An empirical investigation of the Indian households' willingness to pay to avoid power outages

Reliable electricity is a key factor in improving the living conditions of households and sustainable development of countries. Developing country governments and international organizations address the question of how to obtain a reliable supply of electricity and thus eliminate power outages at the top of their political agendas. In this framework, the aim of this paper is to estimate the willingness to pay of Indian urban consumers for having a continuous supply of electricity, avoiding unexpected power outages, using contingent valuation method. Two different econometric approaches are used. The households in the survey have been asked to state their willingness to pay for five different types of outages. Empirical data from 1043 Indian households has been analyzed using double hurdle approach. The econometric results indicate that, among the investigated households with an average individual annual income around $1630,00, their willingness to pay to avoid power outage strictly depend on the length of outages ranging, on average, from $0.37 (2 h) $3.00 (12 h), that is, households prefer to reduce the duration of outages. Further, income and environmental attitude of respondents positively influence higher WTP to avoid power outages. Our findings provide useful insights for policy makers to design and promote more reliable and customer centric energy generation and distribution models.

Automated summary

This study estimates the willingness to pay of Indian urban consumers for a continuous supply of electricity using contingent valuation method. The findings show that the amount consumers are willing to pay depends on the duration of power outages, with households preferring shorter outages. Income and environmental attitude also positively influence higher willingness to pay. These insights can inform policymakers in designing more reliable and customer-centric energy generation and distribution models.