Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 776: 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 ()
Additional contact information
Fredrik Carlsson: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden
Mitesh Kataria: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden
Elina Lampi: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden
Peter Martinsson: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden
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.
Keywords: Power outage; stated preferences; Sweden
19 pages, October 2019
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