Past and present outage costs – A follow-up study of households’ willingness to pay to avoid power outages

Fredrik Carlsson, Mitesh Kataria (), Elina Lampi and Peter Martinsson

No 776, Working Papers in Economics from University of Gothenburg, Department of Economics

Abstract: Households’ demand for electricity continues to increase. This trend per se should indicate increased disutility from power outages. On the other hand, batteries and other back-up systems have been improved and the frequency and duration of outages have been reduced in many countries. By comparing the results from two stated preference studies on Swedish households’ willingness to pay to avoid power outages in 2004 and 2017, we investigate whether the willingness to pay has changed. The willingness to pay is assessed for power outages of different durations, and whether it is planned or unplanned. We find three main differences: i) The proportion of households stating zero willingness to pay to avoid power outages decreased significantly from 2004 to 2017 and ii) the overall WTP was considerably higher in 2017 than in 2014, but iii) the WTP for duration of an outage has decreased. These results have implications for how regulators incentivize and regulate electricity suppliers since they suggest that a reliable supply of electricity is of greater importance now than what earlier studies have suggested.

Keywords: Power outage; stated preferences; Sweden (search for similar items in EconPapers)
JEL-codes: D12 Q40 Q41 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2019-10
New Economics Papers: this item is included in nep-dcm, nep-ene, nep-eur, nep-reg and nep-upt
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Journal Article: Past and present outage costs – A follow-up study of households’ willingness to pay to avoid power outages (2021)
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