Cost of power outages for manufacturing firms in Ethiopia: A stated preference study

Fredrik Carlsson, Eyoual Demeke, Peter Martinsson and Tewodros Tesemma

Energy Economics, 2020, vol. 88, issue C

Abstract: A reliable supply of electricity is essential for an operation of a firm. Nevertheless, in most developing countries electricity supply is highly unreliable. In this study, we estimate the cost of power outages for micro, small, and medium-sized enterprises in Addis Ababa, Ethiopia, using a stated preference survey. We find that the willingness to pay, and thus the cost of power outages, is substantial. The estimated willingness to pay for a reduction of one power outage corresponds to a tariff increase of 16 %. The willingness to pay for reducing the average length of a power outage by 1 h corresponds to a 33% increase. The compensating variation for a zero-outage situation corresponds to about three times the current electricity cost. There is, however, considerable heterogeneity in costs across sectors, firm sizes, and levels of electricity consumption. Policy makers could consider this observed heterogeneity when it comes to aspects such as where to invest to improve reliability, and introduce differentiated electricity contracts.

Keywords: Power outages; Willingness to pay; Choice experiment; Firms; Ethiopia (search for similar items in EconPapers)
JEL-codes: D22 Q41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S014098832030092X
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Cost of Power Outages for Manufacturing Firms in Ethiopia: A Stated Preference Study (2018)
Working Paper: Cost of Power Outages for Manufacturing Firms in Ethiopia: A Stated Preference Study (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:88:y:2020:i:c:s014098832030092x

DOI: 10.1016/j.eneco.2020.104753

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().