Authors: Richa Goyal, Arne Jacobson, Robin Gravesteijn
Solar home systems can be costly, especially for low income households. As a result, a majority of low income people have been unable to access clean energy technology to meet their energy needs. The introduction of innovative financing models like pay-as-you-go (PAYGO) provide a new window of opportunity.
UNCDF’s CleanStart Programme, in partnership with SolarAid/Acumen and the Schatz Energy Research Center (SERC), is conducting research on energy adoption patterns in Uganda. The research seeks to investigate the validity of the ‘solar energy ladder’ hypothesis and determine the patterns in which users adopt higher levels of solar based energy access. The study will also investigate if flexible consumer financing options can help enable higher levels of energy access and if PAYGO options have the ability to expand access and use of mobile banking.
This blog series reveals some of the early outcomes of the study. Our first blog showed that dissatisfaction and high cost associated with traditional energy sources and the utility grid generates significant market demand for solar off-grid energy. The second blog demonstrated the importance of direct marketing and delivery channels in driving the solar product purchase decisions of customers.
In our third and final blog before launching our report, we look at the role of pay-as-you-go financing in enabling adoption of mini-solar home systems. In particular, we examine how PAYGO options impact energy access, affordability and general financial inclusion. Here are some initial findings.
There is substantial reduction in use of traditional fuels with adoption of solar products
After adopting solar products, 55% respondents across all levels of solar energy access reported that they did not use existing energy sources such as kerosene, candles, dry cell batteries, and paid mobile phone charging services. This is indicative of a perfect substitution of these ‘status quo’ energy options with solar among these households. The study examined the solar off-grid product adoption behavior of three respondent groups:
- users of small solar portable lanterns (SPLs)
- users of mini-solar home systems (SHS)
- users of large solar home systems
The level of perfect substitution of traditional fuels with solar technologies is higher for large SHS owners at 82%, compared to mini-SHS users at 51% and SPL owners at 40%. It is not surprising that large system owners substitute greater levels of their lighting and mobile charging demand with solar systems, and, hence, have a lower reliance on traditional fuels.