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In this intellectually stimulating episode, we delve deeper into economic phenomena that are often overlooked in the context of deep rural mini-grids: Price Elasticity of Demand and Economies of Scale. Join us as Nico Peterschmidt, the CEO of INENSUS, and Diego Perez (PhD, CFA), INENSUS’ Head of Consultancy, delve into the intricate world of price elasticity and its critical role in shaping economic perspectives in mini-grid settings.

Our conversation uncovers the reasons why the omission of price elasticity considerations can lead to the underperformance of funding programs, regulatory frameworks, and operational strategies in deep rural mini-grids. We explore the intricate layers of price elasticity, referencing studies carried out in Tanzania and Sierra Leone, discussing its implications on household budgets and electricity consumption, and exploring the divergent demand patterns among various consumer segments.

In this episode, we also venture into the association between price elasticity and another fundamental economic principle in mini-grids: economies of scale. By intertwining these concepts, Nico and Diego reveal surprising derivations that could fundamentally shift the paradigm on how we perceive and approach mini-grids. Our detailed examination of the various cost components of a mini-grid elucidates how the synthesis of economies of scale and price elasticity can instigate a virtuous cycle, culminating in decreased tariffs and amplified demand.

Our deep dive extends to exploring the latent opportunities for funders within the mini-grid sector, illuminating how integrating a nuanced understanding of economies of scale and price elasticity can pave the way for investments that are both low in cost and high in impact.

Don’t miss this enlightening episode as we weave through economic theories, empirical studies, and practical insights, painting a detailed and vibrant canvas of the multifaceted world of price elasticity and its interplay with economies of scale in deep rural mini-grids. Whether you are a seasoned expert in economics or a curious mind eager to learn more about the intricate dynamics of mini-grid economics, this episode offers a rich blend of knowledge, insights, and discussions aimed at broadening your understanding and sparking thoughtful conversation on the subject.

Please find the price elasticity paper mentioned in this episode here: https://inensus.com/wp-content/uploads/2023/09/INENSUS_WorkingPaper_PriceElasticity.pdf

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