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close this bookPhotovoltaic Household Electrification Programs - Best Practices (WB)
close this folderBarriers to affordability
View the document(introduction...)
View the documentFirst cost barriers
View the documentHigh transaction costs
View the documentMarket distortions

(introduction...)

4.1 The previous Chapter outlined the conditions under which solar home systems are the least-cost option for rural lighting and power supply. However, from the point of view of the potential user, the key issue is the affordability of the PV system in relation to its perceived value. While many beneficiaries of rural electrification benefit from subsidies, PV users are generally expected to pay for most of the costs of their systems. This Chapter examines barriers that constrain the purchase of solar home systems. These include:

· High capital costs and lack of access to credit make solar home systems too expensive for many rural households;

· High transactions costs arise in purchase or servicing of solar home systems due to limited supply, sales outlets, technicians and financing infrastructure in rural areas;

· Market distortions often increase the price of solar home systems relative to alternatives. These include:
- import duties, tariffs, and taxes; and
- subsidies for kerosene and grid-based service to rural consumers.