Off-grid households’ preferences for electricity services: policy implications for mini-grid deployment in rural Tanzania

Mini-grids play a critical role in providing electricity to remote, off-grid communities in Sub-Saharan Africa. However, success of mini-grid projects can be hindered by poor cash flows and limited revenue returns. A clear understanding of off-grid households’ preferences for electricity services is a prerequisite for mini-grid stakeholders to set tariff structures and stimulate income-generating power demand to scale up mini-grid deployment. This study conducted a choice experiment survey in two off-grid villages targeted by new mini-grid projects in Tanzania to reveal heterogeneity in households’ preferences for multiple electricity service attributes. We found that households’ heterogeneous preferences were significantly associated with demographic (e.g. gender), socioeconomic (e.g. ownership of TV), and energy-related behavioural characteristics (e.g. charging devices away from home). We suggest that service-based, tiered tariffs and business models can be designed to cater for the heterogeneous demands and preferences of different segments of customers. Successful deployment of mini-grids needs to consider the competition from the existing solar home systems and focus on the provision of higher tiers of electricity services. Gender equality issues should be addressed in rural electrification efforts given the significantly greater vulnerability of female-led households to higher electricity fees.