Solar Power to Transform Food Systems and Rural Livelihoods: Evidence from a Solar-Powered Cold Storage Intervention in Nigeria

Abstract

In developing countries, a substantial amount of perishable and often highly nutritious commodities, such as fruits and vegetables, are lost after harvest, mainly caused by the lack of key infrastructures, such as electricity and cold chain facilities. On the other hand, the world has recently seen the potential of solar power in decarbonizing economies and transforming rural livelihoods in developing countries. A new technology, such as solar power photovoltaics, is highly divisible and, therefore, can be easily introduced to overcome the lack of sustainable electricity supply. In 2020–2021, we implemented an intervention to rebuild rural livelihoods in conflict-affected northeast Nigeria by building solar-powered cold storage facilities that can reduce food loss and increase consumption of perishable, micronutrient-rich horticulture products; increase incomes of market agents and producers; and improve employment. The intervention brought a significant increase in the number of days that horticulture products remain fresh, market sales for cold storage users, and the amount of vegetables available to the local population. Cost-benefit analysis showed a significant net economic gain in the long-run. Our example shows that a technological innovation, which overcomes the lack of an essential investment for development, can trigger economic transformation.

1 Introduction

As the electricity grid in many developing countries is not expansive, the share of households connected is very low. About 759 million people are without power, and most are concentrated in Sub-Saharan Africa (World Bank 2021). For example, in rural areas of Nigeria, only 30% of the rural households had access to power in 2019 (National Bureau of Statistics 2019), and this proportion significantly decreases in more remote areas. In the Northeast region, 79% of the households have no access to electricity (National Bureau of Statistics 2019). In such technologically–disadvantaged situations, people face additional burdens. For example, household activities are seriously constrained outside of daylight hours, and children have difficulty studying in the evenings. A large volume of perishable and often nutritious foods are spoiled due to the lack of cooling technologies that normally require a stable electricity supply. Access to electricity is a key bottleneck in creating transformation in many aspects of rural livelihoods in developing countries.

The inability to cool and keep perishable, often highly nutritious foods (e.g., fruits and vegetables) fresh and edible results in food loss and waste on a large scale. A rough estimate of food loss in fruits and vegetables is 15–50% in Sub-Saharan Africa (FAO 2011, 2019). It is a loss in income and nutritional values potentially available to the population. Foods are lost through various stages of postharvest value chains: soon after harvest, transportation to local markets, wholesale/retail markets, and food processing.

Modern cooling technologies are an important instrument to address a multitude of challenges emerging in increasingly complex food systems, including food loss and waste, food safety, food and nutrition security; poverty and economic growth; and environmental sustainability. Cold storage, including cool transportation, has been an increasingly important technology to reduce food loss and food waste globally by reducing microbial growth that causes spoilage (Lichtenberg and Ding 2008; Häsler et al. 2019; IFPRI 2020; Mayton et al. 2020; Kashyap and Agarwal 2020). Cold storage is also expected to reduce the growth of most human pathogens, ensuring enhanced food safety (Uçar and Özçelik 2013). The use of cold storage has also been a milestone toward improved food and nutrition security through micronutrient-rich horticulture crops like vegetables and fruits (Ali and Tsou 1997; Schreinemachers et al. 2018; Surendran et al. 2020). Earlier, Japan had seen the above transformations in the 1960s, promoted by the Science and Technology Agency Resource Research Committee (1965) in its so-called “cold chain recommendations’’,¹ which pushed the modernization of its food systems, leading to improvements in diets and health.

Studies also advocate for the potential of cooling technologies, including cold storage facilities, to accomplish inclusive economic growth, either through its contributions to export growth of horticulture commodities (Gebreeyesus and Sonobe 2012; Whitfield 2012; Minten et al. 2012) or improved market functioning in the domestic market (Schreinemachers et al. 2018), including higher or more stable prices received by suppliers (Rakshit 2011; Lichtenberg and Ding 2008) combined with increased sales achieved through reduced loss (Allen and de Brauw 2018). Such growth promises that similar technologies can be relevant in Sub-Saharan Africa today (Tschirley et al. 2015).

Recently, the potential of solar power technology has been increasingly recognized not only in decarbonizing economies but also in transforming livelihoods in rural areas of developing countries. Over the last decade, solar photovoltaic module prices have fallen dramatically, nearly 80%. Essentially, solar radiation is a free resource, which is non-exclusive, though depending on climate. The solar photovoltaic module is a new technology that is highly divisible and therefore easily adaptable in those areas, depending on its relative costs, to overcome the lack of key infrastructure, such as grid electricity supply.

The World Bank (2020) reports that 70 countries have excellent conditions for photovoltaics, where the long-term daily photovoltaic power potential averages or exceeds 4.5 kWh/kWp. Countries in the Middle East, North African region, and Sub-Saharan Africa dominate this category, accompanied by Afghanistan, Argentina, Australia, Chile, Iran, Mexico, Mongolia, Pakistan, Peru, and many countries in the Pacific and the Atlantic. Nigeria, which we present as our case study, is a high potential country, among others from Sub-Saharan Africa.

This chapter is organized as follows. The next section details the intervention to install solar-powered cold storage facilities in northeast Nigeria. The impacts of the intervention are shown in Sect. 24.3. Food loss of horticultural products is substantially reduced through solar-powered cold storage, which has implications for local incomes and nutrition intake. Results of the cost-benefit analysis we conducted are shown in Sect. 24.4, where we demonstrate that the internal rate of return for solar power is comparable to that for grid electricity, which is not available in most areas in the target region. Concluding remarks are mentioned, focusing on the linkage between investment complementarities and economic transformation.

2 Intervention to Install Solar-Powered Cold Storage Facilities

In this project, seven cold storage facilities were installed in seven horticulture markets in northeast Nigeria between December 2020 and January 2021. The project was supported by the Government of Japan as an emergency response to rebuild livelihoods in a conflict-affected region. Northeast Nigeria was selected as the region had long suffered from the destruction of livelihoods by insurgent groups. In 2019, 79% of the households in the region had no access to grid electricity. Since only 30% of the households in rural areas have access to grid electricity, very few households in the region’s rural areas have stable access to electricity.

We first identified 14 eligible markets across five states: Adamawa, Bauchi, Gombe, Jigawa, and Yobe in northeast Nigeria. These 14 markets were selected because they are horticulture markets and operate daily, where the installation of cold storage can have maximum potentials. We selected seven horticulture markets from this list where cold storage facilities were installed (intervention markets), leaving the remaining seven as comparable markets where cold storage facilities were not installed (comparison markets). Fig 24.1 shows the locations of these 14 markets. The seven intervention markets and the seven comparison markets are scattered across five states, with two markets each in Adamawa and Bauchi states and one market each in Gombe, Jigawa, and Yobe states.

Fig. 24.1

Locations of horticulture markets where solar-powered cold storage facilities were installed (intervention markets) (IFPRI Survey 2020, National Bureau of Statistics 2019, and National Agricultural Extension and Research Liaison Services 2020)

The installed cold storage facilities were designed as prototypes and used and already operated by ColdHubs Ltd., a Nigeria-based social enterprise, in about 30 other horticulture markets across Nigeria at the time of our study. The cold storages installed in this study are relatively small, each with a maximum capacity of 3 tons of common horticulture products.² Each cold storage is powered by 5.6-kilowatt solar panels, that is, 18 of the 380-W photovoltaic panels manufactured by Panasonic. The surplus electricity generated during the day is stored so that it can be released to enable continued refrigeration at night. Cold storage also uses environment-friendly refrigerants like propane, which is less harmful to the ozone layer.

These cold storage facilities were installed within the market premises; the exact locations depended on the negotiations between ColdHubs and market authorities, based on leveled-space availability, general ease of access from most market stalls, and the absence of nearby objects that block sunlight.

Solar panels used in our intervention are the 380-W monocrystalline (passivated emitter and rear cell or PERC) solar photovoltaic module manufactured by Panasonic. Panasonic solar panels achieved significantly higher efficiency (i.e., the conversion rate of solar energy to electricity outputs) at 19.6% compared to 16.9% and 15.5% by competing products. Their temperature coefficient (i.e., the indicator of how electricity output capability drops as the panel temperature rises above 25℃) is also slightly better than the competing products (−0.39% per ℃ vs. −0.40 and−0.41%).³ Even though Panasonic solar panels were slightly more expensive than competing products per watt (USD 0.58 per watt vs. USD 0.51 and USD 0.57), they are competitive and likely to be more efficient and stable in solar power generation, especially in a high-temperature environment in the long-term.

As is common for typical solar panels, the electricity generation capacity lasts quite long, achieving at least 90% and 80% of initial capacity levels even after 12 and 25 years, respectively.

3 Impacts

The seven solar-powered cold storage facilities aim to store fruits and vegetables in a temperature-controlled environment. This contributes to improving local livelihoods by reducing food loss, improving nutrition intake, and generating new employment, especially among women. The utilization of the storage facilities as of February 2022 is summarized in Table 24.1.

Table 24.1 Quantities of horticulture crops stored (kg) (ColdHubs, February 2022)

Table 24.1 shows that, on a typical day, seven cold storage facilities are stocked with a total of about 13 tons (about 1.9 tons per cold storage on average) of horticulture commodities, including major vegetables like tomato, green peppers, onions, okra, cabbage, cucumbers, and fruits like watermelon and orange. The set of commodities stored also varies considerably across market locations. This suggests that cold storage potentially meets varying preferences for horticulture commodities across locations and connects value chains for various horticulture commodities originating from diverse production areas. Despite having the same storage capacities, utilization rates can still vary considerably across the seven storage facilities. The utilization rate in Dutse Daily Market is particularly high, potentially because of its relative proximity to Kano, the second-largest city and a major urban center in Nigeria.

The fig in Table 24.1 relative to those captured two months after the launch of these cold storage facilities (i.e., March 2021), reported in Takeshima et al. (2021), suggest a steady growth over time in the amount of horticulture commodities stored. As demands for perishable horticulture commodities grow in the surrounding areas and cold storage facilities become locally more recognized, the utilization rates of other cold storage facilities are expected to continue rising over time.

The impacts on the quality preservation of fruits and vegetables can be easily seen in changes in the number of days horticulture products remain fresh (Fig. 24.2).

Fig. 24.2

Number of days products remain fresh, by major commodity (reports by market agents) (Authors’ calculation based on IFPRI Survey 2020)

These figures are based on market agents’ reports, reflecting the definition of freshness acceptable to various buyers and customers. Commodities stored in cold storage have considerably longer shelf life. When stored at air temperature, most commodities lose freshness within 2–7 days (from 2.1 days for lettuce to 6.6 days for watermelon). This is because of high temperatures that prevail in northern Nigeria throughout the year, which rarely drop below 20 ℃ even at nighttime and can often reach 35 ℃ during daytime even under shaded conditions. There are very limited alternative means to keep commodities cooler. Although certain varieties with longer shelf life under air temperature have long been grown in Nigeria (e.g., tomatoes with harder skins that slow spoilage), the ability to preserve freshness is limited.

In contrast, major horticulture commodities stored in cold storage in these markets tend to maintain their freshness for 10–20 days (ranging from 10.1 days for tomato to 20.4 days for watermelon). In terms of differences, the extended shelf life ranges from 6.9 days for tomatoes to 15.4 days for eggplants. In terms of ratios, shelf life is extended by 2.5–5.7 times (ranging from 2.5 times for spring onions to 5.7 times for lettuce). The extended shelf life at these magnitudes for horticulture commodities may have substantial economic benefits in horticulture markets in countries like Nigeria, where timely transactions are challenging due to poor infrastructure and high transaction costs.

Panel A of Table 24.2 shows changes in sales volumes, profitability, and reported reductions in food loss for cold storage users by comparing pre- and post-intervention situations. It is important to note that cold storage users are not a random sample of market agents in the intervention markets, so the figures presented are subject to selection bias. They are asked to pay a small amount of user fees too. First, they experienced increased sales volumes and profitability and decreased wastage by using cold storage. If commodities are restricted to those stored in cold storage, the comparison of wastage between the pre- and post-intervention stages shows a significant improvement in reducing wastage; that is, cold storages make the rate of wastage nearly zero.

Table 24.2 Impacts (Authors’ calculations based on IFPRI Survey 2020)

Next, we aimed to resolve the selectivity bias of cold storage users by applying propensity score matching methods to the difference-in-difference specifications. Panel B of Table 24.2 summarizes the impacts of cold storage on the same outcome variables: sales volumes, profitability, and reported reductions in food loss, estimated at the market-agent level. The results suggest that cold storage led to statistically significant improvements in many of these outcomes. It has led to net increases in sales volumes by as much as 69% and net increases in the share (%) of net revenues to gross revenues by 13% points. It has also led to a net reduction in the share (%) of the value of loss to total gross revenue by 11.2% points for items put in cold storage, which was substantial enough that, even when considering all items sold by market agents, the loss was reduced by 4.7% points at the market-agent level.

These effects are largely consistent with other propensity score matching specifications. The estimated Rosenbaum bounds suggest that statistical significance holds even when the odds ratio of using cold storage changes by about 40%, meaning that the results are reasonably robust against hidden bias, which propensity score matching results are sometimes sensitive to. The increase in sales may be due to reduced loss and supply responses to increased prices.

4 Cost-Benefit

In this section, we compare the internal rate of return among solar energy, diesel generator and grid electricity to run the cold storage to investigate the relative economic viability of solar-powered cold storage in the empirical setting quite common in rural areas of developing countries.

A simple framework is laid out here. The probability of being consumed is ${P}^{j}=\mathrm{Pr}[{t}_{c}<{\tilde{t }}_{j}]$ where ${t}_{c}$ is the time consumed and $\tilde{t }$ is the time spoiled. Let $j$ denote no storage ($j=1$) and cold storage ($j=2$). Here ${\tilde{t }}_{j}$ is larger in cold storage than in no storage, therefore ${P}^{1}<{P}^{2}$. The probability of being spoiled is $1-{P}^{j}$. Let $y$ and $q$ denote the quantity and retail price vectors, respectively. That is, $y=[{y}_{1},{y}_{2},\dots .,{y}_{N}]$ and $q=[{q}_{1},{q}_{2},\dots .,{q}_{N}]$. The expected value of commodities consumed is $\sum_{i=1}^{N}{P}_{i}^{j}{y}_{i}{q}_{i}$, where $j=\mathrm{1,2}$. The net benefit of storing commodities in cold storage is $\Delta =\sum_{i=1}^{N}{(P}_{i}^{2}{-{P}_{i}^{1})y}_{i}{q}_{i}$. If ${P}_{i}^{2}\approx 1$, it is $\Delta \approx \sum_{i=1}^{N}(1{-{P}_{i}^{1})y}_{i}{q}_{i}$.

Net benefit relative to no storage comes from the difference in food loss rate (probability) between cooled and non-cooled conditions. For simplicity, we assume that the food loss rate is almost zero if cooled in storage and that commodities are replaced every five days (Fig. 24.2). In the following calculation, we use the utilization data from the Dutse market (Table 24.1). Though the net benefit from food loss reduction is not only in economic gains but can also include positive health effects through preserved nutritional values in horticultural commodities, the latter is not included in our analysis below. For brevity, operational costs are assumed to be negligible in all scenarios. As mentioned, there are two alternative scenarios compared to solar power: diesel-generated electricity and grid electricity.

We consider three cases differentiated by food loss rate: Case 1 (25%without cold storage), Case 2 (20%), and Case 3 (15%). The monthly internal rate of return is shown in Table 24.3.

Table 24.3 Cost-benefit (Authors’ estimations)

First, in Case 1, we see relatively large rates of return in the grid (39.5%) and solar electricity (33.2%). The rate of return for diesel-generated electricity is 11.9% due to relatively large fuel costs incurring monthly. The large rates of return for the grid and solar scenarios may be due to a relatively high food loss rate in Case 1. Second, in Cases 2 and 3, we lowered the food loss rate to more realistic figures, as shown in Table 24.2. We obtained rates of return for the grid and solar scenarios, respectively, 12.2% and 11.4% in Case 2 and 9.0% and 8.6% in Case 3. The diesel scenario shows 8.3% and 5.8%, respectively, which are much lower than the grid and solar options.

The above analysis shows that the internal rates of return for the grid and solar power scenarios are relatively similar and that the diesel generator may not be a practical option, at least in the context of Nigeria. However, it is important to note that, in general, grid electricity is available in urban residential areas only. In fact, 79% of the households in the northeast region have no access to grid electricity. Thus, the grid option is not a practical option for cooling, which is needed mostly in rural farming or local market areas.

5 Conclusions

Cooling technologies are becoming increasingly integral elements of global food system transformation. For example, these technologies can potentially lead to a greater and more stable supply of perishable horticulture commodities and a reduction in food loss and waste, income growth for low-income producers and traders through strengthened linkages with more modern markets, and food and nutrition security for consumers through increased consumption of micronutrients. In recent years, the rapidly declining cost of off-grid solar electricity has enhanced the potential economic viability of providing such cooling technologies in disadvantaged regions like northeast Nigeria, where access to a conventional source of grid electricity has remained largely unavailable.

Complementarities across investments and coordination failures have been an important idea for industrialization in the literature on economic development (e.g., Bardhan and Udry 1999). The big push was proposed by Rosenstein-Rodan (1943) with insight from backwardness in Eastern Europe’s early stage of development, and a more recent version of his big push theory was translated into a game-theoretic framework of strategic complementarities and multiple equilibria (Murphy et al. 1989). In this line of thoughts, one crucial component, which is missing or insufficient among the investments that exhibit high mutual complementarities, blocks overall economic development. Electricity is a good example that has high complementarities with many economic activities. The investment to generate electricity has been heavy and indivisible until the emergence of highly divisible solar panels. Our study from northeast Nigeria shows a clear case that a technological innovation, which overcomes the lack of such an investment, can trigger economic transformation.

6 Recollections of Professor Keijiro Otsuka

At the early stage of my career as a development economist, I was fortunate to meet Professor Otsuka, who mentors junior researchers through his research activities. The future of small farms in Asia was one of the topics we worked on involving a few of my colleagues from the International Food Policy Research Institute (IFPRI) and China. His field-based empirical works and economic theories are closely linked, offering strikingly intuitive insights into many issues. Joining the National Graduate Institute for Policy Studies (GRIPS) as a faculty jointly appointed from IFPRI, I was also able to witness his strong passion for educating young generations from developing countries. I am honored to be part of the Festschrift, celebrating his lifetime achievements in diverse areas of agricultural and development economics–Futoshi Yamauchi.