Determinants of WTP among energy-poor households: Implications for planning models and frameworks

Electrification rates in low-income countries have faced steady improvements in the last few decades, with impressive technological advances having been made in both grid and off-grid electricity supply channels. Nonetheless, the persistent demand- and supply-side challenges of electricity access and reliability, predominantly in Asia and sub-Saharan Africa, reduce the feasibility of universal electricity access by 2030. In particular, while governments and firms have made measurable progress in investing in the expansion of supply along the extensive margin (increases in access), there has been less improvement in the rate of electrification along the intensive margin (increasing quality of supply and reliability). These gaps have given rise to a growing research agenda on both the demand and the willingness to pay (WTP) for the expansion of electrification, with diverse technologies along both margins in urban and rural settings. Motivated by this agenda, I use survey data from six states in India to conduct a descriptive analysis of socioeconomic, behavioural, and technical factors that correlate with variations in household valuation of electricity access and reliability in rural municipalities. The aim is not to provide causal evidence but, rather, insights into which potential factors explain energy-poor households’ decision making and WTP for a spectrum of electricity services from both grid and off-grid supply technologies. Recommendations are provided on the ways in which these insights can both further expand how energy poverty and WTP are measured within general access frameworks, as well as in optimization tools for national electrification planning through the use of proxy metrics, including the cost of non-served energy.

By: Roxanne Rahnama