The importance of entrepreneurial spirit for adoption of solar microgrids
By Michaël Aklin and Patrick Bayer
Solar-powered microgrids offer an appealing answer to energy poverty in the rural developing world. They are clean, flexible, and can be installed in the most remote areas. But they are also new. Cash-constrained customers, such as poor farmers, are often weary of spending resources on these untested pieces of technology. In such an environment, what is the profile of the likely customers? We conducted a study [gated; preprint] in Uttar Pradesh, India, to sketch the profile of the solar microgrid user. Our analysis shows that three factors are particularly crucial: wealth, savings, and an entrepreneurial spirit are key to identify early adopters.
The starting point for our analysis is the urgent need to provide clean energy to the more than one billion individuals who lack electricity. Offgrid technologies, such as solar-powered microgrids, could be part of the solution. But despite several success stories in countries such as Bangladesh and Kenya, the deployment of offgrid power systems has not been exactly smooth. Generating capacity typically remains too low to run agricultural machinery such as grinders or TV sets and radio. Maintenance of the solar systems is often challenging for rural villagers, and the electric output varies with weather conditions. This frustrates those who are supposed to adopt these technologies and stalls technology adoption.
Both state and non-state actors have looked for ways to improve these numbers. But most action has been on the supply side. Yet the decision to buy (or rent) solar technologies ultimately belongs to households. So, what makes them tick?
Economists have looked at this question from a productive angle (see for instance here or here). In these models, farmers learn about the value of a new technology by using it (or observing others do so) and then decide to acquire it or not (for instance here or here). What these studies miss however is to examine what makes households adopt these technologies. Studying households’ decision-making is however critical as many benefits attributed to solar microgrids accrue here: doing homework or sewing at night, allowing social interaction after dusk, and village safety all affect households’ quality of living. This is where our study comes in.
Our analysis rests on a broader impact evaluation of solar microgrids [open access]. We partnered with Mera Gao Power, a solar microgrid company based in Uttar Pradesh in northern India. This company sells access to a microgrid for a monthly fee of 100 rupees (about USD 1.5). Participating households receive two bright LED lights and a mobile phone charger. Power is stored in a battery during the day, and then made available to each household in the evening (from 6 to 10 or 11PM). Mera Gao reached out to a random set of villages to offer them their services. Potential customers then decided to subscribe or not. Earlier, we had collected sociodemographic data on these households. Once Mera Gao had completed its sales pitch, we could examine what made households more likely to become customers or not.
Perhaps unsurprisingly, affluent households (measured in terms of their monthly expenditure and their ability to save money) were more likely subscribers. But wealth is not everything. Our results show that having an entrepreneurial spirit is crucial. When a respondent’s entrepreneurial index increased by one unit, the odds of adoption jumped by 19-26%.
Our results underline that offgrid solar power will spread from the top of the income distribution. Even among poorer communities, it is the wealthier that can afford to take a chance of new technologies, a conclusion that some of us had also reached here for India as a whole. However, income is not everything. Psychological factors play a major role. Joseph Schumpeter said that the “entrepreneur gets things done.” This piece of wisdom seems applicable to solar technologies.
Michaël Aklin is Assistant Professor of Political Science at the University of Pittsburgh, http://www.pitt.edu/~aklin/
Patrick Bayer is Lecturer in International Relations at the University of Glasgow, http://patrickbayer.com/