Effect of global warming on willingness to pay for uninterrupted electricity supply in European nations

Jed Cohen (), Klaus Moeltner, Johannes Reichl and Michael Schmidthaler
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Jed Cohen: The Energy Institute at Johannes Kepler University
Johannes Reichl: The Energy Institute at Johannes Kepler University
Michael Schmidthaler: The Energy Institute at Johannes Kepler University

Nature Energy, 2018, vol. 3, issue 1, 37-45

Abstract: Abstract Predicted changes in temperature and other weather events may damage the electricity grid and cause power outages. Understanding the costs of power outages and how these costs change over time with global warming can inform outage-mitigation-investment decisions. Here we show that across 19 EU nations the value of uninterrupted electricity supply is strongly related to local temperatures, and will increase as the climate warms. Bayesian hierarchical modelling of data from a choice experiment and respondent-specific temperature measures reveals estimates of willingness to pay (WTP) to avoid an hour of power outage between €0.32 and €1.86 per household. WTP varies on the basis of season and is heterogeneous between European nations. Winter outages currently cause larger per household welfare losses than summer outages per hour of outage. However, this dynamic will begin to shift under plausible future climates, with summer outages becoming substantially more costly and winter outages becoming slightly less costly on a per-household, per-hour basis.

Date: 2018
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DOI: 10.1038/s41560-017-0045-4

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