Financing electricity access in Africa: A choice experiment study of household investor preferences for renewable energy investments in Ghana

Abstract

Inadequate access to electricity is one of the pressing developmental challenges in Sub-Saharan Africa. Ensuring universal access by 2030 will require additional sources of finance as current investment volumes are inadequate. Increasingly, the integral role that household investors can play is being realised and understanding the preferences of such household investors is crucial to raising the necessary investments to bridge the gap. Using a discrete choice survey administered to Ghanaian household investors, this paper presents findings on household investor willingness to pay for the attributes associated with renewable energy (RE) investments and the effect of demographic variables on the likelihood of investing. The findings show that the track record of the developer is the most valued attribute associated with the highest marginal willingness to pay for RE projects. This was followed by the project viability attribute that represents the availability of support systems deemed necessary to enhance the viability of RE projects. Interestingly, the rate of return, although valued, was not the most important in the investment decision-making. Regarding demographics, young people (18–34 years) were found to be more likely than other counterparts to invest in renewable energy. Additionally, the findings establish the presence of heterogeneity between respondents for investment attributes. Finally, an investigation of the choice of technology showed that solar PV was the most preferred technology while wind energy is the least preferred. Overall, this paper highlights the importance of non-financial factors in the renewable energy investment decision making of household investors aside the rate of return.