IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/11374.html

Using Price Incentives to Bound Welfare from Pay-as-You-Go Solar Electricity

Author

Listed:
  • Lang, Megan Elizabeth

Abstract

Non-price barriers suppress demand at the adoption margin, complicating efforts to quantify the welfare effects of rural electrification. This paper studies demand for pay-as-you-go (PAYGo) solar electricity using a randomized experiment with 800 existing PAYGo customers in Kenya and Rwanda post-adoption. The experiment randomly assigns incentives that lower the effective price of usage for consumers who meet monthly purchase thresholds. Although average demand is unchanged, consumers with the highest pre-experimental demand increase their purchases by 6–7% in response to the incentive. These responses are used to estimate a lower bound on consumer surplus from PAYGo solar. The study finds large gains for high-demand consumers, but benefits deteriorate substantially for low-demand consumers. Combining these estimates with evidence from the literature on the environmental externalities of solar home systems, the marginal value of public funds of PAYGo solar subsidies is at most 1.7 in Kenya and 2 in Rwanda.

Suggested Citation

  • Lang, Megan Elizabeth, 2026. "Using Price Incentives to Bound Welfare from Pay-as-You-Go Solar Electricity," Policy Research Working Paper Series 11374, The World Bank.
    • Handle: RePEc:wbk:wbrwps:11374
    as

    Download full text from publisher

    File URL: https://documents.worldbank.org/curated/en/099426305072616097/pdf/IDU-44f2f6db-bade-440b-ae2e-acb82ba3993f.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gunther Bensch & Jochen Kluve & Jörg Peters, 2011. "Impacts of rural electrification in Rwanda," Journal of Development Effectiveness, Taylor & Francis Journals, vol. 3(4), pages 567-588, December.
    2. Dubin, Jeffrey A & McFadden, Daniel L, 1984. "An Econometric Analysis of Residential Electric Appliance Holdings and Consumption," Econometrica, Econometric Society, vol. 52(2), pages 345-362, March.
    3. Charles Muchunku & Kirsten Ulsrud & Debajit Palit & Wim Jonker‐Klunne, 2018. "Diffusion of solar PV in East Africa: What can be learned from private sector delivery models?," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 7(3), May.
    4. Taryn Dinkelman, 2011. "The Effects of Rural Electrification on Employment: New Evidence from South Africa," American Economic Review, American Economic Association, vol. 101(7), pages 3078-3108, December.
    5. Molly Lipscomb & A. Mushfiq Mobarak & Tania Barham, 2013. "Development Effects of Electrification: Evidence from the Topographic Placement of Hydropower Plants in Brazil," American Economic Journal: Applied Economics, American Economic Association, vol. 5(2), pages 200-231, April.
    6. Michael Grimm & Luciane Lenz & Jörg Peters & Maximiliane Sievert, 2020. "Demand for Off-Grid Solar Electricity: Experimental Evidence from Rwanda," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 7(3), pages 417-454.
    7. Nathaniel Hendren & Ben Sprung-Keyser, 2020. "A Unified Welfare Analysis of Government Policies," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(3), pages 1209-1318.
    8. Fiona Burlig & Louis Preonas, 2024. "Out of the Darkness and into the Light? Development Effects of Rural Electrification," Journal of Political Economy, University of Chicago Press, vol. 132(9), pages 2937-2971.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lang, Megan, 2025. "The role of market frictions in demand for prepaid electricity," Journal of Development Economics, Elsevier, vol. 175(C).
    2. Lang, Megan Elizabeth, 2025. "The Role of Market Frictions in Demand for Prepaid Electricity," Policy Research Working Paper Series 11097, The World Bank.
    3. Schmidt, Maika & Moradi, Alexander, 2026. "Community effects of electrification: Evidence from Burkina Faso’s grid extension," Journal of Development Economics, Elsevier, vol. 178(C).
    4. Paul J. Gertler & Orie Shelef & Catherine D. Wolfram & Alan Fuchs, 2016. "The Demand for Energy-Using Assets among the World's Rising Middle Classes," American Economic Review, American Economic Association, vol. 106(6), pages 1366-1401, June.
    5. Gupta, Ridhima & Pelli, Martino, 2021. "Electrification and cooking fuel choice in rural India," World Development, Elsevier, vol. 146(C).
    6. Deutschmann, Joshua W. & Postepska, Agnieszka & Sarr, Leopold, 2021. "Measuring willingness to pay for reliable electricity: Evidence from Senegal," World Development, Elsevier, vol. 138(C).
    7. Duncan Chaplin & Arif Mamun & Ali Protik & John Schurrer & Divya Vohra & Kristine Bos & Hannah Burak & Laura Meyer & Anca Dumitrescu & Christopher Ksoll & Thomas Cook, "undated". "Grid Electricity Expansion in Tanzania by MCC: Findings from a Rigorous Impact Evaluation, Final Report," Mathematica Policy Research Reports 144768f69008442e96369195e, Mathematica Policy Research.
    8. Sievert, Maximiliane & Steinbuks, Jevgenijs, 2020. "Willingness to pay for electricity access in extreme poverty: Evidence from sub-Saharan Africa," World Development, Elsevier, vol. 128(C).
    9. Magbondé, Kadoukpè Gildas & Reilly, Barry & Kauma, Bridget, 2024. "The distributional effects of rural electrification on household welfare: Evidence from Senegal," Utilities Policy, Elsevier, vol. 91(C).
    10. Jörg Peters & Maximiliane Sievert, 2015. "Impacts of Rural Electrification Revisited – The African Context," Ruhr Economic Papers 0556, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    11. Manning, Dale T. & Means, Peter & Zimmerle, Daniel & Galvin, Kathleen & Loomis, John & Paustian, Keith, 2015. "Using contingent behavior analysis to measure benefits from rural electrification in developing countries: an example from Rwanda," Energy Policy, Elsevier, vol. 86(C), pages 393-401.
    12. Holstenkamp, Lars, 2019. "What do we know about cooperative sustainable electrification in the global South? A synthesis of the literature and refined social-ecological systems framework," Renewable and Sustainable Energy Reviews, Elsevier, vol. 109(C), pages 307-320.
    13. Dominique van de Walle & Martin Ravallion & Vibhuti Mendiratta & Gayatri Koolwal, 2017. "Long-term Gains from Electrification in Rural India," The World Bank Economic Review, World Bank, vol. 31(2), pages 385-411.
    14. Ankel-Peters, Jörg & Schmidt, Christoph M., 2025. "Rural electrification, the credibility revolution, and the limits of evidence-based policy," Environment and Development Economics, Cambridge University Press, vol. 30(1), pages 70-81, February.
    15. Lai, Wangyang & Lin, Liguo & Shen, Xiaochi & Zhou, Maigeng, 2025. "Investing in a transition fuel: The remarkable decline in mortality from China's rollout of natural gas infrastructure," Journal of Environmental Economics and Management, Elsevier, vol. 130(C).
    16. Subedi, Mukti Nath & Bharadwaj, Bishal & Rafiq, Shuddhasattwa, 2023. "Who benefits from the decentralised energy system (DES)? Evidence from Nepal’s micro-hydropower (MHP)," Energy Economics, Elsevier, vol. 120(C).
    17. Cavatassi, Romina & Garg, Teevrat & Graff Zivin, Joshua & Paolantonio, Adriana & Vargas, David & Wollburg, Philip, 2026. "Climate Change Adaptation and Development: A Conceptual Framework," IZA Discussion Papers 18464, IZA Network @ LISER.
    18. Chindarkar, Namrata & Goyal, Nihit, 2023. "Did it increase energy consumption? A difference-in-differences evaluation of a rural electrification policy in Gujarat, India using night-time lights data," Energy Policy, Elsevier, vol. 183(C).
    19. Lenz, Luciane & Munyehirwe, Anicet & Peters, Jörg & Sievert, Maximiliane, 2017. "Does Large-Scale Infrastructure Investment Alleviate Poverty? Impacts of Rwanda’s Electricity Access Roll-Out Program," World Development, Elsevier, vol. 89(C), pages 88-110.
    20. Enrico Nano, 2022. "Electrifying Nigeria: the Impact of Rural Access to Electricity on Kids' Schooling," IHEID Working Papers 03-2022, Economics Section, The Graduate Institute of International Studies.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:11374. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.