Renewable Minigrid Electrification in Off-Grid Rural Ghana: Exploring Households Willingness to Pay

Abstract

Renewable energy minigrids hold significant prospects for Africa’s energy sector and its economic development in general. The government of Ghana has established pilot renewable minigrids in five off-grid communities as a testing ground for the electrification of over 600 existing rural communities that cannot be electrified via the national grid. Although there is evidence on willingness to pay (WTP) values for renewable-generated electricity in some developing countries, little is known about households’ WTP for renewable-based electricity in Ghana and, in particular, about renewable minigrids for rural electrification. This paper provides one of the first WTP estimates for renewable-based electricity for rural electrification in a developing economy context such as Ghana. Using data from a contingent valuation survey undertaken in all five pilot renewable minigrid project communities, we found that rural households are willing to pay an average of 30 GHC/month (≈5 USD/month) for high-quality renewable-powered electricity services, which is twice the amount they are currently paying based on the Uniform National Tariffs. The hypothetical bias is addressed by conducting a survey among active users of the minigrids. The starting point bias is reduced by employing random starting bids. The respondents are willing to pay between 9 and 11% of their discretionary incomes to cover the cost of accessing reliable renewable-powered electricity in the rural, off-grid communities in Ghana. The paper concludes by discussing the policy implications of these findings regarding the development of tariff regulations and business models for renewable minigrids in the rural, off-grid sector.