Economic costs of electricity shortage: an input-output analysis

In the course of societal advancement and growth, the significance of electricity undergoes an undeniable expansion, necessitating precise estimates of the economic implications of electricity deficits for stakeholders such as system operators, policy decision-makers, and national governments. This study endeavors to employ the methodology proposed by Chen and Vella to calculate the marginal costs associated with electrical energy inadequacies, utilizing an input-output scrutiny. The input-output analytical framework is deployed to scrutinize the average economic consequences of transient electricity shortfalls across various sectors within the Iranian economy. The findings of this study indicate that the marginal cost of unmet electricity demand ranges from IRR 7.5 to IRR 3702 per kilowatt-hour, with the cost being largely contingent upon the extent of the shortfall in each non-electricity sector, the magnitude of their final demand, and the extent of dependency on the electricity industry. In this specific context, the foremost three sectors to consider mitigating electricity supply are the “Electricity final demand,” “Mining of coal and lignite,” and “Veterinary activities,” which would potentially result in a reduction of 7.43 IRR/kWh, 12.97 IRR/kWh, and 16.33 IRR/kWh, respectively. This research, therefore, provides an academic, distinguished, and cultivated perspective to understand the economics of electrical energy shortages and offers meaningful insights for decision-makers considering the intricacies of electricity supply and demand balancing.