Photovoltaics can reduce economic poverty by 4.5% in China

Researchers from the University of Zurich and Wuhan University have assessed how solar energy resources affect social and economic development to reduce poverty in China, using empirical data from the country’s Photovoltaic Poverty Alleviation Project (PPAP).

Through PPAP, the government provides monetary and material assistance for the installation of PV systems, which then enables poor households to earn an income by selling electricity to grid companies. “An increasing number of studies have shown that integrating PV with issues such as poverty reduction or environmental protection has made significant contributions to global sustainable development in recent years,” the scientists noted. “Exploring the comprehensive effectiveness of projects based on PV may play a good role in promoting poverty reduction and energy sustainability in other countries.”

The team found that the PPAP program could reduce the “multidimensional poverty” – which encompasses multiple aspects of personal and societal well-being – level by 3.0%. It noted that previous studies have focused on solar projects’ effects on energy poverty or the economic benefits on communities. This study also observed that while PPAP can reduce economic poverty by 4.5%, it can also “contribute 3.4% and 3.2% to poverty reduction in the two dimensions of social and human capital, respectively.”

For their assessment, the researchers identified five poverty dimensions and 11 indicators based on the Sustainable Livelihoods Framework, as well as a comprehensive multidimensional poverty index. The research team constructed a four-year data set based on figures from the 1,402 counties in mainland China. The 71 pilot counties of the PPAP were designated as the treatment group, while the rest of the counties were set as the control group. The research team used the propensity score matching and difference-in-difference (PSM-DID) method of modeling to determine the net contribution the PPAP had on multidimensional poverty reduction.

“We selected control counties that matched the treated counties on key variables,” the academics explained. “The matching variables include a county’s per capita GDP, the proportion of the educated population, the agricultural land area, and the county’s development level, because these variables are closely related to the county’s poverty level and control the county’s macroeconomic development, education level, and land investment.”

The team also found that the extent of poverty alleviation varied strongly depending on the region of China in which a PV project was installed.  For example, the poverty reduction effect was strongest in the Northwest at 4.3%, while it was weakest in the Southwest at 1.9%. The researchers speculated that the difference in PV power station types supported by PPAP could also have played a role. For example, the northern regions primarily rely on large-scale, centralized facilities, which can help more households.

Their findings are available in the study “The effect of large scale photovoltaic-based projects on poverty reduction: Empirical evidence from China,” published in Renewable Energy. “These results imply that policymakers can plan PV deployments taking into account the heterogeneity of project implementation to maximize its benefits and avoid one-size-fits-all policies across the whole country,” they concluded.