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

This policy brief examines the use of end-user subsidies to bridge the affordability gap for electricity access, specifically focusing on solar home systems (SHSs) in high-impact countries. It analyzes methodologies for calculating affordability gaps, outlines key design attributes for subsidy programs, and evaluates case studies from Ghana, Uganda, and Togo to identify factors contributing to program success or failure.

• End-user subsidies are essential for achieving universal electricity access, particularly for the world's poorest households. An analysis by Lighting Global estimated that providing basic off-grid electricity products to 617 million people globally would require between USD 6.6 billion and 11 billion in financing, with up to USD 3.4 billion needed as public subsidies for end users.
• The document distinguishes between the affordability gap and the accessibility gap. The affordability gap refers to the financing needed for households that cannot afford a product based on current income, while the accessibility gap is a supply-side issue where consumers lack a feasible way to obtain products due to remoteness or lack of infrastructure.
• Poorly designed end-user subsidies can cause market distortion. Risks include signaling to consumers that product values should be lower than commercial prices, creating uncertainty for commercial players if there is no clear exit strategy, and enabling arbitrage or leakage where subsidized products are resold at higher prices.
• Two primary methodologies for measuring the affordability gap are discussed: the 'Taking the Pulse' approach and the World Bank's 'Off-Grid Solar Market Trends Report'. Both generally use an energy burden threshold of 5% of monthly expenditure, but the World Bank methodology introduces a 'affordable at a stretch' category (5-10% for pico products and up to 15% for larger systems).

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} }