From fields to markets: Solar power adoption impact on Nepali farmers' livelihoods

Abstract

The economic gap between urban and rural areas is increasingly being bridged by off-farm activities, with renewable energy playing a crucial role in this shift. Over the years, solar power systems have enabled numerous off-grid households to diversify into non-farming pursuits. This study delves into how adopting solar power systems influences farming households in Nepal, enhancing their engagement in the off-farm economy. By analyzing cross-sectional survey data, our research reveals that (1) households with solar power systems are 37.7 % more likely to participate in off-farm activities. (2) Employing instrumental variable and propensity score matching techniques to address endogeneity, the study confirms the positive impact of solar adoption on off-farm economic involvement. (3) the research findings underscore that access to solar power not only aids farmers in making informed decisions about off-farm activities but also interacts with various socio-economic factors. Finally, to drive economic transformation among farming households, our study suggests that policymakers should establish special funds or credit facilities to support solar power access for off-grid farming communities.