IDEAS home Printed from https://ideas.repec.org/a/eee/juipol/v43y2016ipbp151-164.html
   My bibliography  Save this article

A choice experiment on the willingness of households to accept power outages

Author

Listed:
  • Abrate, Graziano
  • Bruno, Clementina
  • Erbetta, Fabrizio
  • Fraquelli, Giovanni
  • Lorite-Espejo, Azahara

Abstract

Outage cost estimation is particularly important for investment decisions related to the security and reliability of electricity supply. The heterogeneity in approaches and findings calls for more research on this topic. This paper presents a model for evaluating household Willingness to Accept (WTA) power outages in relation to expected compensation for an electricity interruption. Using a choice experiment, applied to a test sample of Italian households, we evaluate the effect of different interruption scenarios based on duration and proposed discount. The results postulate an average value of 25.37 euro/kWh of lost load for a typical Italian household. Based on survey data, the value of lost load is correlated to a set of household characteristics as well as to different durations of the hypothetical interruption.

Suggested Citation

  • Abrate, Graziano & Bruno, Clementina & Erbetta, Fabrizio & Fraquelli, Giovanni & Lorite-Espejo, Azahara, 2016. "A choice experiment on the willingness of households to accept power outages," Utilities Policy, Elsevier, vol. 43(PB), pages 151-164.
    • Handle: RePEc:eee:juipol:v:43:y:2016:i:pb:p:151-164
    DOI: 10.1016/j.jup.2016.09.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0957178716302491
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jup.2016.09.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Leahy, Eimear & Tol, Richard S.J., 2011. "An estimate of the value of lost load for Ireland," Energy Policy, Elsevier, vol. 39(3), pages 1514-1520, March.
    2. Linares, Pedro & Rey, Luis, 2013. "The costs of electricity interruptions in Spain. Are we sending the right signals?," Energy Policy, Elsevier, vol. 61(C), pages 751-760.
    3. Greene,William H. & Hensher,David A., 2010. "Modeling Ordered Choices," Cambridge Books, Cambridge University Press, number 9780521194204, September.
    4. Woo, Chi-Keung, 1994. "Managing water supply shortage : Interruption vs. pricing," Journal of Public Economics, Elsevier, vol. 54(1), pages 145-160, May.
    5. Samuelson, William & Zeckhauser, Richard, 1988. "Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
    6. Douglas W. Caves & Joseph A. Herriges & Robert J. Windle, 1992. "The Cost of Electric Power Interruptions in the Industrial Sector: Estimates Derived from Interruptible Service Programs," Land Economics, University of Wisconsin Press, vol. 68(1), pages 49-61.
    7. Carlsson, Fredrik & Martinsson, Peter, 2008. "Does it matter when a power outage occurs? -- A choice experiment study on the willingness to pay to avoid power outages," Energy Economics, Elsevier, vol. 30(3), pages 1232-1245, May.
    8. Daniel Kahneman & Jack L. Knetsch & Richard H. Thaler, 1991. "Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 193-206, Winter.
    9. Herriges, Joseph A. & Caves, Douglas W. & Windle, R. J., 1992. "The Cost of Power Interruptions in the Industrial Sector: Estimates Derived from Interruptible Service Programs," Staff General Research Papers Archive 10789, Iowa State University, Department of Economics.
    10. Caves, Douglas W & Herriges, Joseph A & Windle, Robert J, 1990. "Customer Demand for Service Reliability in the Electric Power Industry: A Synthesis of the Outage Cost Literature," Bulletin of Economic Research, Wiley Blackwell, vol. 42(2), pages 79-119, April.
    11. Latacz-Lohmann, Uwe & Schulz, Norbert & Breustedt, Gunnar, 2014. "Assessing Farmers' Willingness to Accept "Greening": Insights from a Discrete Choice Experiment in Gremany," 88th Annual Conference, April 9-11, 2014, AgroParisTech, Paris, France 170560, Agricultural Economics Society.
    12. Serra, Pablo & Fierro, Gabriel, 1997. "Outage costs in Chilean industry," Energy Economics, Elsevier, vol. 19(4), pages 417-434, October.
    13. Christopher W. Anderson & Joost R. Santos & Yacov Y. Haimes, 2007. "A Risk-based Input-Output Methodology for Measuring the Effects of the August 2003 Northeast Blackout," Economic Systems Research, Taylor & Francis Journals, vol. 19(2), pages 183-204.
    14. Reichl, Johannes & Schmidthaler, Michael & Schneider, Friedrich, 2013. "The value of supply security: The costs of power outages to Austrian households, firms and the public sector," Energy Economics, Elsevier, vol. 36(C), pages 256-261.
    15. Woo, C.K. & Ho, T. & Shiu, A. & Cheng, Y.S. & Horowitz, I. & Wang, J., 2014. "Residential outage cost estimation: Hong Kong," Energy Policy, Elsevier, vol. 72(C), pages 204-210.
    16. Rodilla, P. & Batlle, C., 2012. "Security of electricity supply at the generation level: Problem analysis," Energy Policy, Elsevier, vol. 40(C), pages 177-185.
    17. Norbert Schulz & Gunnar Breustedt & Uwe Latacz-Lohmann, 2014. "Assessing Farmers' Willingness to Accept “Greening”: Insights from a Discrete Choice Experiment in Germany," Journal of Agricultural Economics, Wiley Blackwell, vol. 65(1), pages 26-48, January.
    18. Raymond S. Hartman & Michael J. Doane & Chi-Keung Woo, 1991. "Consumer Rationality and the Status Quo," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(1), pages 141-162.
    19. Ignacio J. Perez-Arriaga & Carlos Batlle, 2012. "Impacts of Intermittent Renewables on Electricity Generation System Operation," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    20. de Nooij, Michiel & Koopmans, Carl & Bijvoet, Carlijn, 2007. "The value of supply security: The costs of power interruptions: Economic input for damage reduction and investment in networks," Energy Economics, Elsevier, vol. 29(2), pages 277-295, March.
    21. Jeff Bennett & Russell Blamey (ed.), 2001. "The Choice Modelling Approach to Environmental Valuation," Books, Edward Elgar Publishing, number 2028.
    22. Praktiknjo, Aaron J. & Hähnel, Alexander & Erdmann, Georg, 2011. "Assessing energy supply security: Outage costs in private households," Energy Policy, Elsevier, vol. 39(12), pages 7825-7833.
    23. Beenstock, Michael & Goldin, Ephraim & Haitovsky, Yoel, 1998. "Response bias in a conjoint analysis of power outages," Energy Economics, Elsevier, vol. 20(2), pages 135-156, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Thomas, Douglas & Fung, Juan, 2022. "Measuring downstream supply chain losses due to power disturbances," Energy Economics, Elsevier, vol. 114(C).
    2. Harold, Jason & Bertsch, Valentin & Fell, Harrison, 2021. "Preferences for curtailable electricity contracts: Can curtailment benefit consumers and the electricity system?," Energy Economics, Elsevier, vol. 102(C).
    3. Gunduz, N & Kufeoglu, S. & Winzer, C. & Lehtonen, M., 2018. "Regional Differences in Economic Impacts of Power Outages in Finland," Cambridge Working Papers in Economics 1841, Faculty of Economics, University of Cambridge.
    4. Srivastava, Aman & Van Passel, Steven & Kessels, Roselinde & Valkering, Pieter & Laes, Erik, 2020. "Reducing winter peaks in electricity consumption: A choice experiment to structure demand response programs," Energy Policy, Elsevier, vol. 137(C).
    5. Bertsch, Valentin & Harold, Jason & Fell, Harrison, 2019. "Consumer preferences for end-use specific curtailable electricity contracts on household appliances during peak load hours," Papers WP632, Economic and Social Research Institute (ESRI).
    6. Majid Hashemi, 2021. "The Effect of Reliability Improvements on Household Electricity Consumption and Coping Behavior: A Multi-dimensional Approach," Working Paper 1469, Economics Department, Queen's University.
    7. Brown, David P. & Muehlenbachs, Lucija, 2023. "The Value of Electricity Reliability: Evidence from Battery Adoption," Working Papers 2023-5, University of Alberta, Department of Economics, revised 26 Jul 2024.
    8. Brown, David P. & Muehlenbachs, Lucija, 2023. "The Value of Electricity Reliability: Evidence from Battery Adoption," Working Papers 2023-5, University of Alberta, Department of Economics, revised 26 Jul 2024.
    9. Paul Nduhuura & Matthias Garschagen & Abdellatif Zerga, 2021. "Impacts of Electricity Outages in Urban Households in Developing Countries: A Case of Accra, Ghana," Energies, MDPI, vol. 14(12), pages 1-26, June.
    10. Sinan Küfeoğlu & Niyazi Gündüz & Hao Chen & Matti Lehtonen, 2018. "Shadow Pricing of Electric Power Interruptions for Distribution System Operators in Finland," Energies, MDPI, vol. 11(7), pages 1-14, July.
    11. Majid Hashemi & Glenn Jenkins, 2021. "The Economic Benefits of Mitigating the Risk of Unplanned Power Outages," Working Paper 1468, Economics Department, Queen's University.
    12. Srivastava, A. & Van Passel, S. & Valkering, P. & Laes, E.J.W., 2021. "Power outages and bill savings: A choice experiment on residential demand response acceptability in Delhi," Renewable and Sustainable Energy Reviews, Elsevier, vol. 143(C).
    13. Hashemi, Majid & Jenkins, Glenn, 2022. "Can privatization of distribution substations improve electricity reliability for non-residential customers? An application to Nepal," Utilities Policy, Elsevier, vol. 74(C).
    14. Motz, Alessandra, 2021. "Security of supply and the energy transition: The households' perspective investigated through a discrete choice model with latent classes," Energy Economics, Elsevier, vol. 97(C).
    15. Deutschmann, Joshua W. & Postepska, Agnieszka & Sarr, Leopold, 2021. "Measuring willingness to pay for reliable electricity: Evidence from Senegal," World Development, Elsevier, vol. 138(C).
    16. Jin, Taeyoung & Lee, Tae Eui & Kim, Dowon, 2023. "Value of lost load estimation for the South Korea's manufacturing sector—finding the gap between the supply and demand side," Renewable and Sustainable Energy Reviews, Elsevier, vol. 187(C).
    17. Bernadeta Gołębiowska, 2020. "Preferences for demand side management—a review of choice experiment studies," Working Papers 2020-05, Faculty of Economic Sciences, University of Warsaw.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Clementina Bruno & Ugo Finardi & Azahara Lorite-Espejo & Elena Ragazzi, 2016. "Emerging costs deriving from blackouts for individual firms: evidence from an Italian case study," quaderni IRCrES 201601, CNR-IRCrES Research Institute on Sustainable Economic Growth - Moncalieri (TO) ITALY - former Institute for Economic Research on Firms and Growth - Torino (TO) ITALY.
    2. Woo, C.K. & Ho, T. & Shiu, A. & Cheng, Y.S. & Horowitz, I. & Wang, J., 2014. "Residential outage cost estimation: Hong Kong," Energy Policy, Elsevier, vol. 72(C), pages 204-210.
    3. Jin, Taeyoung & Lee, Tae Eui & Kim, Dowon, 2023. "Value of lost load estimation for the South Korea's manufacturing sector—finding the gap between the supply and demand side," Renewable and Sustainable Energy Reviews, Elsevier, vol. 187(C).
    4. Landegren, Finn & Johansson, Jonas & Samuelsson, Olof, 2019. "Quality of supply regulations versus societal priorities regarding electricity outage consequences: Case study in a Swedish context," International Journal of Critical Infrastructure Protection, Elsevier, vol. 26(C).
    5. Pepermans, Guido, 2011. "The value of continuous power supply for Flemish households," Energy Policy, Elsevier, vol. 39(12), pages 7853-7864.
    6. Botelho, Vinícius, 2019. "Estimating the economic impacts of power supply interruptions," Energy Economics, Elsevier, vol. 80(C), pages 983-994.
    7. Woo, C.K. & Tishler, A. & Zarnikau, J. & Chen, Y., 2021. "Average residential outage cost estimates for the lower 48 states in the US," Energy Economics, Elsevier, vol. 98(C).
    8. Motz, Alessandra, 2021. "Security of supply and the energy transition: The households' perspective investigated through a discrete choice model with latent classes," Energy Economics, Elsevier, vol. 97(C).
    9. Wolf, André & Wenzel, Lars, 2016. "Regional diversity in the costs of electricity outages: Results for German counties," Utilities Policy, Elsevier, vol. 43(PB), pages 195-205.
    10. Wolf, André & Wenzel, Lars, 2015. "Welfare implications of power rationing: An application to Germany," Energy, Elsevier, vol. 84(C), pages 53-62.
    11. Elie Bouri & Joseph El Assad, 2016. "The Lebanese Electricity Woes: An Estimation of the Economical Costs of Power Interruptions," Energies, MDPI, vol. 9(8), pages 1-12, July.
    12. Röpke, Luise, 2013. "The development of renewable energies and supply security: A trade-off analysis," Energy Policy, Elsevier, vol. 61(C), pages 1011-1021.
    13. Kim, Kayoung & Cho, Youngsang, 2017. "Estimation of power outage costs in the industrial sector of South Korea," Energy Policy, Elsevier, vol. 101(C), pages 236-245.
    14. de Nooij, Michiel & Baarsma, Barbara & Bloemhof, Gabriël & Slootweg, Han & Dijk, Harold, 2010. "Development and application of a cost-benefit framework for energy reliability: Using probabilistic methods in network planning and regulation to enhance social welfare: The N-1 rule," Energy Economics, Elsevier, vol. 32(6), pages 1277-1282, November.
    15. Ovaere, Marten & Heylen, Evelyn & Proost, Stef & Deconinck, Geert & Van Hertem, Dirk, 2019. "How detailed value of lost load data impact power system reliability decisions," Energy Policy, Elsevier, vol. 132(C), pages 1064-1075.
    16. Amoah, Anthony & Ferrini, Silvia & Schaafsma, Marije, 2019. "Electricity outages in Ghana: Are contingent valuation estimates valid?," Energy Policy, Elsevier, vol. 135(C).
    17. de Nooij, Michiel & Koopmans, Carl & Bijvoet, Carlijn, 2007. "The value of supply security: The costs of power interruptions: Economic input for damage reduction and investment in networks," Energy Economics, Elsevier, vol. 29(2), pages 277-295, March.
    18. Luise Röpke, 2015. "Essays on the Integration of New Energy Sources into Existing Energy Systems," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 58.
    19. Woo, C.K. & Cheng, Y.S. & Law, A. & Zarnikau, J. & Ho, S.T. & Leung, H.Y., 2015. "Consumer support for a public utilities commission in Hong Kong," Energy Policy, Elsevier, vol. 76(C), pages 87-97.
    20. Jed J. Cohen & Johannes Reichl, 2022. "Comparing Internet and phone survey mode effects across countries and research contexts," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(1), pages 44-71, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:juipol:v:43:y:2016:i:pb:p:151-164. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.sciencedirect.com/journal/utilities-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.