The willingness to pay by households for improved reliability of electricity service in North Cyprus

Abstract

This research examines households' willingness to pay (WTP) for an improved electricity service. Households' WTP is estimated using the payment ladder contingent valuation (CV) data from 350 in-person interviews in North Cyprus. In order to avoid the cost of outages, households are willing to incur a 13.8% increase in their monthly electricity bill. A cost-benefit analysis (CBA) indicates that the annualized economic benefits of improved reliability of the electricity service would be approximately USD 35.6 million for the residential sector. This figure is more than enough to finance the investments needed to completely eradicate any electricity outages. In addition, the fuel savings from substituting the generation of the new plants for the old plants would yield about USD 32.9 million per year in fuel savings. Hence, a change from the current low-reliability policy to one of providing a high-quality service would yield an economic net present value to the residents of North Cyprus of twice the investment costs, or USD 173.3 million, within five years. (C) 2015 Elsevier Ltd. All rights reserved.