Understanding Off-Grid Solar’s Role in Energy Access
By Ryan Kennedy
Countries around the world are in the midst of a global push to provide all citizens with access to modern electricity. A major question concerning this expansion is what role, if any, off-grid solar (solar home systems, mini-grids, etc.) will play in this expansion. This year ISEP teamed up with BBOXX, a large solar home system provided, primarily operating in Rwanda and Kenya, to analyze their customer base and draw some conclusions about both the types of customers they attract and the demographic characteristics of their customer groups. Our results suggest that the main customers for their solar home systems are exactly the types of customers that are often problematic for grid expansion. Moreover, we find that women and word-of-mouth play a key role, not just in expanding their customer base, but also in promoting reliable customer payments.
Much of the investment governments have put into expanding energy access has come by way of expanding access to grid electricity. But the expansion of the electricity grid faces numerous obstacles. First, some areas are very difficult to reach with grid electricity. For example, when villages are located in remote, mountainous, or island regions, expanding cables to the regions can be difficult. Even when cables are expanded into an area, the quality of access may be suspect. Second, grid expansion does not necessarily equate to household access. Both the cost and unreliability of grid access may prevent some homes from acquiring legal connections. Third, expanding grid electrification into areas with low electricity demand stresses electrical utilities. Low demand customers and high government subsidization can burden utilities with high debt levels. This jeopardizes the stability of grid expansion efforts. Finally, simply expanding the grid can produce a tradeoff between low quality expansion versus improving existing infrastructure to existing larger consumers.
So what can the current customer base of a solar home system provider tell us about the role of off-grid solar? We analyzed the daily records of 34,811 BBOXX customers in Rwanda and Kenya. What we found was that the vast majority of these customers fell into a single category – very low energy demand, but quite reliable in paying their bills. Almost 90% of their customers fell into this category – only purchasing the minimal usage package for lights, laptop, and cell phone charging. These are exactly the types of customers that are most likely to be problematic for grid utility companies. Moreover, the geographic location of these customers was also in areas where grid expansion lagged. The results suggest that off-grid solar can play an important role in reaching customers for which utility companies have little incentive to recruit, much less provide with high quality electricity.
We also found some interesting patterns among customers who were more likely to fall into this core category versus those who fell into other categories (e.g. did a worse job paying their bills and/or had larger energy demands). While most of BBOXX’s customers were men, women made up a disproportionate amount of the people who fell into this core category. This is in line with what has been found in some of the literature on micro-finance, where some scholars have found that women are more likely to repay their debts. Since women disproportionately benefit from household electricity access, it makes sense that they also place a heavier emphasis on ensuring continued basic access. We also noted that those who were recruited by word-of-mouth were more likely to fall into this core category. While it is not surprising that word-of-mouth is a good way to expand customer base, this result suggests that people who are spreading the word to their friends are also finding people who are likely to be good at paying their bills on time, providing an incentive beyond sales to encourage social network recruiting.
In sum, while grid extension will continue to play a key role in eliminating energy poverty, off-grid solutions can also play a major part in achieving this goal. Not everyone needs, wants, or can afford high quality grid electricity at this time. Off-grid systems provide an alternative that can improve quality of life.
Ryan Kennedy (@RyanKennedy7) is the Senator Don Henderson Chair and associate professor of political science at the University of Houston. He is also the associate director of analytics of the Initiative for Sustainable Energy Policy (ISEP).
Photo credit: BBOXX