THE ROLE OF END-USER SUBSIDIES IN CLOSING THE AFFORDABILITY GAP

The document analyzes how end-user subsidies—direct or indirect payments to consumers—can bridge the affordability gap for basic electricity access. It evaluates two primary methodologies for calculating this gap (SEforALL's 'Taking the Pulse' and the World Bank's 'Off-Grid Solar Market Trends Report') and identifies key design attributes such as financing structures, delivery modalities, and verification systems. Through case studies, it finds that Ghana's programme succeeded due to accurate targeting and pricing, while Uganda's faced challenges with high costs and payment delays. Togo's CIZO programme is highlighted for its innovative use of mobile money for subsidy delivery. The brief concludes that improving demographic and consumption data is essential to avoid market distortion and ensure subsidies reach the poorest households.

• Global electricity access remains a challenge, with 759 million people lacking basic access as of 2019, 75 percent of whom reside in Sub-Saharan Africa.
• Providing basic off-grid electricity products, such as solar home systems (SHSs), to 617 million people globally would require between USD 6.6 and 11 billion in financing, with up to USD 3.4 billion needed as public subsidies for end users.
• The 'Taking the Pulse' methodology defines affordability by comparing the percentage of household consumption spent on electricity to the cost of a system, assuming a threshold where a household is unable to afford a product if it requires more than 5 percent of total household income.
• The World Bank's Off-Grid Solar Market Trends Report methodology introduces a category called 'affordable at a stretch', where products cost between 5 and 10 percent of monthly expenditure for pico products and up to 15 percent for larger systems.
• Ghana's 'Improving Rural Energy Access through Solar Home Systems' programme successfully provided SHSs and lanterns to rural households using subsidies of 50–60% and implicit targeting for off-grid areas.
• Uganda's Energy for Rural Transformation (ERT) Phase 2 programme struggled to meet its target of 20,000 SHS installations, realizing only 14,000 due to payment delays, complicated monitoring, and high product prices that remained unaffordable for rural households.
• Togo's CIZO programme utilizes a digital PAYGO model where the government tops up a customer's monthly payment of USD 4 by another USD 4, provided the customer is in an internal database of eligible customers.
• End-user subsidies can cause market distortion if they erroneously signal that product values should be lower than commercial prices, lack clear exit strategies for commercial players, or lead to arbitrage where subsidized products are resold at higher prices.
• There is a need for a new energy burden threshold specifically for developing and emerging economies, as the current 6 percent threshold was based on a 2003 US study for on-grid connections.

APA

Richmond, M., Pinko, N., & Azhar, H. (2022). THE ROLE OF END-USER SUBSIDIES IN CLOSING THE AFFORDABILITY GAP. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2022/04/The-Role-of-End-User-Subsidies-in-Closing-the-Affordability-Gap.pdf

Chicago

Richmond, Morgan, Nicole Pinko, and Haysam Azhar. THE ROLE OF END-USER SUBSIDIES IN CLOSING THE AFFORDABILITY GAP. Climate Policy Initiative, 2022. https://www.climatepolicyinitiative.org/wp-content/uploads/2022/04/The-Role-of-End-User-Subsidies-in-Closing-the-Affordability-Gap.pdf.

Wikipedia

{{cite report |last1=Richmond |first1=Morgan |last2=Pinko |first2=Nicole |last3=Azhar |first3=Haysam |title=THE ROLE OF END-USER SUBSIDIES IN CLOSING THE AFFORDABILITY GAP |publisher=Climate Policy Initiative |date=March 2022 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2022/04/The-Role-of-End-User-Subsidies-in-Closing-the-Affordability-Gap.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{richmond2022role, author = {Richmond, Morgan and Pinko, Nicole and Azhar, Haysam}, title = {{THE ROLE OF END-USER SUBSIDIES IN CLOSING THE AFFORDABILITY GAP}}, institution = {Climate Policy Initiative}, year = {2022}, month = mar, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2022/04/The-Role-of-End-User-Subsidies-in-Closing-the-Affordability-Gap.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }