Measuring willingness to pay for reliable electricity: Evidence from Senegal

Low-quality electricity service constitutes a significant obstacle in achieving sustainable development. Governments in low-income countries and donors are increasingly seeking to invest in improving electricity service quality and reliability. Understanding households' and firms' willingness to pay (WTP) for quality improvements is key to designing investments in the electricity sector. In this paper, we provide new evidence on WTP for service quality improvements from a nationally-representative survey in Senegal. We find that households and firms are willing to pay a premium over current tariffs for high-quality electricity service without outages. However, WTP for marginal service improvements is significantly lower than WTP for uninterrupted service, suggesting that, for households and firms, any increase in electricity tariff must be accompanied by substantial quality improvements. We discuss the multi-round bidding game built in our data to emphasize the importance of design choices in eliciting the WTP and draw some policy implications. (C) 2020 The Author(s). Published by Elsevier Ltd.

Automated summary

This paper provides new evidence on willingness to pay for electricity service quality improvements in Senegal, suggesting that households and firms are willing to pay a premium for uninterrupted high-quality service. However, willingness to pay for marginal service improvements is lower, highlighting the importance of substantial quality improvements when considering any increase in electricity tariffs. The study also emphasizes the significance of design choices and policy implications in eliciting willingness to pay.