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Past and present outage costs – A follow-up study of households’ willingness to pay to avoid power outages

Author

Listed:
  • Carlsson, Fredrik

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Kataria, Mitesh

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Lampi, Elina

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Martinsson, Peter

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

Households’ demand for electricity continues to increase. This trend per se should indicate increased disutility from power outages. On the other hand, batteries and other back-up systems have been improved and the frequency and duration of outages have been reduced in many countries. By comparing the results from two stated preference studies on Swedish households’ willingness to pay to avoid power outages in 2004 and 2017, we investigate whether the willingness to pay has changed. The willingness to pay is assessed for power outages of different durations, and whether it is planned or unplanned. We find three main differences: i) The proportion of households stating zero willingness to pay to avoid power outages decreased significantly from 2004 to 2017 and ii) the overall WTP was considerably higher in 2017 than in 2014, but iii) the WTP for duration of an outage has decreased. These results have implications for how regulators incentivize and regulate electricity suppliers since they suggest that a reliable supply of electricity is of greater importance now than what earlier studies have suggested.

Suggested Citation

  • Carlsson, Fredrik & Kataria, Mitesh & Lampi, Elina & Martinsson, Peter, 2019. "Past and present outage costs – A follow-up study of households’ willingness to pay to avoid power outages," Working Papers in Economics 776, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0776
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    Cited by:

    1. 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.
    2. Brown, David P. & Muehlenbachs, Lucija, 2023. "The Value of Electricity Reliability: Evidence from Battery Adoption," Working Papers 2023-5, University of Alberta, Department of Economics.
    3. Richard S. J. Tol, 2023. "Navigating the energy trilemma during geopolitical and environmental crises," Papers 2301.07671, arXiv.org.
    4. Majid Hashemi & Glenn Jenkins, 2021. "The Economic Benefits of Mitigating the Risk of Unplanned Power Outages," Working Paper 1468, Economics Department, Queen's University.
    5. 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).
    6. Imaduddin Ahmed & Priti Parikh & Parfait Munezero & Graham Sianjase & D’Maris Coffman, 2023. "The impact of power outages on households in Zambia," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(3), pages 835-867, October.

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    More about this item

    Keywords

    Power outage; stated preferences; Sweden;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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