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Averting Expenditures and Willingness to Pay for Electricity Supply Reliability

Author

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  • 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. Carlsson, Fredrik & Martinsson, Peter, 2008. "Does it matter when a power outage occurs? -- A choice experiment study on the willingness to pay to avoid power outages," Energy Economics, Elsevier, vol. 30(3), pages 1232-1245, May.
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    Cited by:

    1. Hashemi, Majid, 2021. "The economic value of unsupplied electricity: Evidence from Nepal," Energy Economics, Elsevier, vol. 95(C).

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    More about this item

    Keywords

    averting expenditures; electricity; reliability; revealed preference; willingness to pay;
    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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