Acumen’s Energy Impact Series and the impact of solar lighting on poverty
The off-grid energy sector is well-equipped to talk about the customer value proposition or social impact to end-users of access to modern energy. What has been lacking is robust, credible, evidence on this. That’s not to say that there has not been a lot of work by social enterprises, NGOs, and donors to understand the impact, but that there has been a lack of academic research to assess this. This has sometimes meant that it is harder to influence policy, direct funding or investment, and attract capital into the sector confidently.
Back in 2012, SolarAid set up their Research & Impact department and started the task to do just this. Getting feet on the ground to listen to people living off-grid, reaching out to customers using solar lanterns, and setting up large-scale research projects with key players like Stanford, Berkeley, and UNCDF to start answering the bigger questions around the links between solar lighting and poverty, education, health, and movement up the energy ladder.
In 2016, Acumen rehomed this work as an opportunity to continue Acumen’s work in energy and continued focus on this sector. Acumen have been investing in energy since 2007, making more than 20 investments in companies providing access to brighter, cleaner, cheaper, safer energy solutions from biomass-powered mini-grids to pay-as-you-go solar home systems to improved cookstove designers and distributors.
Acumen recently launched the Energy Impact Series which will share the results of this academic research work, ending with results of Acumen’s Energy Lean Data project. This is Acumen’s first deep-dive into a specific sector, looking at the impact of energy access using the GOGLA harmonized impact metrics or the GACC indicators alongside other questions developed by the Lean Data team at Acumen.
The first results shared are from the research conducted by ETH Zurich with 1,400 households in rural Kenya. The key findings?
- Solar lanterns save low-income customers money from diverting spending on baseline methods such as kerosene for lamps, batteries for torches, or candles. Families in the study halved their monthly spending on energy saving 1-2% of total household spending. A small but significant change for those living on less than $3.10 per person per day.
- Low-income customers are highly price sensitive; we knew this intuitively, but the research shows just how much small changes in prices disproportionately change purchase rates.
- While customers are sensitive to price, their spending on energy is inelastic as it is seen as a necessity. This is highlighted by the fact that the poorest households spend a large amount of their income on energy – around 10% for the poorest families.
- While there is often concern that products or services given free are not valued by customers and therefore behaviour may not change, this study found that solar lights were universally accepted and adopted. Participants in the study had similar usage patterns regardless of whether they received the light free or purchased it.
Do solar lights dramatically reduce poverty? No, probably not on their own, but they can reduce energy poverty, and they can certainly contribute to opportunities for families to redistribute income to more immediate needs such as food, or more developmental desires such as spending on education and health.
Kat Harrison is Associate Director, Impact at Acumen.