Are micro-benefits negligible? The implications of the rapid expansion of Solar Home Systems (SHS) in rural Bangladesh for sustainable development Satoru Komatsu a,n , Shinji Kaneko a , Partha Pratim Ghosh b a Graduate School for International Development and Cooperation, Hiroshima University, 1-5-1 Kagamiyama, Higashi-hiroshima, Hiroshima 739-8529, Japan b Arc Bangladesh, Bangladesh article info Article history: Received 2 November 2010 Accepted 11 November 2010 Available online 30 December 2010 Keywords: Solar Home Systems Benefit assessment Bangladesh abstract This paper examines the multiple benefits of the adoption of Solar Home Systems (SHS) and discusses the dissemination potential for sustainable rural livelihoods in developing countries. Based on a household survey conducted in rural Bangladesh, we first identify the impact of SHS on the reduction in energy costs and compare purchasing costs. We then examine household lifestyle changes following the adoption of SHS. Finally, we consider several price-reduction scenarios to examine the potential demand for SHS and to evaluate its future dissemination potential. The results of the analysis indicate that households with SHS successfully reduce their consumption of kerosene and dependency on rechargeable batteries, with the cost reductions accounting for some 20–30% of monthly expenditures on SHS. Moreover, most households with SHS can enjoy its benefits, including electric lighting, watching television, and the ease of mobile phone recharging at home. Further, the price reduction can make possible potential demand in more than 60% of households without SHS, while additional price reductions promote the purchase of even larger SHS packages. This study concludes that even though the scale of single SHS is small, the micro-benefits for each household and the dissemination potential are substantial. & 2010 Elsevier Ltd. All rights reserved. 1. Introduction Currently, 1.456 billion people worldwide suffer a deprived supply of electricity, of which 99.8% live in developing countries (IEA, 2009). However, although electricity is a necessity for improving the livelihood of rural households, grid expansion often requires expensive financial investment in infrastructure (power stations, substations, transmission lines, etc.), such as in a devel- oping country like Bangladesh. Grid expansion also implies an increased dependence on fossil fuels and incremental emissions of greenhouse gases (GHG). Accordingly, Solar Home Systems (SHS) based on solar photovoltaic (PV) systems for individual households are becoming more popular in non-electrified areas of developing countries as an affordable alternative for obtaining access to electricity. Unfortunately, the amount of sunshine combined with the relatively small size of SHS at the household level effectively limit electricity generating capacity. Accordingly, as the production of electricity is typically in the range 30–130 Watt peak (Wp), SHS would normally allow households to use only low-powered elec- trical devices such as electric lamps, radios and cassette players, (black and white) televisions (TV), and mobile phone rechargers. Worldwide solar PV installation for off-grid regions increased up until 2008 (REN21, 2009). SHS projects have also steadily expanded in the developing countries of Asia, South America, and Africa in the last thirty years, especially after the 1990s, with the installation of some 931,700 SHS units in developing countries up until 2000 (Nieuwenhout et al., 2001). While recent figures on the number of SHS units in developing countries are not available, we would expect that the number of installations has continued to increase rapidly as the use of SHS becomes a popular electrification method in developing countries. For example, the rapid growth of demand for SHS can be readily observed in Sri Lanka (Wijayatunga and Attalage, 2005), India (REN21, 2009), and Bangladesh (IDCOL, 2010). The rewards for households with SHS comprise two kinds of benefits, namely savings in energy costs and improvements in lifestyle. First, the installation of SHS can reduce the costs of fuel such as kerosene and paraffin, and allow the removal of the rechargeable batteries relied upon before the installation of SHS (e.g., Wijayatunga and Attalage, 2005; Mondal, 2010). Second, the contribution of SHS in rural households is also extensive in terms of convenience, improvement in the quality of life, safety, and better quality of lighting from electric as opposed to kerosene lamps (e.g., Martinot et al., 2001; Urmee et al., 2009). That said, even though the costs of rural electrification with SHS are lower than those of grid expansion, high investment costs for the poor in developing countries usually characterise SHS projects. For instance, a 50-Wp system costs US$490–500 in India and Contents lists available at ScienceDirect journal homepage: www.elsevier.com/locate/enpol Energy Policy 0301-4215/$ - see front matter & 2010 Elsevier Ltd. All rights reserved. doi:10.1016/j.enpol.2010.11.022 n Corresponding author. Tel.: +81 82 424 6932; fax: +81 82 424 6904. E-mail addresses: skomatsu@hiroshima-u.ac.jp (S. Komatsu), kshinji@hiroshima-u.ac.jp (S. Kaneko), partha1975@gmail.com (P.P. Ghosh). Energy Policy 39 (2011) 4022–4031