Abstract
Employing two complementary pieces of information from a nationally-representative sample of grid-connected consumers in Nepal - revealed coping behavior and stated willingness to pay (WTP) - this paper analyzes the demand for electricity reliability. First, ex-ante WTP values are estimated for households and firms under different electricity tariff categories. The results indicate substantial heterogeneity in needs and preferences for electricity reliability across and within residential and non-residential tariff categories. The obtained WTP values are then regressed on a set of household- and firm-level observable characteristics to determine the predictors of demand for reliability. Third, predictions by ex-ante WTP estimates are validated using ex-post changes in electricity consumption levels due to countrywide reliability improvements in Nepal. For policy-making purposes, the findings highlight the importance of conducting a detailed analysis of households' preferences and firms' opportunity costs when evaluating the costs and benefits of electricity reliability investments.
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