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Demand for off-grid solar electricity: Experimental evidence from Rwanda

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  • Grimm, Michael
  • Lenz, Luciane
  • Peters, Jörg
  • Sievert, Maximiliane

Abstract

The cost of providing electricity to the unconnected 1.1 billion people in developing countries is significant. High hopes are pinned on market-based dissemination of offgrid technologies to complement the expensive extension of public grid infrastructure. In this paper, we elicit the revealed willingness-to-pay for different off-grid solar technologies in a field experiment in rural Rwanda. Our findings show that households are willing to dedicate substantial parts of their budget to electricity, but not enough to reach cost-covering prices. Randomly assigned payment periods do not alter this finding. We interpret the results from two perspectives. First, we examine whether the United Nations' universal energy access goal can be reached via unsubsidized markets. Second, in a stylized welfare cost-benefit analysis, we compare a subsidization policy for off-grid solar electrification to a grid extension policy. Our findings suggest that, for most of rural Africa, off-grid solar is the preferable technology to reach mass electrification, and that grid infrastructure should concentrate on selected prosperous regions.

Suggested Citation

  • Grimm, Michael & Lenz, Luciane & Peters, Jörg & Sievert, Maximiliane, 2018. "Demand for off-grid solar electricity: Experimental evidence from Rwanda," Ruhr Economic Papers 745, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
  • Handle: RePEc:zbw:rwirep:745
    DOI: 10.4419/86788865
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    More about this item

    Keywords

    public infrastructure; technology adoption; electrification; willingness-to-pay; energy access;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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