Does the payment vehicle matter for valuing improved electricity reliability? A discrete choice experiment in Ethiopia
Research co-authored by Marc Jeuland and Subhrendu Pattanayak is published in Utilities Policy.
Frequent power outages hurt businesses in many developing countries. Because resources are limited, it's important to know how much businesses value more reliable electricity.
Marc Jeuland, professor of public policy, and Subhrendu Pattanayak, Oak Foundation Distinguished Professor of Environmental and Energy Policy, co-authored a study using a split-sample design to examine whether business enterprises in Addis Ababa, Ethiopia, have different valuations for improved power supply reliability under two payment vehicles - higher electricity bills or through taxes.
In "Does the payment vehicle matter for valuing improved electricity reliability? A discrete choice experiment in Ethiopia," published in Utilities Policy, the authors explain the study's results show that these businesses are willing to pay an average of US$33 per year to reduce outages by one hour each month and US$24 per year to have one fewer outage per month. These amounts represent approximately 11% and 8% of the typical annual electricity bill of 10,615 Birr (US$295), respectively, highlighting that businesses place substantial value on electricity reliability.
Jeuland, Pattanayak, and co-authors Tensay Hadush Meles, Alemu Mekonnen, Abebe D. Beyene, Thomas Klug, Sied Hassen and Samuel Sebsibie find no significant differences in preferences or willing to pay estimates between the two payment vehicles, suggesting both could work for financing power reliability investments.