Journal Article - October 2021

Households’ valuation of power outages in major cities of Ethiopia: An application of stated preference methods

Tensay Hadush Meles, Alemu Mekonnen, Abebe D.Beyene, Sied Hassan, Subhrendu Pattanayak, Samuel Sebsibie, Thomas Klug, Marc Jeuland
In many developing countries, electricity consumers experience frequent supply interruptions, leading to high coping costs and stifled investment, which contribute to energy poverty. In 2019, we implemented stated preference experiments to estimate households' preferences for improved electricity supply in a nationally representative sample of urban households, covering 42 cities in Ethiopia. In the first split-sample experiment, we presented respondents with a contingent valuation (CV) scenario that alternatively elicited their willingness to pay (WTP) for reduced evening-time power outages, or their willingness to accept (WTA) compensation for increased disruptions. Then, we implemented a discrete choice experiment with the same respondents to understand preferences for the frequency, duration and time of a day attributes of outages, as well as the value of advanced notification. The results from the CV survey show that household WTP is approximately 40 birr (US$1.4) for a three-hour reduction of duration in power outages in the evening and that WTA is 42 birr (US$1.4) for a similar increase in the duration of outages during that period. The choice experiment meanwhile reveals that household WTP is 11 birr (US$0.4) for a one-unit reduction in the number of outages and 53 birr (US$1.8) to avoid daytime or nighttime outages relative to morning outages, on average. Households prefer a day prior outage notification to a week prior notification, with a marginal WTP of 23 birr (US$0.8). Information about the value of such outage attributes can help inform strategies that better address electricity consumers' preferences and needs. We finally discussed the relationship between energy poverty and preferences for improved electricity supply.
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