Credit constraints and willingness to pay for electricity among non-connected households in Zambia

Abstract

Access to electricity in Zambia remains low, with most households dependent on traditional energy sources. This study analyzes data from a contingent valuation (CV) survey conducted by the World Bank to estimate household willingness to pay (WTP) for electricity connections among non-connected households. It evaluates two electrification technologies: grid electricity and solar home systems (SHS), categorized into low-capacity and high-capacity systems. The findings show that WTP is positive across technologies and increases with extended payment options. Mean WTP for grid electricity and high-capacity SHS exceeds market prices, indicating potential for private sector involvement in expanding access. In contrast, low-capacity SHS has a mean WTP below market prices, suggesting that subsidies are needed for viable private sector participation. This highlights the importance of offering electricity technologies that provide more than just lighting, particularly in rural areas where high-capacity systems can foster economic activities. The study also emphasizes the necessity for households to access credit financing or subsidies to afford market prices for solar PV systems and to manage their consumption effectively. Additionally, social factors such as housing quality and educational attainment significantly influence mean WTP for electricity connections across the various technologies.