Clean energy could be achieved through Entrepreneurial skills: Study

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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?

Michaël Aklin
Patrick Bayer

Michaël Aklin Assistant Professor of Political Science at the University of Pittsburgh and Patrick Bayer Lecturer in International Relations at the University of Glasgow  conducted a study in Uttar Pradesh, India, to sketch the profile of the solar microgrid users. Their analysis reveal the three factors that are particularly crucial: wealth, savings, and an entrepreneurial spirit, key to identify early adopters.

The starting point for their  analysis was 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 had not been smooth enough. 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 solar technologies ultimately belongs to households. So, what makes them tick.

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. 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 their study comes in.

Their analysis rests on a broader impact evaluation of solar microgrids. They 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). All the participant households received 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 socio demographic data on these households. Once Mera Gao had completed its sales pitch, the reseachers examined what made households more likely to become customers or not. 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.

The results reveal 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%. The results underlined 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 to invest in  new technologies, a conclusion that the researchers had reached  for India as a whole.

The researchers also found that psychological factors play a major role. Joseph Schumpeter said that the “entrepreneur gets things done.” This piece of wisdom seems applicable to solar technologies as well. 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.

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