Characteristics and Determinants of Household Electricity Demand from Decentralized Renewable-Based Mini-Grids : An Econometric Analysis Using Metered Data

While the use of renewable-based off-grid mini-grids for rural electrification is increasing in developing countries, not much is known about the characteristics and determinants of household electricity demand from these technologies. This paper aims to characterize and investigate the main factors influencing household electricity demand from solar Photovoltaic (PV) mini-grids using a metered dataset and cross-sectional survey of 218 households in two isolated small towns in Ethiopia. Three different models were employed to perform the empirical analysis, Censored Tobit, Gamma GzLM, and Quantile regression. We find that the daily load profiles and hourly electricity demand patterns of the two towns are vastly different, despite having a similar number of customers. It is calculated that the mean monthly electricity consumption of productive user households (137 kWh) is more than four times that of ordinary rural households (30 kWh). The econometric analyses showed that productive use, number of rooms, monthly income, electricity price, stock of appliances, power outage hours and location are the most significant predictors of household electricity demand. Contrary to previous studies, higher electricity prices and longer load-shedding hours are positively and strongly correlated with higher consumption. Qualitative data from open-ended survey questions and key informants interviews showed that lack of access and the high cost of appliances are among the major hurdles to using electricity. Our findings suggest that household electricity consumption from renewable decentralized mini-grids in the context of developing countries is a complex function determined primarily by customer type, appliance stock, and location-specific variables rather than traditional income and price factors. In addition, the study highlighted that harnessing the potential of mini-grids and satisfying the energy demand of productive users may require the implementation of improved load (demand) management strategies, and differentiated tariff structures. This will enhance the reliability and commercial viability of the mini-grids, thereby creating a win-win situation