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The Opportunity Cost Of Electricity Outages And Privatization Of Substations In Nepal

Author

Listed:
  • Aygul Ozbafli

    (Queen's University)

  • Glenn Jenkins
  • Roop Jyoti

    (Ministry of Finance, Nepal)

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.

Suggested Citation

  • Aygul Ozbafli & Glenn Jenkins & Roop Jyoti, 2006. "The Opportunity Cost Of Electricity Outages And Privatization Of Substations In Nepal," Working Paper 1066, Economics Department, Queen's University.
  • Handle: RePEc:qed:wpaper:1066
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    File URL: https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1066.pdf
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    References listed on IDEAS

    as
    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.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Fisher-Vanden, Karen & Mansur, Erin T. & Wang, Qiong (Juliana), 2015. "Electricity shortages and firm productivity: Evidence from China's industrial firms," Journal of Development Economics, Elsevier, vol. 114(C), pages 172-188.
    2. 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.
    3. Fakih Ali & Ghazzawi Nancy & Ghazalian Pascal, 2020. "The Effects of Power Outages on the Performance of Manufacturing Firms in the MENA Region," Review of Middle East Economics and Finance, De Gruyter, vol. 16(3), pages 1-28, December.
    4. Lassana Cissokho, 2015. "Power Outages and the Productivity of Small and Medium Enterprises: the role of Formality," EcoMod2015 8239, EcoMod.

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    More about this item

    Keywords

    opportunity costs; reliability; electricity supply; privatization;
    All these keywords.

    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; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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