Self-Generation and Households' Willingness to Pay for Reliable Electricity Service in Nigeria

Many households in developing countries often engage in self-generation to mitigate the impacts of poor public electricity provision. What is less well known, however, is whether (and how) self-generation influences households' willingness to pay (WTP) for service reliability. Using data collected from a sample of Nigerian households, the results reveal that engagement in self-generation is positively correlated with WTP for reliability. This is despite the fact that self-generation reduces the negative welfare impact of unreliability. Further analyses, however, show that backup households' decisions to pay a higher amount than non-backup households are influenced by the costs of self-generation: an increase of N1 (US$0.006) in self-generation's fuel cost per-hour is associated with WTP about N5.22 (US$0.032) more in the monthly bill. However, households' WTP US$0.15-0.16/kWh of improved reliability is smaller than the marginal costs of reliability from self-generation - US$0.27-0.41/kWh. We conclude by discussing the policy implications of our findings

Get rid of it: to what extent might improved reliability reduce self-generation in Nigeria?

Despite the global concerns surrounding the threats of climate change to both human health and sustainable environments, gasoline- or diesel-powered generators with non-negligible emissions have become a popular choice among Nigerian households due to the poor publicly provided electricity. This study examines the extent to which an improvement in publicly supplied electricity may reduce backup generation and, by implication, reduce emissions from Nigerian homes. The results from a random-effects probit analysis reveal that, although improved electricity service quality would significantly reduce self-generation, self-generation would continue in the country, especially among rich and educated households. The study concludes by highlighting the policy implications of the findings

The prospects for smart energy prices: observations from 50 years of residential pricing for fixed line telecoms and electricity

This study focuses on how energy and communications have evolved over the last 50 years and what we can learn from history in order to examine the prospects for smart energy pricing by 2050. We begin by discussing the nature of energy and telecoms products and why price discrimination should be expected. We then review various business and pricing strategies that have evolved in the two industries. We find that business models for both the telecoms and energy sectors have changed from the traditional services business model (i.e., offering of calls and messages for telecoms, and utility supply services for energy) to more dynamic, integrated and complex business models. These new business models include the managed services provider model, the bundled services model, and the prosumer business model, among others. Similarly, several changes in pricing structure have evolved. There has been a reduction in the number of distanced-based and increasing time-based price differentiation in fixed line telecoms and the abolition of residential floor area-based differentiation in electricity pricing. We conclude with a discussion on how the rollout of the next generation of electricity meters (smart and advanced meters) may further shape electricity pricing in the future

The promotion of regional integration of electricity markets: lessons for developing countries

This paper focuses on how to promote regional cooperation in electricity. We begin by discussing the theory of international trade cooperation in electricity, with a view to discussing what preconditions might be important in facilitating wide area trading across national borders. We then develop lessons based on the comparison of four case studies. These include three regional developing country power pools – the Southern African Power pool (SAPP), West African Power pool (WAPP) and the Central American Power Market (MER). We contrast these with Northern Europe's Nord Pool. These cases highlight both the potential and difficulty of having cross-jurisdictional power pools. In the light of the theory and evidence we present, we draw key lessons in the areas of: preconditions for trading; necessary institutional arrangements; practicalities of timetabling; reasons to be hopeful about future prospects.The authors acknowledge the financial support of the World Bank and the support and advice of Mike Toman and Jevgenijs Steinbuks. All opinions expressed in the paper are those of the authors alone and should not be taken to represent those of the World Bank or any of its employees

A firm level analysis of outage loss differentials and self-generation: evidence from African business enterprises

This study examines the outage loss differential between firms that engage in backup generation and those that do not. Unmitigated outage losses were estimated to be US$2.01–US$23.92 per kWh for firms engaging in self-generation, and range from US$1.54–US$32.46 per kWh for firms without self-generation. We also find that firms engaging in self-generation would have suffered additional 1–183% outage losses had they not invested in self-generation. On the other hand, firms without self-generation would have reduced their outage losses by around 6–46% if they had engaged in selfgeneration. Further analyses however reveal that, although engagement in selfgeneration reduced outage losses, a firm engaging in self-generation may still suffer a greater unmitigated outage loss relative to a firm without a backup generator. The relative outage losses depend on the relative vulnerability of the operations of the two sets of firms to power interruption, and the relative generating capacity of a selfgenerating firm to its own required electricity loads. Policy reforms that allow firms, whose operations are highly vulnerable to outages, to make a binding contract with utilities in order to get preferential supply are recommended

The prospects for smart energy prices: observations from 50 years of residential pricing for fixed line telecoms and electricity

This study focuses on how energy and communications have evolved over the last 50 years and what we can learn from history in order to examine the prospects for smart energy pricing by 2050. We begin by discussing the nature of energy and telecoms products and why price discrimination should be expected. We then review various business and pricing strategies that have evolved in the two industries. We find that business models for both the telecoms and energy sectors have changed from the traditional services business model (i.e., offering of calls and messages for telecoms, and utility supply services for energy) to more dynamic, integrated and complex business models. These new business models include the managed services provider model, the bundled services model, and the prosumer business model, among others. Similarly, several changes in pricing structure have evolved. There has been a reduction in the number of distanced-based and increasing time-based price differentiation in fixed line telecoms and the abolition of residential floor area-based differentiation in electricity pricing. We conclude with a discussion on how the rollout of the next generation of electricity meters (smart and advanced meters) may further shape electricity pricing in the future