Microeconomic analysis of rural electrification alternatives in developing countries

According to the United Nations there are currently 1.4 billion people globally who lack access to electricity. In most circumstances connecting these individuals to the existing electricity grid is not a feasible option. New developments in solar technology present an alternative to traditional fuel-based generator systems, allowing households a choice in servicing their off-grid electricity needs. In this paper I ask, under what conditions will a household adopt a renewable energy technology over a fuel-based alternative? Upon calibrating a model of optimal choice between consumption of energy services and a composite good, I find that under current prices and technology conditions, households with low income levels (below 1,330 $US and up to 6,570 $US) will choose home solar systems as their technology of choice.