PAYGo Solar Expands Electricity Access but Economic Benefits Remain Uneven

A new World Bank study is reshaping the debate around rural electrification in Africa by asking a simple but important question: how much do poor households actually value electricity? Conducted by World Bank researcher Megan Lang with support from the International Growth Centre and researchers linked to the University of California, Berkeley, the study examined pay-as-you-go solar systems in Kenya and Rwanda. These systems allow households to access electricity without paying high upfront costs, making them increasingly popular in remote rural areas where national electricity grids remain too expensive to expand.

Instead of buying a solar system outright, families make a small down payment and then purchase electricity access through mobile money whenever needed. If payments stop, the system automatically shuts down until more credit is purchased. This flexible payment model has become a major tool in efforts to expand energy access across Africa.

Testing How Consumers Respond

The study followed 800 existing solar customers in Kenya and Rwanda during 2018 and 2019. Researchers introduced incentives that effectively reduced the cost of electricity for some users. Customers could earn one or two bonus days of free electricity if they bought enough access time during the month. Another group simply received informational reminders from the company.

The idea was to see whether households would increase electricity purchases when the effective price became cheaper. Surprisingly, most households did not change their behavior much at all. Average electricity demand stayed largely the same, even with incentives in place.

But the results changed sharply when researchers looked at different groups of consumers. Families that already used a lot of electricity responded positively to the incentives. In Kenya, high-demand households increased purchases by nearly 8 percent under the stronger incentive scheme. Similar patterns appeared in Rwanda.

Lower-demand households, however, showed little interest. Some even reduced their purchases, possibly because the bonus targets felt too difficult to achieve.

Big Benefits for Heavy Users

The research found that households already relying heavily on solar electricity gained significant welfare benefits from the systems. In Kenya, high-demand users were estimated to receive at least US$19 worth of monthly benefits from their solar electricity. In Rwanda, where solar energy is relatively more expensive compared to traditional fuels, the benefits were lower at around US$4 per month.

Across all households, the estimated gains were more modest. Average monthly welfare benefits were calculated at around US$10.65 in Kenya and US$1.94 in Rwanda.

The study argues that these findings are important because they capture how households value electricity after they have already adopted and experienced the technology. Earlier studies often focused only on whether households were willing to connect to electricity in the first place, which could underestimate demand because of fears about cost, reliability, or maintenance.

By studying people already using the systems, the research provides a clearer picture of the real value electricity brings to daily life.

Why Reliability Matters

One of the most interesting findings concerns electricity reliability. Researchers expected households might charge devices heavily before their systems were shut off for non-payment, especially if they owned rechargeable appliances. But the data showed very little evidence of this behavior.

Even households with rechargeable devices made only small adjustments before losing access. This suggests that rural families place a strong value on having reliable and continuous electricity available, even if they consume relatively small amounts overall.

The findings also challenge the common assumption that low-income rural households have little demand for electricity. Instead, the study suggests that many households value electricity highly but still struggle with affordability.

A Warning on Subsidies

Although the study finds that pay-as-you-go solar systems improve welfare, it also raises concerns about large public subsidy programs. Solar electricity remains expensive compared to traditional rural energy sources such as kerosene, candles, disposable batteries, and paid phone charging services.

The researchers calculated the “marginal value of public funds,” a measure economists use to compare the effectiveness of government spending programs. Under optimistic assumptions, solar subsidies appeared moderately beneficial. But once likely financial losses faced by solar companies serving poorer customers were included, the economic case became much weaker.

The study concludes that pay-as-you-go solar systems clearly improve lives, especially for households already using electricity regularly. However, it warns that governments should be careful about assuming that expanding access through heavy subsidies will always produce large economic returns.

For policymakers across Africa, the message is clear: rural electrification remains essential, but making it affordable, reliable, and financially sustainable may prove just as important as simply expanding access itself.