Decentralized markets for electricity in low-income countries

Governments in low-income countries are increasingly integrating off-grid electricity provision into national electrification strategies, creating novel, decentralized markets for electricity. I study a highly decentralized product that plays an increasingly important role in energy access: pay as you go (PAYGo) solar home systems. Unlike grid electrification, PAYGo solar features low upfront connection prices but relatively high usage prices. To what extent are high intensive margin prices limiting the adoption of solar home systems? In 2019, the Togolese government implemented a large subsidy reducing usage prices by 17.8%–41.7%, while the upfront price of adoption remained constant. I estimate that the subsidy dramatically increased adoption, with the largest effects occurring for the smallest systems (240% increase). I go on to develop a stylized model that shows that the effects of such subsidies are uncertain due to the unique cost structure of decentralized solar electricity. My results highlight the importance of use prices in the electrification decisions of low-income households.