Demand for Off-Grid Solar Electricity – Experimental Evidence from Rwanda

ZEF – Discussion Papers on Development Policy No. 232

36 Pages Posted: 24 Feb 2017

See all articles by Michael Grimm

Michael Grimm

Erasmus University Rotterdam; University of Passau; IZA; DIW Berlin

Luciane Lenz

Rhine-Westphalia Institute for Economic Research (RWI-Essen)

Jörg Peters

RWI - Leibniz Institute for Economic Research; University of Passau - Business Administration and Economics

Maximiliane Sievert

RWI - Leibniz Institute for Economic Research

Multiple version iconThere are 3 versions of this paper

Date Written: February 2017

Abstract

Providing electricity to the unconnected 1.1 billion people in developing countries is one of the top political priorities of the international community, yet the costs of reaching this objective are very high. The present paper examines whether the objective and the associated costs are justified by the value that target beneficiaries assign to electricity. We provide experimental evidence on the revealed willingness-to-pay (WTP) for three types of off-grid solar electricity devices. Our findings show that households are willing to dedicate a substantial part of their expenditures to electricity. In absolute terms, though, the WTP does not suffice to reach cost-covering prices. Different payment schemes, which we randomized across our sample, do not alter the WTP significantly. If universal electricity access is to be achieved, direct subsidies might be necessary. We argue that from a public policy perspective it is more rationale to promote off-grid solar than grid-based electrification because of its better cost-benefit performance.

Keywords: Technology adoption, electrification, willingness-to-pay, real-purchase offer game, energy access

JEL Classification: D12, O12, O13, Q28, Q41

Suggested Citation

Grimm, Michael and Lenz, Luciane and Peters, Jörg and Sievert, Maximiliane, Demand for Off-Grid Solar Electricity – Experimental Evidence from Rwanda (February 2017). ZEF – Discussion Papers on Development Policy No. 232. Available at SSRN: https://ssrn.com/abstract=2922433 or http://dx.doi.org/10.2139/ssrn.2922433

Michael Grimm

Erasmus University Rotterdam ( email )

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University of Passau ( email )

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IZA ( email )

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DIW Berlin ( email )

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Luciane Lenz

Rhine-Westphalia Institute for Economic Research (RWI-Essen) ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany

Jörg Peters (Contact Author)

RWI - Leibniz Institute for Economic Research ( email )

Hohenzollernstr. 1-3
45128 Essen
Germany
0049-201-8149-247 (Phone)

HOME PAGE: http://www.rwi-essen.de

University of Passau - Business Administration and Economics ( email )

Wirtschaftswissenschaftliche Fakultaet
Passau, D-94030
Germany

Maximiliane Sievert

RWI - Leibniz Institute for Economic Research ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany

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