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The Opportunity Cost of Electricity Outages and Privatization of Substations in Nepal

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Author Info

  • Roop Jyoti

    (Ministry of Finance, Nepal)

  • Aygul Ozbafli

    ()
    (Girne American University, North Cyprus)

  • Glenn Jenkins

    ()
    (Queen's University, Canada)

Abstract

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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File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1066.pdf
File Function: First version 2006
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Bibliographic Info

Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1066.

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Length: 24 pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:qed:wpaper:1066

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Keywords: electricity supply; reliability; opportunity costs; privatization;

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References

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  1. Michael Beenstock & Ephraim Goldin & Yoel Haitovsky, 1997. "The Cost of Power Outages in the Business and Public Sectors in Israel: Revealed Preference vs. Subjective Valuation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 39-61.
  2. Benjamin Bental & S. Abraham Ravid, 1982. "A Simple Method for Evaluating the Marginal Cost of Unsupplied Electricity," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 249-253, Spring.
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Cited by:
  1. Azam Chaudhry, 2010. "A Panel Data Analysis of Electricity Demand in Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 15(Special E), pages 75-106, September.
  2. Karen Fisher-Vanden & Erin T. Mansur & Qiong (Juliana) Wang, 2012. "Costly Blackouts? Measuring Productivity and Environmental Effects of Electricity Shortages," NBER Working Papers 17741, National Bureau of Economic Research, Inc.

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