The Effect of Information and Subsidy on Adoption of Solar Lanterns : An Application of the Bdm Bidding Mechanism in Rural Ethiopia

The transition to solar energy to provide clean lighting for rural households in developing countries has been slow. Using a Becker-Degroot-Marschak (BDM) bidding mechanism in a randomized field experiment, this study investigated the effect of information and subsidy policy instruments on the uptake of solar lanterns. The BDM approach used provides a more comprehensive and more transparent approach for eliciting willingness to pay (WTP), as our random draw is from a wide range of uniformly distributed prices, drawn in front of the subjects. We found that an increase in subsidy level increases the adoption rate. Provision of information about private and public benefits of the solar lantern generally did not have a significant effect on adoption rate and willingness to pay. Households with access to grid electricity have a lower WTP for the solar lantern and are thus less likely to adopt, while those using kerosene for lighting are more likely to adopt. We also find that access to credit increases WTP for the lantern. The results suggest that the Sustainable Energy for All and UN Sustainable Development Goals related to universal electricity and clean energy access may not be achieved without subsidizing household-level solar lighting