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A firm-level analysis of outage loss differentials and self-generation: Evidence from African business enterprises

Musiliu Oseni and Michael Pollitt ()

Energy Economics, 2015, vol. 52, issue PB, 277-286

Abstract: This study examines the outage loss differential between firms that engage in backup generation and those that do not. Unmitigated outage losses were estimated to be US$2.01–23.92 per kWh for firms engaging in self-generation, and range from US$1.54 to 32.46 per kWh for firms without self-generation. We also find that firms engaging in self-generation would have suffered additional 1–183% outage losses had they not invested in self-generation. On the other hand, firms without self-generation would have reduced their outage losses by around 6–46% if they had engaged in self-generation. Further analyses, however, reveal that, although engagement in self-generation reduced outage losses, a firm engaging in self-generation may still suffer a greater unmitigated outage loss relative to a firm without a backup generator. The relative outage losses depend on the relative vulnerability of the operations of the two sets of firms to power interruption, and the relative generating capacity of a self-generating firm to its own required electricity loads. Policy reforms that allow firms, whose operations are highly vulnerable to outages, to make a binding contract with utilities in order to get preferential supply are recommended.

Keywords: Self-generation; Outage loss; Firms; Value of lost load; Sub-Saharan Africa; South Asia (search for similar items in EconPapers)
JEL-codes: L94 Q41 L6 L8 (search for similar items in EconPapers)
Date: 2015
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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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