How would residential electricity consumers respond to reductions in power outages?

Abstract

Frequent power outages constrain households' electricity consumption and lead to additional backup expenditures on top of their electric utility bills in many developing countries. This study analyzes how residential electricity consumers of different income levels would change their electricity consumption and backup decisions in response to electricity reliability improvements. Using a nationally-representative sample of Nepalese households, the findings point out that improved reliability is positively correlated with the probability of electric appliance ownership. The interaction of income and reliability-constraint indicators suggests that the unreliable electricity supply constrains households equally at all income levels. However, the results from an ordered probit model with three off-grid backup decision alternatives indicate that the improved reliability matters more for poorer households, for whom the combined ownership cost of both appliances and backup equipment may be prohibitive. Putting this paper's findings into an energy-policy perspective, a connection to the grid by itself does not necessarily translate to realized benefits from electricity consumption. The reliability of the service plays a critical role, especially for poorer households.