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Averting Expenditures and Willingness to Pay for Electricity Supply Reliability

Author

Listed:
  • Naghmeh Niroomand

    (Automotive Powertrain Technologies Laboratory, Empa - Swiss Federal Laboratories for Materials Science and Technology, Switzerland)

  • Glenn P. Jenkins

    (Department of Economics, Queens University, Kingston, Ontario, Canada, K7L3N6 and Cambridge Resources International Inc.)

Abstract

Nepal has suffered from the worst electricity shortages in South Asia. This study is an attempt to measure the willingness to pay for an improved service using a model of revealed preference. Respondents are asked about the actions they are taking to reduce the impact on their household or business of scheduled and unscheduled outages and more stable voltage. We estimate the averting expenditures that were being incurred to compensate for the lack of reliability of the electricity service. The estimated cost of the averting actions as a percentage of the electricity bills is 53 % for households, 47 % for small businesses, 46 % for medium businesses, and 35 % for large businesses. Based on the estimations, we find that in 2017 the annual benefit from improving the reliability of the electricity service would be approximately US$ 188 million with a present value over 20 years of US$ 1.6 billion.

Suggested Citation

  • Naghmeh Niroomand & Glenn P. Jenkins, 2022. "Averting Expenditures and Willingness to Pay for Electricity Supply Reliability," Development Discussion Papers 2022-16, JDI Executive Programs.
    • Handle: RePEc:qed:dpaper:4597
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    References listed on IDEAS

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    1. Chakravorty, Ujjayant & Pelli, Martino & Ural Marchand, Beyza, 2014. "Does the quality of electricity matter? Evidence from rural India," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 228-247.
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    10. Ozbafli, Aygul & Jenkins, Glenn P., 2015. "The willingness to pay by households for improved reliability of electricity service in North Cyprus," Energy Policy, Elsevier, vol. 87(C), pages 359-369.
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    3. Hashemi, Majid, 2021. "The economic value of unsupplied electricity: Evidence from Nepal," Energy Economics, Elsevier, vol. 95(C).

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    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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