The cost of electric power outages in the residential sector: A willingness to pay approach

Abstract

Service providers and policymakers require data on the value of a service to consumers to justify investment. Due to the high reliability of electricity services in Europe, data on the value of constant electricity supply is not available. A choice experiment framework is used to estimate the welfare cost to households of power outages in northwest England. The willingness to pay (WTP) estimates obtained suggest that a household in northwest England is WTP; £5.29 to avoid having power outages in peak periods, £7.37 to have outages during the week rather than the weekend or bank holiday, and £31.37 to avoid power outages in winter. Households are also WTP between £1.17 (20 min) and £0.05 (480 min) to avoid a power outage depending on the length of the power outage. The use of a mixed logit model also demonstrated the impact of different socio-demographic and household characteristics on respondents WTP to avoid a power outage. From a policy perspective, the results provide data or a 'price' on the importance of constant electricity supply to domestic customers. Through engagement with policy makers and industry, these 'price signals' may be used to justify future investment and policy in the electricity sector.