I have seen a number of blog posts, panel discussions and news articles that extol the idea of energy leapfrogging. A recent Business Week column on India described, “leapfrogging the nation’s ailing power-distribution infrastructure with solar-powered local networks — the same way mobile-phones have enabled people in poor, remote places to bypass landlines.”
The dramatic increase in cell phone coverage in the developing world is astounding and definitely worth admiring. But, the supposed analogy between cell phones and distributed solar is misplaced for several reasons.
- Distributed solar is a much bigger investment for a household than a cell phone. Distributed solar takes on different forms, ranging from a single solar lantern, to a solar home system that will power several lights and a cell phone charger to a solar microgrid, covering at most around 50 households.
Let’s take a mid-sized solar home system. In Kenya right now, an 8W mKopa solar home system requires a $33 down payment and then about $0.45 a day for a year, for a total of almost $200. The system allows the owner to power 2 LED lights and a phone charger. By contrast, Kenyans can buy an inexpensive cell phone for around $20 and pay no monthly fee. Sending texts costs ~1 cent.
I suspect that part of the solar versus cell phone price difference relates to my next point.
- Cell phones still take advantage of a centralized network but distributed solar does not. Yes, cell phones are nearly ubiquitous in many parts of the developing world, but so are cell towers. Centralized networks provide dramatic cost advantages that cell phones exploit but that distributed solar, like solar home systems, do not.
Imagine if everyone in the US tried to make a cell phone call at exactly the same moment in time. This would completely overload the existing systems, as they are currently built to meet actual cell phone usage, where the millions of users are making independent decisions about when to use the network.
When we start to make decisions at the same time, the system overloads and drops calls or fails to connect them. That’s what happened right after the Boston Marathon bombings, as everyone simultaneously tried to reach loved ones in Boston. Except in rare cases like disasters, though, the basic network economics allow us all to connect our calls at many times lower cost than if we each had dedicated network services. Roughly speaking, if every cell phone user requires 1 unit of capacity when they make a call, we do not need to build 1,000 units of capacity to supply each additional 1,000 users because those users are essentially never all making calls at exactly the same moment.
Distributed solar misses out on these basic economics. Taken to an extreme, providing every unconnected household with a solar home system would require many, many times more generating capacity than supplying them with grid power. In the US, EPRI has calculated that a typical household would pay four to eight times as much for equivalent services from an off-grid system.
The beauty of network economies is the more people on the system, the more we can rely on the powers of averaging. I would be curious to see a calculation similar to EPRI’s that compared a 50-household microgrid to grid power. I suspect that 50 people living in the same village will have correlated demand, so averaging doesn’t do as much good.
- Distributed solar for every household should not be the ultimate development goal. Related to the above point, unless the economics of local solar generation change dramatically, it will not make sense to power every home, hospital, school, office building and factory with an unconnected distributed solar system.
I sense that the proponents of energy leapfrogging are implicitly assuming that just getting a household “electricity” means we can stop thinking about electrification and move on to the next development challenge. Getting households enough electricity to power a light and a cell phone charger is a step, but not the eventual development goal. We will need much more generating capacity to power fans, refrigerators and home production, like sewing, not to mention powering health clinics, hospitals, schools, and local food stores. As I have argued before, both health care and education are consumed locally, so if we are going to use grid power for that, we might as well use it for homes.
- A cell phone provides higher service quality than a landline phone, while that’s not necessarily the case with distributed solar. I realize this is obvious: cell phones are portable but landlines aren’t. The expression, “wait by the phone” is going to go out of style soon. Cell phones also let you send texts, and, in some cases, surf the web. About one third of US households have dropped their landlines in favor of cell phones.
But, we are not seeing US households disconnecting from the grid to get a solar home system. Yes, a small number of US homes have rooftop solar, but they’re still drawing from the grid when their solar panels aren’t producing electricity.
True, solar can be more reliable than the grid in some developing countries where daily outages lasting several hours are the norm. But, we don’t yet know how newly electrified households value that reliability. Clearly, those of us living in the US, who are used to less than 3 hours of outages per year, value reliability. In our hyper connected lives, living without internet, lighting, refrigeration, etc., is a real drag. But, for households who don’t yet have electricity, we don’t really know whether they’d rather have highly reliable electricity or enough electricity to occasionally operate a TV, fan or home sewing machine. And, in the US, without extensive backup capacity or a grid connection, distributed solar is much less reliable than the grid.
I worry that the idea of energy leapfrogging lulls us into ignoring the difficult development versus environment tradeoffs involved with bringing electricity and other improved energy services, like motorized vehicles, to people who do not currently have them.
I am not claiming that solar has no role in electrifying the 1.3 billion people who live without it. To the contrary, grid-scale renewables can take advantage of network economics. If solar panel or storage costs are coming down, why not centralize them and connect them to the grid? And, there certainly may be some areas that are so far from existing grid infrastructure, that solar is cheaper than extending the grid. I’d call that an energy stepping stone, though.
Modern energy can transform people’s lives, so it’s unfair to insist that households who do not currently have electricity use the high cost, zero-carbon alternative. Language matters, so let’s stop talking about energy leapfrogging and keep our eyes on the goal of achieving cost-effective, low-carbon solutions.
Catherine Wolfram is the Cora Jane Flood Professor of Business Administration at the Haas School of Business, University of California, Berkeley. During Academic year 2018-19, she will serve as the Acting Associate Dean for Academic Affairs at Berkeley Haas. She is the Program Director of the National Bureau of Economic Research's Environment and Energy Economics Program, Faculty Director of The E2e Project, a research organization focused on energy efficiency and a research affiliate at the Energy Institute at Haas. She is also an affiliated faculty member of in the Agriculture and Resource Economics department and the Energy and Resources Group at Berkeley.
Wolfram has published extensively on the economics of energy markets. Her work has analyzed rural electrification programs in the developing world, energy efficiency programs in the US, the effects of environmental regulation on energy markets and the impact of privatization and restructuring in the US and UK. She is currently implementing several randomized controlled trials to evaluate energy programs in the U.S., Ghana, and Kenya.
She received a PhD in Economics from MIT in 1996 and an AB from Harvard in 1989. Before joining the faculty at UC Berkeley, she was an Assistant Professor of Economics at Harvard.