Impact of power outages on households in developing countries: Evidence from Ethiopia

In developing countries, access to electricity has received much attention, but the reliability of its supply has received less focus, though power outages happen frequently and are expected to limit the gains from electricity connection. This paper estimates households’ defensive expenditure and willingness to pay for improved electricity supply in urban Ethiopia using a generalized propensity score method and a stated preference method to account for non-monetary costs of outages. Based on average estimated results, urban Ethiopian households with an electricity connection incur a monthly defensive expenditure of about US$6.2 million for improved electricity supply, on top of the regular electricity bill – more than double the estimated willingness-to-pay for reliability. The study underscores that connection to electricity is not enough; the reliability of its supply is also important to realising the benefits of electrification.