Domestic energy poverty and willingness to pay for alternative energy: the case of Pakistan

Official URL: http://risc01.sabanciuniv.edu/record=b1819808 (Table of Contents)

Reliable and affordable energy service is an essential input factor for the human development and the improvement of the living standard of households. However, Pakistan has been in the grip of severe energy deficiency and under electrification. This study investigates the determinants of the household’s willingness to pay (WTP) for an alternate energy source in Pakistan. Moreover, we explore the factors that affect the adoption of solar home system as an alternative energy source. Using World Bank data collected from 8500 households we applied ordered logit and binary probit approaches to examine these research questions. The results indicate that socio-economic and solar awareness characteristics significantly affect the household WTP for the alternative energy source. Moreover, we document affordability and costs saving attributes are of potential alternative source are important in determining the WTP. Further, the empirical analysis estimated the importance of affordability of electric source and improved availability of the energy for the adoption of solar home system as an energy alternative. These results imply that governments in developing countries need to design policies for the affordable solar home system. Besides our results highlight the importance of ongoing research for better solar energy batteries that could provide longer availability of the energy.