Solar Power isn't Feasible!

Solar Power isn't Feasible!
This cartoon was on the cover of the book "SolarGas" by David Hoye. It echoes the Sharp Solar slogan "Last time I checked nobody owned the sun!"

Sunday, March 2, 2008

Willingness to Pay for the Perfect Hot Water System?

When I began this thesis I was misled by data from the GTZ stating that up to 3/4 of the residents of the part of Manshiyat Nasser where I work had no hot water.

What they should have said was that 3/4 of the people had NO WATER HEATING "WHITE GOODS" , i.e., no appliances specifically and solely purchased for the purpose of heating water.

By saying that 75% of the poor had "no hot water" the authors of the report conjured up images of people shivering under a shower of freezing water in the winter or not bathing at all.

Because I have been raised a privileged westerner, like most of the people who frame the experiences of the underprivileged and set the terms of their discourse with the world of power, my understanding of human needs and wants was constrained by my own narrow experience and limited imagination. I had grown accustomed to bathing by either immersing myself in a tub filled with hot water or standing under the luxuriating spray of heated water in what we call "a shower"; I gained experience with the idea of ladling cold water over myself in the bathroom every morning when I lived in Indonesia and took "Mandis"; there it was a cultural practice that was even found in the homes of the well-to-do. I hated it, however, just as I hated bathing in the icy river when I worked in the rainforest for a year, especially in the mornings when it was still quite chilly. On one trip to stay with my friends the Samsoedins in Bogor I even brought a product with me from California called a "solar shower" (a five gallon reinforced black plastic bag with a shower head attachment and a foot pump for water pressure); I had to wait until 11:00 am to bathe, by which time it was warm enough to use cold water anyway, but I was addicted to the feeling of hot water pouring over me. Something about cold water running down my back makes me shiver both figuratively and literally.

Because of my cultural heritage I stupidly went along with the assessment that hot water was something you had to have a bathroom equipped with a special set of hot water pipes and either a bathtub or shower to experience. If you lacked these amenities, I reasoned from my experience, you were probably like the Indonesians I knew-- you simply didn't use hot water to bathe. Thus, when I went to visit households in inner city Cairo and found a preponderance of families who lacked hot water pipes, sinks, shower heads and tubs, I also believed they "had no hot water". The assessment of the GTZ survey, I thought, had to be true.

In the fall one chilly day the idea was driven home by a survey visit to a home wherein, just before we sat down to ask the family questions about hot water use, one of the son's proceeded to wash his hair in the cold water from a standpipe -- the only source of water in the house -- at the entrance to the dwelling.

This visual confirmation to the idea that people in homes without hot water systems were without hot water itself had been reinforced by verbal exchanges with other young men (like our colleague Mahmoud Dardir) who pride themselves in their ability to bathe in cold water, and in conversations with bourgeois Egyptian employees of U.S. AID (themselves privileged beneficiaries of hot water systems) who recommended against funding our small infrastructure grant for building solar hot water systems, claiming that "the poor don't need hot water".

They stated that Egypt was, by and large, a hot country, and thus hot water was a "luxury good", not an appropriate concern for poor people.

Anybody who has spent a winter in Egypt, however, knows that winter nights and mornings are quite cold, with air temperatures dropping as low as 10 degrees C and water temperatures entering the house at about 14 C. This is by no means freezing, but it is cold enough to be unbearably uncomfortable. Certainly I have never found a bourgeoisie Egyptian whose home is without a hot water heater.

Still, the suspicion remained that perhaps the poor didn't rank hot water as among the most important goods and services they might obtain, and that the opportunity costs of getting hot water were too high to sacrifice any other goods for it, ceterus paribus.

Originally, when we designed our survey, we were thus under the impression that what we were trying to determine was "the value of hot water to the poor."

A low Willingness to Pay for hot water appliances would be suggestive that hot water was, as the bourgeois claimed, a luxury good - something the poor didn't really need. This impression was further reinforced by a delegate to Cairo from Ghana attending an IDRC conference on water. She said "hot water is a luxury to the villagers I work with -- they have greater needs, such as food and clean water to begin with." Ghana, of course, is a tropical country without chilly winters.

Thus the first thing we needed to determine was the importance of hot water to the Cairo poor.

Three questions in the survey approached this issue:

10.6 How important is hot water to you?
10.7 Does the WAY you obtain your hot water make a difference to you?
10.11 During what times of the year do you use hot water?

I will deal with each of these in turn.

10.6 How important is hot water to you?

10.6.1 Very important
10.6.2 Important
10.6.3 Not so important
10.6.4 Not important at all

This first question is a standard formulation that generally should have 5 possible answers so that the middle answer reflects neutrality. The survey team I hired to help refine the survey and conduct it in the field threw out the middle answer after field testing, stating that nobody was giving neutral answers and that the middle answer created a larger split between "important" and "not so important" than was realistic; "not so important" was considered a neutral answer, beneath which "not important at all" was the only logical choice. The idea of a "neither here nor there" or "so-so" answer differing from "not so important" was lexicographically difficult to establish in colloquial arabic.

When we used this question as stated above these were the results:

Zabaleen: 221/225 or 98.2% answered "very important"; 4/225 or 1.8 % answered "important", while 0 answered "not so important" or "not important at all".

Darb Al Ahmar: 174/231 or 75.3% answered "very important"; 52/231 or 22.5% answered "important"; 5/231 or 2.2% answered "not so important" and 0 answered "not important at all".

While these data don't disprove the assumption of the bourgeoisie that "the poor don't need hot water" they certainly contradict any assumption that hot water isn't important to the poor. One would have to compare responses from a similar question posed in Indonesia or Ghana to see how people in a truly "hot country" would react.

Focus groups explained the differences between the Zabaleen and Darb Al Ahmar communities with Zabaleen respondents stating "hot water is of particular urgency to those of us who must live and work in garbage, particularly organic waste, surrounded by pigs and other animals. Without hot water it is impossible to get clean, particularly when dealing with grease, fats and oils, blood and other organic materials." One family showed me greasy pots and pans and grease marks on their skin and clothes and poured cold water on the dirty areas and challenged me to get them clean, even with detergent. "Hot water is necessary to help melt and dissolve the fatty material" they said.

The historic Darb El Ahmar community felt similarly, but some said "we wash here five times a day at the mosque, and some of our jobs are relatively clean, so hot water isn't mandatory". This attitude, however, was only found in 2.2% of the sample. It does, however, speak to the logic of the Islamic injunction to wash at least five times a day -- one must assume a long history of resource deprivation in this part of Cairo -- certainly wood-based fuels have always been scarce in Middle Eastern/North African countries, and prior to the discovery of fossil fuels and delivery infrastructure there was little to burn to create hot water. The public baths were heated by waste heat created from the burning of waste paper gathered by the Wahiyas (predecessors of the Zabaleen) to prepare Fol (Fava beans), so there was a long tradition of using garbage to heat water, though this carried the problematic of smoke creation. Electricity didn't come into the neighborhood until quite recently, and white goods (electric and gas heaters) only began to appear in these neighborhoods within the decade. Thus, a religious mandate to wash the hands, feet, hair, face, behind the ears, the armpits and the genitals at the cold water faucet of the mosque five times a day compensated for constrained opportunities to take the long baths that hot water makes possible. Frequency vs. Amplitude, so to speak.

Observing this in what is still called "Medieval Cairo" one has only to compare this to what was going on in Medieval Europe, where the hot water problematic was not accompanied by any religious pressure to wash regularly; the European poor (and even many upper class) often bathed as infrequently as once a week, and while this did wonders for the perfume market, it was terribly unhygenic, and one of the reasons the Arabs, who had a venerable history of public baths and were aware of the Roman attempts to bring these public goods to their European colonies over a millenium ago (visit the town of "Bath" in England to see!) considered Medieval and "Renaissance"Europeans "barbarians" ; a clean people like the Arabs, living in an area of profound water scarcity, could never quite understand a reluctance to bathe among people from a region of abundant water!

We can only surmise that the difficulty of preparing hot water, particularly after the enclosure act drove so many peasants off their land and turned forests and the wood fuel they contained into the inviolate property of the nobles, made common Europeans reluctant to wash all the time; this hypothesis, if true, would only underscore why it is important to provide the poor, living in unhygenic conditions, easy access to affordable hot water! Supporting this idea is the history of the European and American public bath movement, started by philanthropists in the late 19th century to help solve the health problems accumulating in areas of the urban poor.

Our next question looked at whether the form of hot water delivery made much of a difference:

10.7 Does the WAY you obtain your hot water make a difference to you?

10.7.1 Yes
10.7.2 No
10.7.3 Other

This was a rather weakly worded question by itself. Originally it was part of an attempt to define the importance of various attributes of hot water systems for some contigent valuation or conjoint analysis assessment. The long survey, which we abandoned after extensive field testing because of respondent confusion and fatigue, asked people to rank the relative importance of such things as "ease of use", "push button/valve turning availability", "time needed to prepare hot water", "safety" etc. in a matrix. Some of the essence of these questions were individually retained and will be addressed later.

The base question about the "way in which you obtain hot water" returned the following results:

Zabaleen: 67/225 or 29.8 % answered "it doesn't make a difference" while 158/225 or 70.2% felt it "does make a difference".
Darb El Ahmar returned similar results: 71/231 or 30.7% stated "doesn't make a difference, while 158/231 or 68.4% felt it "does make a difference".

It is interesting that in this regard both communities appear similar in their attitudes for it suggests that even though they differ greatly in their solution to the hot water provision problem, they are both acting out of a well defined preference; i.e. they both care HOW they get their hot water. This would not seem to be the result one would obtain if "the poor did not need hot water".

I stress this point because policy makers who make such glib assumptions are responsible for the direction of funding and cross subsidies, and if they believe that hot water provision is not a concern of the poor they will neglect this issue, as they have. Our study at least begins to offer a remedy to this oversight by asking the poor directly what the value of hot water is to them.

To explore the argument used by the Egyptian upper class and outside funding agencies that "Egypt is a hot country; therefore hot water is a luxury that we should not concern ourselves with, given other development priorities, we explored the following question of seasonality:

10.11 During what times of the year do you use hot water?

10.11.1 All year long
10.11.2 Only during the Winter
10.11.3 Other _________________

In the Zabaleen 185/224 or 83% stated that they used hot water all year long while 39/224 or 17% responded that they only used hot water in the winter. (1 respondent failed to answer the question).

In two cases here we had disagrements between husbands and wives; in record T2 the husband declared that the family only used hot water in the winter while the wife contradicted him and said she used hot water all year long, particularly for washing clothes. In record T4 the husband stated that he only used hot water in the winter but that his wife had to use hot water for washing clothes and for the children in the summer. We have labelled the former case a "winter use only" scenario and the latter an "all year use scenario" given that in this community water heating for clothes washing often still goes on outside the home on a kanoon, while bathing occurs using the stove. In the case of records T2 and T4 the families were recorded as using a Kanoon currently for that purpose.

In Darb Al Ahmar, by contrast, 129/231 or 56% used hot water all year long, while 102/231 or 44% used hot water only during the winter.

This is interesting because, from the greater number of heating appliances in Darb Al Ahmar, one would think that this would be the community where more people use hot water all year long. It is suggestive that the percentage of people using hot water all year long is nearly equal to the number of people owning electric water heaters -- I will be doing a correlational analysis to see if it is the people with certain heating appliances who are using them all year or not.

It became clear to us that we were not looking at the value of hot water per se in this dissertation, but at the value of CONVENIENT HOT WATER. Since almost everybody in the survey declared that hot water was either "very important" or "important" and most people did use hot water all year round, whether or not they had a water heating appliance per se, it was clear that we were not looking at communities who "had no hot water" as the GTZ survey had mistakenly concluded. We found that hot water was universal, whether provided by consumer white goods or by boiling on some kind of stove. Thus it became absurd to ask "what is the value of hot water" to these communities. They had already indicated that value through revealed preference information (i.e., how much they were currently paying to obtain the good in question).

What we were looking at, if we were going to recommend policy for changes in hot water provision infrastructure (for example, subsidies for solar hot water systems) was "the value of a more convenient hot water delivery system." To get at willingness to pay for hot water convenience, we asked the following question at the very end of the survey:

12.1 If you could get a water heating system that offered instant on-demand heating (waiting time less than 2 minutes for water to be hot), was safe, provided hot water 24 hours a day (because of insulated hot water storage tanks) and which had monthly running costs that averaged less than 5 LE per month, but cost about 1000 LE to purchase and install, would you be interested in purchasing such a system if you could buy it on credit?

12.1.1 Yes
12.1.2 No
12.1.3 Other ______________________

If yes: How much would you be willing to pay as a downpayment?
______________ How much would you be willing to pay per month?
______________ How long would you be willing to make monthly payments?

Among the Zabaleen, 149/225 or 66.2% were willing to pay for such an improved hot water system.

Of the 66.2% willing to pay, the average WTP downpayment was 169.40 LE.
and the average monthly payment was 40 LE. over an average of 8 months.
Thus the average WTP in total is: 490 LE

75/225, or 33.8 %, were unwilling to pay anything to improve their hot water delivery system.

By contrast, in Darb Al Ahmar 54/229 or 23.6 % respondents answered the question affirmatively.

The average downpayment was 131.75 LE. and the average monthly payment was 28.20 LE. over an average of 9 months.
Thus the total average WTP is: 388.61 LE

175/229 (76.4 %) were uninterested in paying for any improvement of hot water provision.

This data may indicate that, on the whole, people in Darb Al Ahmar are relatively more satisfied with the hot water solutions they currently enjoy, while the Zabaleen are not. It could also reflect a bias in the Darb El Ahmar community from their experience with the Aga Khan Trust for Culture -- in home restoration previous WTP studies indicated that the community could reasonably afford 30% of the costs of renovation. Since then the AKTC has been working with a 30/70 deal, providing a 70% subsidy to homeowners wanting to improve their conditions.

Since we suggested an improved hot water system could cost roughly 1000 LE (we never said "solar hot water system", and this figure is actually 3 to 4 times less than the actual cost of an unsubsidized 4-6 person solar hot water system) it may be that people roughly assumed they could get up to 70% of the cost of a 1000 LE system paid by the development agency and made their mental calculations accordingly.

Among the Zabaleen there is no such history of subsidies for household improvements, so the figure might be more accurate for that neighborhood. The useful thing now is to compare these figures of stated WTP with the revealed preference information gained from asking the question that preceeed "how important is hot water to you":

10.5 How much did you pay for your current hot water system (capital costs)?

In the Zabaleen the average of the aggregate figure of all households is 531 LE, while the average of the aggregate figure for all households in Darb El Ahmar is 347.42 LE.

In this cursory comparison it is interesting to note that the average WTP of each community closely matches what they are already paying, on average, for hot water systems. The idea emerges that people in general are not willing to pay much more than they are already paying for a good, although the literature states that most people actually pay more than they say they are willing to pay, that is, they tend to underestimate or undervalue things when asked (perhaps for fear of inflating the costs).

For a more nuanced analysis we must compare only the average of the set of people who answered affirmatively and see how what they say they are willing to pay compares with what they are actually paying, and we must note the variance in both what consumers paid and the variance in what they say they are willing to pay for improvements.

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