Examining the willingness to pay for solar electricity
Student name: Ms Yutika Agarwal
Guide: Dr Ritu Mathur
Year of completion: 2015
Host Organisation: TERI University
Abstract: A sustainable form of energy is required in particular for household use to reduce pressure on conventional energy sources. Policies have been formulated by the Ministry of New and Renewable Energy, Government of India to promote solar electricity in the country to benefit the socio-economic and health well-being of households. Solar electricity is gradually becoming easier to tap and ready to use source of electricity. Moreover, with better technology and increased competition in the market, the price of solar rooftop system has witnessed a great fall making it more affordable. This dissertation examines the willingness to pay of urban households in Delhi, Noida and Gurgaon for solar electricity using a contingent valuation method. The urban households’ willingness to pay is for better supply of electricity. A double bounded dichotomous choice model is used to elicit the willingness to pay of households for solar electricity under two models: complete ownership and lease (power purchase agreement/ third party solar financing) model. The results indicate that there is higher willingness to pay under lease model. It also brings out that respondents’ in Noida and Gurgaon are willing to pay more than households in Delhi. The households in Delhi are willing to pay approximately Rs 6.5 per unit of solar generated under complete ownership and Rs 8.8 under lease model, whereas, households of Noida and Gurgaon are willing to pay Rs 7.3 under complete ownership and Rs 9.2 under lease model. The major factors affecting the willingness to pay are: average monthly electricity bill, cost of backup electricity source, mode of payment and awareness about government policies.
Keywords: Solar Electricity, Contingent Valuation, Double Bounded Dichotomous Choice, Willingness to Pay, Delhi-Noida-Gurgaon
