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Low Cost Solar Kits and Household’s Welfare in Rural Rwanda

This paper analyzed the usage and benefits of very simple but quality-certified small solar systems that were freely distributed among households in a randomized way. The 1 Watt panel and the basic energy services the Pico-PV kit provides just barely exceed the benchmark of what the United Nations Sustainable Energy for All (SE4All) initiative considers as access to modern energy (so-called Tier 1 energy access). At the same time, these Pico-PV kits are at the very bottom of the cost range for different electrification options. It can be used for a four diodes lamp and to charge cell phones and radios, but is not intended to provide energy for income generating activities.

Guided by a theoretical household utility framework we have examined the extent to which the kit increases household’s welfare through lower energy expenditures per lumen (the ‘budget effect’), a higher productivity in housework (the ‘productivity effect’), and a higher convenience during recreation (the ‘convenience effect’). Our results show that Pico-PV kits in fact constitute an improvement compared to the baseline energy sources, mostly dry-cell batteries and kerosene. Given the small size of the panel, the charging capacity is obviously not abundantly available and many households did not manage to use the panel for charging the radio and mobile phones; lighting turned out to be the mostly used service. The lamp was indeed intensively used by virtually all treatment group households. In these remote and poor areas, lighting is a scarce good and the availability of the lamp has increased both the quality and the quantity of lighting usage.

The most important finding of our study is that total energy expenditures and expenditures for dry-cell batteries and kerosene go down considerably. This shows that beneficiaries substitute traditional energy sources instead of just increasing their energy consumption. Beyond the mere effect this perceivably has on household welfare, the usage of the lamp also implies social returns, such as major advantages for people’s health (because kerosene usage is associated with harmful smoke emissions) and the environment (because dry-cell batteries are usually disposed in unprotected latrines or in the landscape). Since households in rural Sub-Saharan Africa are rapidly switching from kerosene or candles to LED-lamps that run on dry-cell batteries this finding deserves particular attention.

In addition we find that beneficiaries use the kit for various domestic work processes like cooking or studying. Although we cannot quantify this, we assume that the solar lamp allows doing these activities better and faster than with traditional lighting sources. The solar lamp also enables households to allocate their time more freely and to shift activities towards the evening hours. Children for instance tend to shift their homework to the evening hours. Their total time spent on homework does however not increase. Also for other household members we do not find a substantial change in how they allocate the amount of time between different activities and recreation. Only for women we find some indication that the time spent on housework increases, while the time spent on recreation decreases.

Our results hence underpin the Tier-1-threshold of modern energy access in the SE4All Global Tracking Framework. The Pico-PV kits can in fact meet the need for basic energy services, at least in such poor areas with very low energy consumption levels. If our findings are compared to other data sets from less remote areas, for example a comparable study that has recently been conducted on the Rwandan grid extension program (Peters et al. 2014), it also becomes evident, though, that Pico-PV kits cannot satisfy the whole portfolio of energy demand due to their capacity restrictions.

Accordingly, in many not so remote areas Pico-PV kits can be considered as either a complement to a grid connection for backup purposes or as a bridging technology towards a grid connection at a later point in time. For very poor areas in the periphery of a country (as studied in this paper), in contrast, Pico-PV is in many cases the only option to obtain modern energy because, first, these regions are beyond the reach of the electricity grid for many years to come and, second, other off-grid solutions such as larger solar home systems are too expensive. We therefore argue that households in such remote areas are the major target group of Tier 1 energy systems within the SE4All initiative.

What is crucial for the acceptance of this new technology is the proper functioning and ease in usage of the kit – in particular if a market establishment policy is pursued as programs like Lighting Africa do. It has turned out that a relatively mature product such as the Pico-PV kit used in this study, of which the principal components had been tested and certified by Lighting Africa as well as massively sold in other countries, might still exhibit technical problems under real usage conditions. Testing and certification procedures should therefore encompass a strong component of field tests and not only laboratory examinations. This is particularly important in the light of the rapid penetration of rural Africa with low-quality LED lamps that has occurred in recent years without any governmental involvement. In terms of lighting quality, these dry-cell battery run lamps are on a par with Pico-PV kits.

Nonetheless, Pico-PV kits that meet quality standards in terms of usability and life-time are a worthwhile investment. If kerosene or dry-cell batteries are replaced, households with consumption patterns as observed in our research economize on average 0.95 USD PPP per month, which is around two percent of monthly household expenditures. The investment into the Pico-PV kit then pays off after 18 months, which is less than its life-span of 2-3 years. However, it is easy to imagine that the interplay of cash and credit constraints of the target population, the lack of information, and high preferences for today’s consumption will make most households forego this investment.

This claim points at a dilemma of Lighting Africa and other donor and governmental interventions, which intend to disseminate Pico-PV kits via sustainable markets as a contribution to SE4All: The major target population will hardly be able to bring up the required investment. Financing schemes might in some regions be an obvious solution. But given the long pay-off period for the bottom-of-the-pyramid target group and non-internalized advantages, a rapid effectiveness of such financing schemes is questionable. At the same time, if it is clearly the political will both in national governments and among the international community to provide energy access also to the very poor – not least because of the clear social externalities related to the reduction in the consumption of kerosene and dry-cell batteries, one should consider more direct promotion options.

Subsidized or even free distribution of kits might then be an alternative to reach the poorest of the poor. While many development practitioners are opposed to a free distribution policy and it would be in stark contrast to the strategies pursued by ongoing dissemination programmes, the empirical literature provides evidence from other field experiments that supports the idea (Cohen and Dupas 2010; Kremer and Miguel 2007; Tarozzi et al. 2012). As a matter of course, a subsidized distribution policy would require establishing institutions that maintain the subsidy scheme (including an effective system for maintenance and replacement of broken kits) in order to avoid a flash-in-the-pan effect. Moreover, since subsidies would require public funds, the priority of the SE4All goal would obviously need to be pondered against other development objectives.

Having said this, it is also clear that further experimental studies that can examine the mechanisms behind take-up behaviour, such as the households’ willingness-to-pay for electric energy, the role of credit constraints, and information would certainly be useful. Such research efforts would help to design appropriate strategies to achieve the modern energy for all goals of the international community.

 

 

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