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

Working paper
Authors Fredrik Carlsson
Mitesh Kataria
Elina Lampi
Peter Martinsson
Publisher University of Gothenburg
Place of publication Gothenburg
Publication year 2019
Published at Department of Economics
Language en
Links hdl.handle.net/2077/61914
Keywords Power outage, stated preferences, Sweden
Subject categories 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.

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