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 off-grid 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.
About the speaker
Michael Grimm is Professor of Development Economics at the University of Passau. He is also a Research Professor at the German Institute of Economic Research (DIW) in Berlin, a Fellow at IZA in Bonn and an affiliate of the RWI Research Network. He holds an MA in Economics from Frankfurt University and a PhD in Development Economics from Sciences-Po Paris. His research covers problems related to health, education, entrepreneurship and technology adoption. He has recently conducted a large-scale multi-country evaluation project on the effectiveness of various strategies to provide households with sustainable sources of energy. Currently, he is conducting a randomized experiment on the adoption of organic farming practices in Indonesia.
Date: 27 March 2018
Time: 16:00 - 17:00