Power Outages, Increasing Block Tariffs and Billing Knowledge

Preferences for Improved Electricity Services in Developing Countries: Household’s Defensive Behavior and Willingness to Pay Access to electricity has received much attention but its reliability has been given less focus. Thus, uninterrupted power supply remains a critical challenge facing households in low-income developing countries. In this paper, we use data on household defensive expenditures and willingness to pay (WTP) to analyze households’ preference for improved electricity supply. We provide an estimate of average monthly defensive expenditures at different monthly hours of power outages using the generalized propensity score method – a continuous treatment matching. Furthermore, we elicit households’ willingness to pay for improved electricity supply using the contingent valuation method. To this end, we use a field survey data from 1,152 sample households in Addis Ababa, Ethiopia. Our results show that the estimated average monthly defensive expenditures is substantial and vary by the monthly hours of power outages. Also, results from the stated preference study show that households are willing to pay 19%–25% of the existing average monthly bill for improved electricity supply. JEL Classification: C21, D12, L94, N77, Q41, Q51 Keywords: Power outages, defensive behavior, willingness to pay, Ethiopia, generalized propensity score Do Consumers Respond to Marginal Prices of Electricity under Increasing Block Tariff? In developing countries, electric and water utilities commonly use increasing block tariff (IBT) as a tool to encourage resource conservation, recover costs, and subsidize low-income consumers. However, it is not clear whether consumers actually respond to marginal prices under IBT. We empirically analyze whether marginal price in an IBT influences residential electricity demand, by combining administrative monthly electricity bill records with a detailed survey of sample households. Results from a bunching analysis and Arellano-Bond estimator show that prices of electricity do not significantly affect monthly electricity consumption. The finding highlights that consumers do not respond to marginal prices under IBT if electricity price is low or if they are unaware of the pricing schedules and have difficulty in understanding how their bills are computed in such tariff structures. This, in turn, has severe implications for the efficacy of the policy objectives of IBT. JEL Classification: C23, D12, L11, L94, Q21 Keywords: Residential electricity demand, shared connections, increasing block tariff, bunching analysis, panel data Billing Knowledge and Consumption Behavior: Experimental Evidence from Nonlinear Electricity Tariffs Increasing block tariff for electricity services is a popular tariff structure in developing countries with the ambition to promote resource conservation among users with high consumption and to provide subsidy for low-income consumers. However, in a complex pricing structure, such as increasing block tariff (IBT), consumers may not know the marginal price they face and might not fully understand how their bill is computed. Thus, in this study, we investigate whether educating consumers about how their monthly electricity bill is calculated in an IBT structure affects electricity consumption. To evaluate the effect of the treatment, we conduct a field experiment with residential electricity consumers in Ethiopia where electricity price is heavily subsidized and shared connections are common. Using monthly consumption data from the electric meters, we find no statistically significant effect after six months in response to the treatment. Our finding suggests that it is not the lack of billing information that makes residential electricity consumers insensitive to the IBT. Alternative reasons, such as the low electricity price are provided. JEL Classification: C93, D12, D83, H42, L94 Keywords: Billing knowledge, consumer behavior, non-linear electricity price, field experiment ISBN: 978-91-88199-27-0 (PRINTED) 978-91-88199-28-7(PDF) Contact information: Tensay Hadush Meles, Department of Economics, School of Business, Economics and Law, University of Gothenburg, P.O. Box 640, SE 405 30, Gothenburg, Sweden. E-mail: [email protected]

Paradox of Plenty: Natural Resource Abundance or Dependence?

In this paper, we examine the resource curse hypothesis for the period 1970 - 2007 using a long list measure of natural resources in which we categorized in to: the dependence measures, the intermediate measures and the abundance measures of natural resources. Results demonstrate that the dependence measures of natural resources are significant and have deleterious effect on economic growth. However, we do not find evidence of resource curse in our abundance measures of natural resources. This indicates that the resource curse in the literature is more biased to wards natural resource dependence. To check robustness of the results, we split the data in to two: 1970 to 1990 and 1991 to 2007 but results remain more or less similar

The equity and efficiency of electricity network tariffs

We estimate the welfare implications of a cost-reflective 'Coasian' reform of electricity network tariffs using an Irish case study. We find that current Distribution Use of System (DUoS) tariffs deviate considerably from a cost-reflective structure. At the individual level, tariff reform leads to large welfare changes. However, positive welfare effects are largely cancelled out by negative welfare effects resulting in a small net welfare impacts in aggregate, up to e33 million. The distribution of incidence is strongly regressive. Households in the lowest income decile incur losses of up to e40 per annum while households in the highest income decile benefit by up to e62 per annum. Despite these effects, we show that inefficient DUoS tariffs represent a costly distributional policy. We demonstrate that it is more efficient to counter the regressive effects through the tax-benefit system

Adoption of renewable home heating systems: An agent-based model of heat pump systems in Ireland

Concern about climate change and dependence on fossil fuels is inducing countries to develop and deploy renewable energy technologies. Heat pump systems, which extract heat either from the air, water, or ground sources, are among the viable options for space heating and domestic hot water production in the residential sector. In this paper, we develop an agent-based model to analyze the adoption process of heat pump systems and the underlying diffusion factors. Uniquely, we use a recent nationally representative Irish household survey data to derive parameters for decision rules for technology adoption in the model. In this research, we explore how financial aspects, psychological factors and social networks influence the adoption and diffusion of heat pump systems. We also discuss how individual household socio-demographic characteristics, building characteristics, geographical location of household and policy incentives affect the adoption process. The research should be of interest to policymakers, as we use the model to test the impact of various policies on technology adoption rates

The greenest of green: preferences for homegrown renewables in Ireland

Little is known about consumer preferences for homegrown renewable electricity, i.e., renewables sourced from a consumer's region or nation. Existing literature on other products indicates that people often prefer locally produced goods. Other work, however, highlights the Not-in-my-back-yard sentiments that can arise in response to proposed local electricity infrastructure developments. In this paper, we first examine whether Irish consumers prefer renewable electricity contracts that source electricity from within Ireland and their province, compared to elsewhere in the European Economic Area, using a discrete choice experiment. Results from a survey of 1197 Irish adults indicate positive preferences for homegrown renewable electricity, both that generated within Ireland and to a greater extent in their province. We additionally find that homegrown green electricity is particularly attractive to people with strong place identity and green consumer values. Thematic text analysis identifies a range of different motivations behind these positive preferences, including supporting jobs and the Irish economy, energy security, and helping the environment. Overall, the findings indicate a kind of ‘positive parochialism’ where many people value pro-environmental electricity options that are homegrown

Adoption of Renewable Home Heating Systems: An Agent-Based Model of Heat Pump Systems in Ireland

Concern about climate change and dependence on fossil fuels is inducing countries to develop and deploy renewable energy technologies. Heat pump systems, which extract heat either from the air, water, or ground sources, are among the viable options for space heating and domestic hot water production in the residential sector. In this paper, we develop an agent-based model to analyze the adoption process of heat pump systems and the underlying diffusion factors. Uniquely, we use a recent nationally representative Irish household survey data to derive parameters for decision rules for technology adoption in the model. In this research, we explore how financial aspects, psychological factors and social networks influence the adoption and diffusion of heat pump systems. We also discuss how individual household socio-demographic characteristics, building characteristics, geographical location of household and policy incentives affect the adoption process. The research should be of interest to policymakers, as we use the model to test the impact of various policies on technology adoption rates.Irish Research CouncilGeological Survey of IrelandDepartment of Communications, Climate Action and Environment (Ireland)ESB NetworksSustainable Energy Authority of IrelandUCD Energy InstituteUniversity College Dublin. School of Economic

Are energy performance certificates a strong predictor of actualenergy use? Evidence from high-frequency thermostat panel data

This paper evaluates the extent with which Energy Performance Certificates (EPCs) reflect observed energy used for heating. We use high-frequency smart thermostat panel data in combination with building characteristics and hourly weather information. We exploit variations in boiler operation in the neighborhood of a steady state indoor temperature to elicit the predictive power of an EPC rating on energy use for heating. We find that the implied energy saving of upgrading from the lowest to highest EPC category is more than 3.5 times greater than that identified through ex-post analysis; boiler time operation is 52% greater among the lowest EPC-rated properties relative to the highest, while the EPC rating itself suggest a 183% difference in energy requirements. The findings cast doubt on the efficacy of public energy efficiency retrofit targets aligned to specific EPC standards

How well do building energy performance certificates predict heat loss?

This paper evaluates the predictive power of building energy performance certificates on ex-post home heat loss. Improving the insulative capacity of residential properties is a policy priority in many markets, with building energy performance certificates providing the indicative benchmark. We exploit a rich panel dataset of high-frequency thermostat readings, coupled with data detailing weather and buildings characteristics, to identify an ex-post metric of heat loss. Our results show a significant effect of building energy performance rating on indoor temperature, a proxy for home heat loss. However, we do not find evidence of a distinct gradient in performance between building energy rating categories, as suggested by ex-ante estimates of home heat loss

Heterogeneity in preferences for renewable home heating systems

This paper explores heterogeneity in preferences for renewable home heating, more specifically heat pump systems, using a novel combination of psychological construct statements, based on the theory of planned behavior, and a discrete choice experiment. We employ a latent class analysis of a nationally representative sample of Irish households to identify and characterize distinct respondent classes based on their responses to the statements on attitude, social norm, perceived behavioral control and intention to install heat pump. Furthermore, we conduct a discrete choice experiment with a subsample of randomly selected respondents to estimate preferences for different attributes of a home heating system and the corresponding marginal willingness to pay, where the psychological construct statements are included as explanatory variables. We identify four types of responses to heat pump, revealing different viewpoints towards this technology. Our results show that, in addition to upfront cost and bill savings, non-monetary attributes such as installation hassle and environmental sustainability are important determinants of the uptake of heat pumps. We find that participants' marginal willingness to pay for heat pump attributes is higher in this early stage market for heat pumps than that reported for more established markets. The findings of this study should be useful to policy makers in designing targeted policies to end-user profiles

COVID-19 and EU Climate Targets: Going Further with Less?

The COVID-19 crisis comes at a complex moment for European climate policy as it pivots from a 40% 2030 emissions reduction target to a European Green Deal that is in better alignment with long-term Paris Agreement goals. Here, the implications of the dramatic fall in economic output associated with the crisis are examined using a representative range of growth scenarios. With lower economic activity resulting from the COVID-19 crisis, existing policy measures could achieve the 40% target sooner than 2030. However, we find that even in the most severe economic scenario examined, this falls well short of the 50-55% emissions reduction target under the Green Deal. Maintaining the existing 40% target in 2030 with reduced policy measures on the other hand would move European climate policy away from the required path. This analysis indicates the feasibility of increased climate ambition in the wake of the pandemic and supports the Green Deal 50-55% targets in 2030