Residential renewable energy adoption. Does financial literacy matter?

Clean energy production systems are the most effective and sustainable ways of protecting the natural environment from pollution. Sadly, fossil fuels remain a significant energy source in most emerging economies primarily due to financial challenges. Using Ghana's renewable energy policy initiatives as a case analysis, the study adopted a multiple-stage random sampling approach to sample household heads (N = 413) across two regions in Ghana to assess the adoption of renewable energies' impact of financial literacy among urban households by applying the two-stage residual inclusion technique. The study's findings depict that household income and RE cost are more significant variables impacting RE adoption, whereas the focal study variable, i.e., financial literacy, has some positive effect but at a lower level than these two variables (household income and RE cost). The heterogeneous analysis regarding household income level shows that financial literacy increases the ability to adopt renewable energy in high-income households than low-income households, confirming the significant impact of household income on RE adoption. The study results imply that policymakers in low-income countries should provide tax incentives for importers of renewable energy products/appliances and subsidize the prices for consumers to improve renewable energy technology use. Also, the provision of job opportunities and income diversification strategies education to improve household incomes should be a priority. Moreover, financial literacy through financial education programs in the formal education sector and the mass media to improve citizens' financial skills and knowledge should be prioritized. These recommendations have the potential to advance the financial and economic wellbeing of citizens in facilitating renewable energy transition.

Automated summary

This study examines the impact of financial literacy on the adoption of renewable energy in urban households in Ghana. The findings suggest that household income and the cost of renewable energy are significant factors influencing its adoption, while financial literacy also plays a positive role, albeit at a lesser extent. The study recommends tax incentives for importers of renewable energy products, subsidies for consumers, job opportunities, income diversification strategies, and financial education programs to promote the transition to renewable energy.