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

Resource and Energy Economics, 2021, vol. 64, issue C

Abstract: Households’ demand for electricity continues to increase. This trend per se should indicate increased disutility from power outages. Additionally, 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 (WTP) to avoid power outages in 2004 and 2017, we investigate whether the WTP has changed. The WTP is assessed for power outages of 1- and 4 -h durations, and whether it is planned or unplanned. We find three main differences: (i) the proportion of households stating zero WTP to avoid power outages decreased significantly from 2004 to 2017, meaning that more households are willing to pay to avoid a power outage in 2017 than in 2004; (ii) the overall WTP was considerably higher in 2017 than in 2004, but (iii) the conditional WTP, that is, WTP for those that have a positive WTP for an outage, has decreased. These results have implications for how regulators incentivize and regulate electricity suppliers, because the results suggest that a reliable supply of electricity is of greater importance now than what the literature has suggested.

Keywords: Power outage; Stated preferences; Sweden (search for similar items in EconPapers)
JEL-codes: D12 Q40 Q41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Working Paper: Past and present outage costs – A follow-up study of households’ willingness to pay to avoid power outages (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:64:y:2021:i:c:s0928765521000014

DOI: 10.1016/j.reseneeco.2021.101216

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