“Real” Electricity Still Comes from the Grid

A recent article in the New York Times describes how a solar home provider will, “help some of the 1.2 billion people in the world who don’t have electricity to leapfrog the coal-dependent grid straight to renewable energy sources.” Does that mean someone didn’t read my previous attempt to stamp out the phrase “leapfrogging” in the context of distributed solar energy for households in the developing world?!? Alas!

One of the reasons I object to the phrase leapfrogging is that, at least given current technologies, home solar systems do not provide anywhere close to the same level of service as electricity from the grid. By contrast, a mobile phone, the oft-cited analogy in the leapfrogging discussions, has at least one notable advantage over a landline – it’s mobile.

Preferred to the grid?

Preferred to the grid?

Together with my co-authors Ken Lee and Ted Miguel, I just released a working paper that provides direct evidence that home solar users have not leapfrogged the grid.

We surveyed over 2,500 rural households in Western Kenya, some of whom had grid connections, some of whom had home solar systems and some of whom were un-electrified. (I’m also not nuts about the term “un-electrified” in this context as it suggests that electrification is a binary outcome and a home solar system “electrifies” a household, but please bear with me.)

Households in the “home solar” category had either a solar lantern or a small solar home system. They had paid on average $55 for the solar lanterns and $235 for solar home systems – a lot of money to households whose average annual incomes are likely less than $1,000. Many of them probably have the M-KOPA system, as it’s the most popular in Kenya. It currently costs over $200 and provides an 8-watt panel, two LED bulbs, an LED flashlight, a rechargeable radio and mobile charging adapters.

Here’s what we found:

  1. People want high wattage appliances, such as irons. We asked households to list all of the electrical appliances they own. We then asked them to name the appliance that they would ideally purchase next (that they did not currently own). The chart below shows the most desired appliances among the three groups in our study: “grid connected”, “home solar” and “un-electrified”.Desired

For both the home solar and the un-electrified households, televisions and radios are the most coveted appliances. These do not have to be high wattage, although even a pretty efficient small television at 15 watts is asking too much from the typical 8-watt home solar system in Kenya. Irons, which are the third most desired appliance among home solar households and the fourth most desired appliance among un-electrified households, are very high wattage – typically 1,000 to 1,500 watts.

We also asked the households about their general standard of living, and the home solar users appear richer and better educated than un-electrified households. These higher living standards, however, do not translate into meaningful differences in appliance ownership.

  1. The set of appliances owned by home solar households is much more similar to un-electrified households than the households with grid connections. The set of appliances that home solar and un-electrified households most desire is exactly the same as the set of appliances most likely to be owned by households with grid connections – televisions, radios, mobile phones, and – you guessed it – irons. The grid accommodates high wattage appliances like irons because it has a large capacity and because not everyone uses an iron at the same time, so households can share the infrastructure. So, it looks like both home solar and un-electrified households aspire to the energy consumption of a grid-connected household.Owned
  1. Home solar owners still use almost as much kerosene as un-electrified households. We asked households how much kerosene they had purchased in the past month. Kerosene is primarily used for lighting in our sample — almost none of the households report cooking with kerosene. So, we would expect to see a substantial drop in kerosene consumption for a household enjoying electric lighting.

On average, un-electrified households had spent $3.90 while home solar had spent $3.41. Perhaps the home solar owners are still buying kerosene to light additional rooms or to compensate for days when they cannot charge their solar systems. A greater share of home solar customers reported spending nothing on kerosene — almost 25% compared to 3% of un-electrified households, though this implies that three-quarters of the home solar owners are still relying on kerosene.

Don’t get me wrong. I’m not opposed to solar lanterns or solar home systems. For some households, they provide a real improvement over kerosene lighting. Most solar solutions seem to be priced to give households slight savings compared to buying kerosene. And, to the extent households are using less kerosene, they’re exposed to less indoor air pollution and lower risks of fire or burns. But, they are best described as steps up the energy ladder, rather than leapfrogging.

The Center for Global Development describes recent research that makes a similar point. They found that nearly 90% of households in Tanzania who already had “access to electricity outside of the national grid, such as solar power” still wanted a connection to the national grid. They also link to an article that describes villagers with a solar microgrid in India who still want “real” electricity, by which they mean grid.

Certainly, grid connections provide very different levels of service, depending on the reliability levels. We did not see this in our data, but it’s conceivable that households would have both a home solar system and a grid connection – using the home solar system for basic lighting and cell-phone charging when the grid was unavailable. Fortunately, the World Bank is starting to collect data that will elicit more information on the different level of services that households experience.

Our paper also provides perspective on the potential environmental benefits of home solar. If we’re thinking of home solar as an alternative to a grid connection, it’s important to know how the grid electricity is generated. Over 60 percent of the existing generation in Kenya and other parts of sub-Saharan Africa comes from hydro, geothermal and other non-fossil-fuel sources.

So, pushing households to home solar in Sub-Saharan Africa may not save nearly as much fossil fuel as some proponents would have you believe. But, just because Sub-Saharan African grids are green now, though, does not mean they will continue to be. If all the new generation is expected to come from coal, home solar could have large benefits by offsetting this marginal generation.

We looked at countries’ plans for growing their grids and saw that most countries are projecting they’ll get an even higher fraction of their generation from non-fossil sources over the next 10-20 years (see Figure 2B in the paper).

Think of it this way. As countries in Sub-Saharan Africa develop, they will need more and more electricity to power manufacturing facilities, high rise office buildings, subway systems and all the (mostly urban) residential customers who are already connected to the grid. To meet environmental goals, we need to figure out a way to supply that power with as few emissions as possible. But as long as we’re trying to de-carbonize the grid, providing rural households with home solar systems doesn’t provide many environmental benefits and may even distract from attempts to, for instance, build grid-scale solar.

So, let’s stop talking about leapfrogging and help more people get access to “real” electricity.

About Catherine Wolfram

Catherine Wolfram is the Cora Jane Flood Professor of Business Administration at the Haas School of Business, Co-Director of the Energy Institute at Haas, and a Faculty Director of The E2e Project. Her research analyzes the impact of environmental regulation on energy markets and the effects of electricity industry privatization and restructuring around the world. She is currently implementing several randomized control trials to evaluate energy efficiency programs.
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35 Responses to “Real” Electricity Still Comes from the Grid

  1. Jim Lazar says:

    There seems to be some confusion here as to the role of small distributed generation. It’s never intended to be a substitute or equivalent of a grid connection. But it is “real electricity.”

    The UN Secretary General’s Advisory Committee on Energy and Climate Change has set a goal to provide “basic electricity” to almost everyone worldwide. They define this by end uses: refrigeration to reduce food-borne illness, and lighting so that students can continue their studies after sunset. This comes to 50 kWh per month per person.

    This is an amount most economically provided in urban areas with a grid connection, but in rural areas without electric distribution systems it is most economically provided with a decentralized small solar/battery system. Indeed, there are now superinsulated refrigerators with storage built into them being sold for this purpose.

    What the author fails to compare is the cost of securing a grid connection to the cost of providing essential electricity services with a distributed system. If a grid line extension fee is $500, then a grid connection probably is economical; if that same line extension fee is $15,000, then it’s likely that basic needs are more economically met with solar. That’s how a few thousand properties in Hawaii were solarized in the 1980’s — expensive, but cheaper than an expensive line extension.

    My own experience in Indonesia, where there is a VERY high level of grid connection (PLN is the largest utility in the world by number of people served), is that indeed a clothes iron is right up there with TV, lighting, cellphone charging, and fridge. BUT, the most common tariff there is the “social tariff” in which the line extension is government-subsidized, the customer is limited to a maximum of 480 VA of power draw, and the rate design is a three-block inclining block rate, with 30 kWh/month in the first block. The market has responded with lower-wattage clothes irons (and it takes a long time to iron a dress).

    But to me, in the greater scheme of things, a clothes iron is a lower human need than lighting and refrigeration, which can often be economically provided from solar.

    I would not call it “leapfrogging” to get a small solar system for lighting and phone charging. I would call it moving from miserable to merely impoverished. Just as the first few inches of insulation are the most valuable in retrofitting a home for energy efficiency, the first few watts of electricity are the most valuable in moving towards a less dire human condition.

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  3. Dave Jacobowitz says:

    Wow, does anyone else suspect that 8W M-KOPA system is ridiculously overpriced at $235 for an 8W panel, some LEDs, a 5V regulator for USB and an unspecified battery? I’m pretty sure I could crush that using one-off retail first-world pricing. How about a 50W panel for ~$60 plus 12V 30+Ah gel cell for $80 and $35 charge controller. That leaves $60 for wiring, radio, and a couple of LED luminaires.

    I think this brings to the fore part of the problem in developing countries: lack of competition and associated consumer pricing power and access to credit at reasonable rates.

    I also want to make a comment about priorities. To a lot of our views, wanting an iron before a fridge makes no sense, but I would hope people working in this space can suppress that judgment if they can. The people in question /do/ value the iron, and that should not be discounted.

    Interestingly, if clothes ironing is a serious consideration, a solar oven might be a significantly more cost-effective approach than a solar electric system.

    • Sammy says:

      As you correctly put it the M-KOPA system seems overpriced and I would add undersized. This may partly be due to the target market. The system seems mainly targeted at very poor households who pay for the system over a duration of time in small daily/weekly/monthly installments. There are countless alternatives (in Kenya) to this for those who are able to pay for a solar system upfront and the cost could even be lower than what you gave. Luckily, the cost for connecting to the grid in Kenya for those adjacent to the grid has been subsidized to $150.

      As for the iron vs fridge; getting an iron first makes perfect sense in this part of the world. Refrigeration happens to be less necessary here. Several households in rural areas actually have fridges that they do not use (usually obtained as a gift).

  4. Alan H says:

    I think point #3 could use some additional investigation. Mentioned in the working draft, but not in this article, is the surprising finding that even grid-connected homes spend similar amounts on kerosene. I find the suggested hypothesis that kerosene use in grid-connected homes is related to blackouts, while home solar customer kerosene may be due to of lack sufficient lighting points wanting. Furthermore, if grid-connected homes are experiencing as many dark hours as “un-connected” homes, I don’t see how this supports the argument that there is a substantial difference in level of service between grid-connected homes and solar homes.

    • jmdesp says:

      Yes, I noticed that too in the working draft, and also that the amounts for kerosene
      and other energy expenditures are estimated based on household responses
      to total spending amounts over the last seven days, which seems to me to be seriously imprecise : As connected household spend more than 10$ on the electricity bill, the comparatively much lower expense on kerosen can be imprecisely evaluated, especially if they usually buy for more than seven day at once. I wonder if it would be possible to cross-evaluate it also from how much the local kerosen seller sell, if one given neighboorhood can be described as either electrified or unelectrified. But I expect there’s some use for bikes and it’s a factor that makes it more complicated to evaluate.

      The health effect also is not considered in the paper, it should be mentionned that reducing the amount of kerosene used for lightning is very desirable if only for that.

    • jmdesp says:

      Of note also, is the fact that while the kerosen spending does not evolve much with connection, the percentage of household reporting not spending any money on kerosen does, very significantly. Only 2.5 % for kerosene household, 23.7% for home solar and 33.4 % for connected households. This is a red flag I believe. Given how the brain works, it’s easy to remember not buying any kerosen, but it’s much harder to evaluate correctly how much you’ve spent, so this makes it hard to believe the spending number is reliable.

  5. The shortcomings of a low-capacity solar home system are clear, but the larger issue is that we should not posit the issue as one of two alternatives – a SHS or a conventional grid connection in a system that is designed along the lines of the U.S. grid. There are mini-grids in many locations – some AC and some DC – that can more economically provide higher power levels than isolates SHS systems can. The larger problem is that we have our technologies silo-ed so that a household and village must choose between one of these three options (or four if solar lanterns are included) and then the infrastructure and devices deployed are not particularly useful for or interconnectable if one moves to a different option. We need to enable technology to be fully interoperable so that households (or small businesses) can be anywhere on a continuum of capacity and connectivity while maintaining all infrastructure and devices as useful. This allows grid or mini-grid connections to be intermittent without sacrificing local services. A model that can implement this goal is “Local Power Distribution” – for more on that see: http://nordman.lbl.gov

    Until we create good technology for power distribution within and between buildings, residents of these countries will continue to suffer from a set of bad choices.

  6. Matt says:

    It appears the main problem re using kerosene is the solar systems are only 8 W. Are you sure this is right? PV systems here are often 10kw peak or over a thousand times larger. I mean just increase the wattage a bit.

  7. Peter Berck says:

    On Ironing. Wet clothes make an ideal spot for the tumbu and other like flies to lay eggs, which then infect the clothes wearer. Ironing solves the problem. See https://en.wikipedia.org/wiki/Cordylobia_anthropophaga
    for the details.

  8. Mark Lively says:

    Let’s see if I have the economics correct!! $235 for the installation, at 10%, has a carrying cost of $23.50 per year. 8 watts for 365 days and a 40% capacity factor is 1.168 KWH. That is a cost of $20.12/KWH. And what is the cost of grid connected energy?

  9. Harish Hande says:

    I hope to have a phone call with the authors…as I have been hearing this argument from 1995 when we started. If we had relied then many thousands would not have taken the first step. Hope to have a phone call to put some points across from a practitioners perspective – sometimes we tend to discuss and discuss on the backs of the poor with no real implementation

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  13. mcubedecon says:

    First, I agree with Jim Lazar’s points. The paper talks about costs on one side, but doesn’t put them in perspective to the alternatives. Bruce Nordman’s point about different scales of “grid” also is important. For example, solar projects show scale economies up to about 3 MW but then modular construction flattens the per kW cost. A village microgrid separate from a national central grid may be quite cost competitive.

    The paper appears to lump large hydro in with other utility-scale renewables. The environmental (and economic development) record for large-scale hydro projects in the developing world is dubious at best. There evidence of significant methane emissions from tropical reservoirs. Habitat is destroyed and poorly designed projects don’t deliver expected benefits. Hydro is by far the largest energy supplier on these grids, and they may be little better than coal from an overall environmental perspective.

  14. James Roumasset says:

    Some of the confusion stems from semantics. Catherine is apparently defining “the grid” as an interconnected network consisting of transmission and distribution lines (Wikipedia). (Elsewhere it often refers only to the transmission lines.) Either way, when rural electrification is “real” in many countries, it mostly is a matter of extending an off-grid distribution system to a more remote area. As already pointed out, these systems are usually subsidized by government-provided extension lines. The justification for this may be found in the government’s multi-faceted poverty reduction program. This leaves some moral hazard in the program to the extent that marginal benefits may be below marginal costs (although rural cooperative-run systems still may have high prices due to unavailability of economies of scale or mismanagement). The “unrealness” of electricity can be an advantage in such cases by providing an implicit cap on consumption, e.g. as in the “crushing” solar system proposed by Dave that is presumably(?) enough for a TV, limited lighting, and cell-phone charging. (As he suggests, some government “nudging” to make solar systems more competitive is warranted.)

    This would make for a nice little benefit-cost comparison between real electricity (but high power rates) and using the same budget to subsidize solar systems, leaving consumers with inframarginally cheaper but unreal electricity.

    By the way, many Philippine households with real-but-expensive power still use charcoal irons.

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  20. Tilleul says:

    I think you misunderstood the term “leapfrogging”… Leapfrogging is not about off-grid vs grid connected, it’s about centralised grid vs decentralised smartgrids (DOE has a very good explaination : http://energy.gov/oe/downloads/smart-grid-introduction-0 ). So in both case you’ll have a grid expansion, the question of leapfrogging is then not wether or not developping countries will expand their grid but how will they expand it and how will they manage it. Point is SHS are much cheaper and gives better lightning than kerosene lamps and electrical cells used in flashlight (this is a shame you did not track this major expense BTW) so whatever we do these PV pannels and these batteries will exist. It’s obvious that developping countries will not throw away these assets but connect them together and grow several locally managed grids until they are big enough to be interconnected together. The other alternatives being : keep them in the dark like it has been done for the past 50 years because no private investors will take the risk of expanding the grid for people who don’t use electricity and there is no public funds either for that because maybe money for public infrastructure is cheap in the magical word of AAA+ graded nations but that’s not precisely the case for most of these people.

    The Dharnai microgrid you mentionned is actually a counterexample of your claims. As the article mentionned the (subsidized) public grid is cheap and able to cover large load but unreliable even for days while the (private) solar grid may be expensive and fit for smaller load but highly reliable. What the article did not tell is that villageers there have not switched from the “greenpeace grid” to the “Nitish grid” but use both as the solar grid is more fitted for critical load like lights and phone charging.

    • Catherine Wolfram says:

      Thanks so much for the comment. Are you sure you provided the correct link? The document you link to is focused on smart grids in the U.S., and only seems to mention microgrids for reliability. Also, is there documentation of the Dharnai microgrid operations?

  21. ttringas says:

    Could you elaborate a bit on your third conclusion “Home solar owners still use almost as much kerosene as un-electrified households”? If the number of respondents reporting *no* kerosene purchases goes from 3% to 25% (from un-electrified to home solar) and yet per home kerosene purchases remain then same, then the remaining 75% of your home solar sample must be purchasing significantly more kerosene per household than the un-electrified group.

    It certainly would be an interesting conclusion if switching from un-electrified to home solar has (1) no aggregate effect on kerosene usage and (2) in a majority of cases leads to an increase in kerosene usage. But that seems very improbable to me. What’s the hypothesis here that would allow this data to be extrapolated to a meaningful conclusion?

    You propose “Perhaps the home solar owners are still buying kerosene to light additional rooms or to compensate for days when they cannot charge their solar systems” But wouldn’t that still definitively lead to _less_ kerosene usage in all cases?

    It seems more likely to me that there is a data collection or apples-to-apples issue here, no? For example that the group that has home solar is comparatively wealthier and buys kerosene for friends or relatives.

  22. Chris Marnay says:

    To add to Bruce’s comment. Rather than thinking of electricity supply as an either or, grid or self supply, I like to think more in terms of nested networks. Assume the high voltage meshed grid upstream of the substation exists and has no competitors or collaborators, whereas downstream many options can coexist. Obviously, the regulatory environment rather than technology determines how realistic this might be. What might this world look like? We know well what unidirectional radial distribution of remotely generated power looks like, so take that as a given part of the ecosystem. But, modern technology additionally allows segments of the distribution network to intentionally island and function with its own local sources until reconnection is both possible and desirable. I like to call these systems milligrids (mgrid) although many other names appear in the literature. Second, we’ve all seen or heard of examples of facilities/customers that can disconnect and function as islands. I call these true microgrids and pedantically written µgrid. Additionally, there might be small local systems, which is the sort of supply being discussed in the Kenya case. As Bruce suggests, such networks, may often be DC I call these nanogrids (ngrid). Currently, they may or may not exchange energy with other grids. So, these various networks can coexist, and can also be nested. And, in fact, such entities exist around us now. The power for the routers in your building are likely part of a ngrid, and the Princeton campus is a great example of a µgrid. It functioned as an island for a day and a half following Superstorm Sandy. The Borrego Springs project of SDG&E is an excellent mgrid example. Anyway, getting back to the discussion at hand, multiple types of power delivery can exist and co-exist and framing the choice as either-or is unnecessarily restrictive. IMHO, the more interesting questions revolve around the sequence, which is how Catherine begins her piece. I began with “let’s assume the megagrid (Mgrid) exists” because from our developed world perspective, it does, and it’s unlikely to go away. In the Kenyan case though, the starting point is the opposite level of the nest. If the first power supply to be developed are ngrids, is it reasonable to think the other layers of the nest will be created around them in the familiar structure of the figure? Probably not. I leave it to others to speculate how the overall electricity infrastructure might evolve differently. In any case, it’s not likely to be leapfrogging. Rather it’s mitigating the deprivation of life with only a nanogrid. It seems that the M*KOPA system is DC, so could the limited adoption of appliances but its owners also be the result of limited availability of compatible DC devices, as well as the system’s lower power output? Anyway, I suggest more focus on how such small isolated systems can interact in nested networks that can overcome their limitations, and on what are the technical, economic, and regulatory barriers to the evolution of such arrangements.

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