Welfare implications of power rationing: An application to Germany

Abstract

This study analyzes the economic consequences of power rationing at the level of German counties. Based on a common production function approach, it estimates the costs of power outages for firms and households in all counties and uses these estimates to derive hypothetical rationing plans for the scenario of a country-wide shortage of power supply. Rationing plans are introduced according to several criteria: a random-based approach, a criterion of total cost minimization, a criterion minimizing costs of the most affected region as well as a criterion minimizing the number of people affected. The implementation of each criterion is simulated for different times of the day. The spatial patterns of rationing prove to be heterogenous. Estimated cost structures differ to some extent as well. The results are discussed with regard to their enforceability in the context of the German energy transition.