time, targeted policy interventions—from improved grid management and regulatory reform to subsidised energy efficiency upgrades—have demonstrated potential to boost output, strengthen value chains and foster more inclusive economic development. Understanding the interplay between electricity supply characteristics and firm-level decision-making is thus essential for designing sustainable energy strategies that support industrial modernisation and sustainable livelihoods across the developing world.

Research from Nature Portfolio

Recent studies have developed novel frameworks for assessing power quality and reliability inequities using remotely sensed data and justice theories. By mapping granular power-quality metrics alongside poverty indicators in urban settings, researchers have quantified the distributive impacts of voltage fluctuations and outages on neighbourhoods. This approach has revealed systematic disparities in supply reliability that correlate strongly with income deprivation, highlighting how poor power quality undermines business operations and inhibits small-firm growth. The proposed framework offers policymakers and utilities a tool for pinpointing target areas, optimising grid investments and designing equitable energy transitions that support productive capacity in underserved regions.

Electricity Supply and Firm Productivity in Developing Economies publication trend

The graph below shows the total number of articles in electricity supply and firm productivity in developing economies across all publications each year (not limited to Nature Index journals).

Technical terms

Power quality and reliability (PQR): A composite measure of voltage stability, frequency variations and continuity of supply that affects the performance of electrical equipment and industrial processes.

Outage duration and frequency: Indicators of how long and how often electricity supply is interrupted, with higher values signalling greater disruption risk.

Load-shedding: A deliberate, planned interruption of electricity supply to certain areas to balance demand and prevent total system collapse.

Firm productivity: The efficiency with which a firm converts input factors—especially energy—into output, often measured by ratios such as output per worker or asset turnover.

Self-generation: The practice of firms producing their own electricity, typically via diesel generators or captive power plants, to mitigate grid unreliability but at higher operational cost.

References

1. Mobilizing power quality and reliability measurements for electricity equity and justice in Africa. Nature Energy (2025).
2. Energy crisis, firm profitability, and productivity: An emerging economy perspective. Energy Strategy Reviews (2022).
3. The Effects of Power Outages on the Performance of Manufacturing Firms in the MENA Region. Review of Middle East Economics and Finance (2020).