The unreliability of electricity supplies is a major cause of the high cost of manufacturing in developing countries. In this paper, we are able to measure the cost imposed by power outages and suggest some feasible mitigating measures. The study employs a rich, if not unique, set of data from three large manufacturing enterprises in Nepal. Using it, the opportunity costs to the enterprises from lost production from electricity outages can be estimated accurately. Power outages due to substation failure can be separated from other electricity systems failures. An analysis is carried out on the feasibility of privatized electricity substations. We find that this is a very worthwhile capital investment for the private sector to undertake, even when additional generation capacity to improve overall electricity reliability is not justified.
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Paper provided by Queen's University, Department of Economics in its series Working Papers with number
1066.
Find related papers by JEL classification: L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
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