Flexible Financing and Investment in Renewable Energy Sources: The Case of Biogas Energy in Sidama Region, Ethiopia
In attempt to meeting energy demand via provision of renewable energies such as biogas technology, credit arrangements and local involvement in decision-making are key elements for low-income countries in Africa, while the link between investment cost, affordability, financing, and other socioeconomic differences may affect investment in biogas energy. In this article, a survey of 298 households is used to establish the derivers of investment in biogas energy; the findings being conditioned on credit access with flexible loan repayment options. The estimates of marginal effects from conditional (multinomial) logit model show that flexible loan repayment options might encourage a broader spectrum of households to invest in biogas energy. The key derivers of willingness to invest in short-term loan repayment options were the education and gender of household heads, access to fuelwood sources and waste-water systems, and, livestock ownership. Similarly, households’ willingness to invest in biogas energy funded via medium term financing varies with the level of formal education of household heads, wastewater system, and livestock ownership. However, willingness to fund biogas energy with long-term loans was positively correlated with the area of land in use. Policy implications are that local authorities should work with financial institutions to provide credit at market rates, but with flexible loan repayment options. This will reduce the burden of the biogas market on both users and supplier’s, increase functional sustainability, and promote biogas technology among low-income communities.