Peeling off the layers: A geospatial modeling framework for ex-ante assessment of electrification subsidy schemes uncovers their inefficiencies and implications for equitable rural electrification in Sierra Leone

This paper presents a geospatially resolved modeling framework for ex-ante assessment of electricity subsidy instruments applied to least-cost electrification plans. The framework integrates subsidy modeling directly into the planning stage, enabling evaluation of how alternative subsidy structures alter private developer incentives, mini-grid system sizing decisions, and cost outcomes — before programs are deployed. We apply the framework to Sierra Leone, examining three instruments selected for their prevalence in electrification programs: direct capital subsidies, concessional finance, and supply-side tariff subsidies. The analysis yields three principal findings. First, investment subsidies introduce efficiency distortions: capital grants and concessional finance both incentivize system over-sizing, generating excess capital expenditure for developers and financiers alike, while tariff subsidies create a recurring fiscal burden without inducing the same investment distortion. Second, under a constrained public budget, the instruments produce divergent electrification trajectories: capital subsidies accelerate the rate of new connections, concessional finance may slow it, and tariff subsidies have a negligible effect on connection pace. Third, subsidy allocation strategies that prioritize developer financial sustainability tend to favor high-demand, densely populated communities, deferring connections to lower-demand settlements and thereby reinforcing existing spatial inequalities in access. These results demonstrate that the efficiency and distributional consequences of subsidy design are inseparable: instrument choice determines not only how public resources are spent but also who benefits, when, and at what long-run cost. The framework provides a practical tool for policymakers to evaluate these trade-offs before committing to a subsidy program.