Abstract
Improving electricity access in low-income countries is a challenging problem because of the high costs of grid extension and low demand for grid electricity in rural areas. This study elucidates these constraints by analyzing poor households' willingness-to-pay for different types of electricity access, including lower cost off-grid technologies. The theoretical model illustrates how consumer preferences, operational and capital costs of electricity service delivery, and availability of power supply affect households' decisions to acquire electricity technology. These effects are then assessed empirically by estimating beneficiaries' willingness-to-pay for electricity in three low-income countries that have pockets of households living in extreme poverty -- Burkina Faso, Senegal, and Rwanda. Consistent with the theoretical model, the results indicate very low household willingness-to-pay for electricity access, and that willingness-to-pay diminishes as households' income declines. Therefore, the study recommends concentrating in the nearer term on ultra-low-cost decentralized off-grid solar technologies in programs to provide household electricity to the poor in rural areas.
Highlights
Electricity is an input for important public services, and improving electricity access in developing countries is a significant goal of the international community
These results add to the robustness of our estimates, as they correspond to real‐world electricity expenditures observed in rural areas
This paper contributes to the important policy discussion about improving household electricity access in low‐income developing countries while keeping it affordable and financially viable
Summary
Electricity is an input for important public services, and improving electricity access in developing countries is a significant goal of the international community. We first develop a theoretical model to study how consumer preferences, operational and capital costs of electricity service delivery, as well as availability of power supply, affect poor developing country households’ decisions to acquire (and willingness to pay for) electricity access using different technologies. The overall WTP for electricity access by the rural households covered in the study is low enough that it is not sufficient in itself for covering operational and capital costs of extending on‐grid electricity supply to poor rural households over the short‐ and medium‐term These results suggest concentrating efforts to bring electricity service to very low‐income households in rural areas on ultra‐low‐ cost off‐grid technologies, such as solar lanterns and solar home systems. Blimpo et al (2018) estimate a model of household and utility behavior, in which households choose their energy source and consumption quantity, and profit‐maximizing utilities set connection charges They find that small willingness to pay for grid electricity access leads to low electrification rates. The model allows us to characterize income effects of choosing between different electricity access technologies and determining the value of societal benefit from indirect effects of grid access that makes households indifferent between choosing between the grid and off‐grid technologies for a given income level
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