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Estimation of Households’ and Businesses’ Willingness to Pay for Improved Reliability of Electricity Supply in Nepal

Author

Listed:
  • Naghmeh Niroomand

    (Cambridge Resources International.Inc)

  • Glenn P. Jenkins

    (Department of Economics, Queen's University, Kingston, Canada and Eastern Mediterranean University, North Cyprus)

Abstract

For the decade prior to 2016 Nepal suffered from the worst electricity shortages in South Asia. During this period load shedding occurred for up to 18 hours a day when hydropower generation is low. This research uses parametric and non-parametric models to estimate households’ and businesses’ willingness to pay (WTP) for improved reliability of electricity services in Nepal. A contingent valuation (CV) survey was completed by 1,800 households and 590 businesses. The parametric models are estimated using Logit regressions. The median, Turnbull and the Kriström mean estimation approach were used for the non-parametric estimations. Both households and businesses are willing to pay more to get from a 50% reduction to a complete elimination of outages than they are willing to pay to get from their current situation to a 50% reduction in outages. This difference in the estimates of the WTP for these two options is even more important in the case of businesses than for households. It is estimated that the annual benefit in 2017 from improving the reliability of the electricity service would be approximately US$324 million with a present value over 20 years of between US$2 and 3.8 billion.

Suggested Citation

  • Naghmeh Niroomand & Glenn P. Jenkins, 2018. "Estimation of Households’ and Businesses’ Willingness to Pay for Improved Reliability of Electricity Supply in Nepal," Development Discussion Papers 2018-05, JDI Executive Programs.
    • Handle: RePEc:qed:dpaper:404
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    Keywords

    : Nepal; willingness to pay; electricity outage; contingent valuation; non-parametric methods estimation Electricity.;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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