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The economic value of unsupplied electricity: Evidence from Nepal

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  • Hashemi, Majid

Abstract

Employing two complementary pieces of information from a nationally-representative sample of grid-connected consumers in Nepal - revealed coping behavior and stated willingness to pay (WTP) - this paper analyzes the demand for electricity reliability. First, ex-ante WTP values are estimated for households and firms under different electricity tariff categories. The results indicate substantial heterogeneity in needs and preferences for electricity reliability across and within residential and non-residential tariff categories. The obtained WTP values are then regressed on a set of household- and firm-level observable characteristics to determine the predictors of demand for reliability. Third, predictions by ex-ante WTP estimates are validated using ex-post changes in electricity consumption levels due to countrywide reliability improvements in Nepal. For policy-making purposes, the findings highlight the importance of conducting a detailed analysis of households' preferences and firms' opportunity costs when evaluating the costs and benefits of electricity reliability investments.

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  • Hashemi, Majid, 2021. "The economic value of unsupplied electricity: Evidence from Nepal," Energy Economics, Elsevier, vol. 95(C).
    • Handle: RePEc:eee:eneeco:v:95:y:2021:i:c:s0140988321000293
    DOI: 10.1016/j.eneco.2021.105124
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    Cited by:

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    2. Gao, Shuaizhi & Zhou, Peng & Zhang, Hongyan, 2023. "Does energy transition help narrow the urban-rural income gap? Evidence from China," Energy Policy, Elsevier, vol. 182(C).
    3. Hashemi, Majid & Jenkins, Glenn, 2022. "Can privatization of distribution substations improve electricity reliability for non-residential customers? An application to Nepal," Utilities Policy, Elsevier, vol. 74(C).
    4. Koirala, Dhiroj Prasad & Acharya, Bikram, 2022. "Households’ fuel choices in the context of a decade-long load-shedding problem in Nepal," Energy Policy, Elsevier, vol. 162(C).
    5. Chen, Hao & Yan, Haobo & Gong, Kai & Geng, Haopeng & Yuan, Xiao-Chen, 2022. "Assessing the business interruption costs from power outages in China," Energy Economics, Elsevier, vol. 105(C).
    6. Majid Hashemi, 2021. "The Effect of Reliability Improvements on Household Electricity Consumption and Coping Behavior: A Multi-dimensional Approach," Working Paper 1469, Economics Department, Queen's University.
    7. Majid Hashemi & Glenn Jenkins, 2021. "The Economic Benefits of Mitigating the Risk of Unplanned Power Outages," Working Paper 1468, Economics Department, Queen's University.
    8. Hasan M. Salman & Jagadeesh Pasupuleti & Ahmad H. Sabry, 2023. "Review on Causes of Power Outages and Their Occurrence: Mitigation Strategies," Sustainability, MDPI, vol. 15(20), pages 1-34, October.

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    More about this item

    Keywords

    Power outages; Coping behavior; Contingent valuation; Willingness to pay; Electricity reliability; Low-income countries; Nepal;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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