Electricity Access: A Little Goes a Long Way

by Daniel Schnitzer

A few days ago, I met with a businessman here in Port-au-Prince who, in addition to having a seasonal fruit export business, is a distributor of solar panels, inverters and batteries. For the past few years he has tried, and failed, to sell Solar Home Systems in a part of Haiti with very little access to public electricity. There are many reasons why the systems did not sell well - the retailer had insufficient technical expertise, there was no after sales service, the price was very high, and there was no end-user financing. When I told him about EarthSpark’s model, he was flabbergasted that we were trying to develop supply chains for such small solar technologies. He didn’t seem to understand that while, yes, there is a market for the $300 - $800 systems he tried to sell (and intends to import more to try again), that market is much smaller than the market for $160 systems and even smaller compared to the one for $20 solar lamps. He also seemed to fail to understand the reasons why people would want to buy these smaller technologies. His objection was that people want to watch TV, and that anything less expensive than $300 would not be of good quality. In fact, while his large systems are of very high quality, you can easily find small, high-quality solar technology made by companies like Barefoot Power and SunTransfer. And while many households do aspire to own a TV, this is not their top priority; our 2008 survey showed that of many possible end uses for electricity, lighting was by far the most desired.

The demand for these technologies should be no surprise, and a recent blog post by Mathias Craig, CEO of blueEnergy, provides us with some clues for why these small, affordable technologies are so important. The above graph, which Mathias used in his post, shows the relationship between the Human Development Index (HDI), a quantitative measure of well-being which combines measures of infant mortality, life expectancy, literacy and other indicators, and per capita electricity consumption. This graph is very interesting because it shows that this relationship is characterized by diminishing marginal returns. That is, for every additional kWh of electricity consumed, the amount by which HDI grows decreases. An easy way to visualize this is by observing that if we draw an imaginary line following the general shape of the points on the graph, when we go from 0 to 2,500 kWh there is a change in HDI of 0.8 - 0.3 = 0.5. But when we increase kWh by the same amount again, and go from 2,500 to 5,000 kWh, HDI changes by just 0.9 - 0.8 = 0.1.

This very clearly shows that the first few kWh of electricity have the biggest impact on quality of life. So for a country like Haiti, which sits between Pakistan and Zambia on the graph, a small solar light or system may not seem like much, but it can improve lives drastically - far more for each kWh they use (or dollars they cost) than big, expensive solar home systems.