Acumen Blog

Lighting-the-Way-SQ

Lighting the Way: A Look at Solar Energy’s Impact on Poverty Alleviation

In the last decade, solar lanterns have emerged as a clean, cost-effective solution to provide access to modern energy to the 1.2 billion people currently living off-grid. These small, portable and rechargeable lights fulfill an immediate need for the poor and, as a result, have become increasingly widespread in countries across Africa, South Asia and beyond. They are affordable, easy to use and require little maintenance. And for families who’ve become accustomed to life stopping when the sun sets, a solar lantern can mean hours of light to enjoy dinner together, do homework for class tomorrow, or keep a business open a little later.

While it’s clear at a basic level that access to energy has the potential to transform a family’s standard of living — from cutting monthly costs to contributing to the improved health of a household — there is little academic evidence connecting solar lights to poverty alleviation. With solar energy quickly becoming a smart, cheap and cleaner alternative to fossil fuels, we want to understand its impact on the lives of the poor. With funding from Google, and in partnership with SolarAid and ETH Zurich, the Swiss Federal Institute of Technology, we set out three years ago to learn more about solar energy’s impact on the alleviation of income poverty.

The research worked with more than 1000 low-income households in rural Kenya to learn more how they valued small-scale solar products. In Africa, nearly 70 percent of households do not have access to electricity and, in rural Kenya alone, roughly 93 percent of the population lives without electricity. The study set out to understand how these households used solar products, how much they save and the impact they had in their day-to-day lives.

Here’s what we learned:

Solar lanterns save cash. As part of the research, low-income customers were offered a variety of solar lanterns at market price, subsidized prices, or free of charge, enabling families to replace kerosene lamps with a clean solar light. As a result, households reduced their monthly expenditure on energy by roughly half, freeing between one to two percent of total household expenditure.

Price matters. As anticipated, the demand for solar lanterns was heavily connected to the price offered. Close to 69 percent of households jumped at the opportunity to purchase a light at a discounted rate of $4 while only 29 percent made the purchase at the market price of $9. But 100 percent took the opportunity to use a solar light when offered free. Of course, it’s no surprise that demand rises with a lower price, but this is the first evidence of the extent of price-sensitivity of low income consumers.

Poorer households spend a larger share of their total expenditure on energy. The findings show that the poorest households spend a relatively large proportion of their income on energy (the poorest quintile spent around 10 percent of their total expenditure in energy). But as families become wealthier, energy expenditure falls as a proportion of total expenditure (the average across all households was around 5 percent of their total expenditure).

Everyone loves (and uses) a solar lantern. They’re easy to use and, whether households were given a lantern free of charge or paid for them, their usage and behavior didn’t change. This suggests that users derive value from the lights regardless of how they obtain them. It could mean that there is a role for subsidy in reaching the very poorest with lighting.

Light-1

These lessons are helping prove that solar lanterns play a small but significant role in improving the economic welfare of the poor. By fulfilling an immediate need, solar lights are the fastest and least expensive way for low-income families to access modern energy and move up the energy ladder. They also provide valuable insight to companies, governments and nonprofits about the price sensitivity of different types of consumers, in order to support market development, vital in achieving the UN Sustainable Development Goal of universal energy access by 2030.

To read more about the results of the research download the summary report here and the full academic working paper here.

This is the first installment of a series of lessons from a range of new research into the social impact of off-grid energy in emerging markets. You can find the second installment here.

***

The research is complemented by Acumen’s own customer-based data collection applying our Lean Data approach. This work was originally conceived by Kat Harrison, formerly head of research and impact at SolarAid and now Acumen’s Associate Director of Impact.

Comments

Warning: Fake internship post on WhatsApp in our name in East Africa

It has come to our attention that an anonymous source in the East Africa region is soliciting individuals over social media and WhatsApp to provide personal information to apply for an Acumen paid internship. THIS IS A SCAM. The false solicitation includes a link to a Google form asking for personal and sensitive information, which could easily be used for identity theft; you should NOT submit any information through the provided links over social media. PLEASE BE CAREFUL and if you have already submitted information, consider taking steps to protect your information and identity. If you are interested in Acumen, opportunities are posted on our website at www.acumen.org, which is Acumen’s primary channel for recruiting. [Read More]

Solar Home Systems: Over-investment or overvaluation?

When you hear the term “unicorn,” you usually think of Silicon Valley. Your mind goes to companies like AirBnB and Snapchat, startups that seem to grow from zero to $1 billon overnight, not to social enterprises trying to bring energy to the poor. But we’re seeing a trend emerge in the off-grid sector, in which some young solar home system companies are being overvalued before they’ve had a chance to prove themselves. [Read More]

Skills Partnerships: Start with Listening

The relationship between the social sector and the corporate world is complex. Skills Partnerships have emerged as a way of engaging both sectors. This form of engagement may have started with activities like leveraging a corporation’s expansive workforce to build a house for the homeless or help underprivileged students with their resumes, but it has since evolved to include highly skilled workers sharing their expertise with all types of organizations. [Read More]

ANDREA SOROS COLOMBEL RETURNS TO ACUMEN’S BOARD OF DIRECTORS

We are thrilled to announce Andrea Soros Colombel’s return to Acumen’s Board of Directors. Andrea played an integral role in the development of Acumen as a Founding Partner in 2001, then deepening her commitment by serving on the Board from 2005 to 2014. During that time, she helped shepherd a number of major projects at Acumen, including the inception of our portfolio of off-grid energy companies. Andrea has returned to the Board after three years and we welcome her thoughtful leadership and generous support. [Read More]

Models of High-Level Partnerships with Social Enterprises: Venture Partnerships

How can corporations and social enterprises partner to create a world that works for everyone? On April 4, 2017, Acumen hosted a workshop on high-impact partnerships for leading social enterprises, global corporations, and the organizations that work to link them as a part of the Skoll World Forum Ecosystem Events, to explore this question. Supported by EY, Sainsbury’s, Pfizer and the Skoll Centre for Social Entrepreneurship, the session explored three different kinds of partnerships: Skills, Channel and Venture. [Read More]

A Cleaner Path: Solar Energy’s Impact on Health

Imagine for a moment that the light used in your home was a poison. One that could damage your lungs, irritate your eyes, even impact the health of your unborn child. You’d think twice about flicking on that switch. Kerosene lamps—used by an estimated 290 million people across Africa—contribute to household air pollution. Such pollution is responsible for more deaths a year than tuberculosis, malaria and HIV combined. [Read More]

Acumen Hosts Workshop on Building High-Impact Partnerships at Skoll World Forum

Acumen, with support from EY, Sainsbury’s, Pfizer, and the Skoll Centre for Social Entrepreneurship, is hosting their second Beyond Dialogue workshop today as a part of the Skoll World Forum. The event, Beyond Dialogue: Three Models for High Impact Collaboration, will bring together leading global corporations, innovative social enterprises, experts and intermediaries to work together to uncover new knowledge and opportunities to partner. [Read More]