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Economic consequence analysis of electric power infrastructure disruptions: General equilibrium approaches

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  • Sue Wing, Ian
  • Rose, Adam Z.

Abstract

We develop a stylized two-sector analytical general equilibrium model that elucidates mechanisms of adjustment to widespread, long-duration electric power disruptions. Algebraic solutions illustrate the relative importance of resilience through producer and consumer input substitutability and mitigation investment in backup infrastructure capacity in moderating the economy-wide costs of outages. Simulations of the impacts of a two-week power outage on California's Bay Area economy using both the analytical model and a computational general equilibrium model yield welfare losses that are substantially smaller than stated-preference estimates of willingness to pay. Results highlight the role of resilience in moderating consequences of energy supply shocks.

Suggested Citation

  • Sue Wing, Ian & Rose, Adam Z., 2020. "Economic consequence analysis of electric power infrastructure disruptions: General equilibrium approaches," Energy Economics, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:eneeco:v:89:y:2020:i:c:s0140988320300955
    DOI: 10.1016/j.eneco.2020.104756
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    References listed on IDEAS

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    Cited by:

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    3. Timilsina,Govinda R. & Hochman,Gal & Song,Ze, 2020. "Infrastructure, Economic Growth, and Poverty : A Review," Policy Research Working Paper Series 9258, The World Bank.
    4. Hashemi, Majid, 2021. "The economic value of unsupplied electricity: Evidence from Nepal," Energy Economics, Elsevier, vol. 95(C).

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    More about this item

    Keywords

    Electricity disruptions; Analytical general equilibrium modeling; Reliability; Resilience;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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