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“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.

Catherine Wolfram View All

Catherine Wolfram is Associate Dean for Academic Affairs and the Cora Jane Flood Professor of Business Administration at the Haas School of Business, University of California, Berkeley. ​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.

41 thoughts on ““Real” Electricity Still Comes from the Grid Leave a comment

  1. 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

  2. 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?

  3. 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.

  4. 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:

    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.

  5. 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.

    • 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.

    • 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.

  6. 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.

    • 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).

      • The cost of M-Kopa solar system – in my view the cost of capital/credit should be factored in when calculating the real cost of acquiring the product. It is also important to note that the cost of access to credit not only in Kenya but also in other third world countries is high due to the high default risk associated with the erratic nature of the target beneficiaries’ cash flow. Poor roads and communication network are other cost drivers. Unfortunately the poor customer must bear all these costs which unfortunately further make a basic product unaffordable to majority of the rural population.

  7. 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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