ESTIMATING WILLINGNESS TO PAY FOR RELIABLE ELECTRICITY SUPPLY: A CHOICE EXPERIMENT STUDY

Aygul Ozbafli and Glenn Jenkins ()
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Aygul Ozbafli: JDINT'L Department of Economics Queen's University, Canada

No 2013-01, Development Discussion Papers from JDI Executive Programs

Abstract: This research examines households’ willingness to pay (WTP) for an improved electricity service. Households’ stated WTP is estimated using the choice experiment method (CE). The data used in the estimations came from 350 in-person interviews conducted during the period 5–22 August 2008 in North Cyprus. Compensating variation (CV) estimates for a zero-outage scenario are calculated using the parameter estimates from the mixed logit (ML) model; these are 6.65 YTL (Turkish lira) per month (5.66 USD) for summer and 25.83 YTL per month (21.97 USD) for winter. In order to avoid the cost of outages, households are willing to incur a 3.6% and a 13.9% increase in their monthly electricity bill for summer and winter, respectively. The WTP per hour unserved is 0.28 YTL (0.24 USD) for summer, and 1.08 YTL (0.92 USD) for winter. A preliminary cost–benefit analysis indicates that the annualized economic benefits are approximately 16.3 million USD for the residential sector, and justify an investment in additional generation capacity of approximately 120 MW.

Keywords: Willingness to pay; choice experiment; electricity; outages; reliability (search for similar items in EconPapers)
JEL-codes: D12 D61 L94 L98 Q41 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2013-11
New Economics Papers: this item is included in nep-ara, nep-dcm, nep-ene and nep-reg
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Estimating the willingness to pay for reliable electricity supply: A choice experiment study (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:qed:dpaper:224

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