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Economic consequence analysis of electric power infrastructure disruptions: General equilibrium approaches

Ian Sue Wing and Adam Z. Rose

Energy Economics, 2020, vol. 89, issue C

Abstract: We develop a stylized two-sector analytical general equilibrium model that elucidates mechanisms of adjustment to widespread, long-duration electric power disruptions. Algebraic solutions illustrate the relative importance of resilience through producer and consumer input substitutability and mitigation investment in backup infrastructure capacity in moderating the economy-wide costs of outages. Simulations of the impacts of a two-week power outage on California's Bay Area economy using both the analytical model and a computational general equilibrium model yield welfare losses that are substantially smaller than stated-preference estimates of willingness to pay. Results highlight the role of resilience in moderating consequences of energy supply shocks.

Keywords: Electricity disruptions; Analytical general equilibrium modeling; Reliability; Resilience (search for similar items in EconPapers)
JEL-codes: C63 D58 L94 Q43 Q54 R13 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.eneco.2020.104756

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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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