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

In developing countries, access to electricity has received much attention. However, the reliability of its supply has been given less focus, though power outages happen frequently and are expected to limit gains from electricity connection. In this paper, I go beyond electricity connection and provide an average estimate of monthly defensive expenditures at different monthly hours of power outages for urban households in Ethiopia, using the generalized propensity score method. I also elicit households' willingness to pay for improved electricity supply, using a stated preference method, to account for non-monetary costs of outages. Based on the average estimated results, a back-of-the-envelope calculation for urban households of Ethiopia with electricity connection provides a monthly defensive expenditure of US$14.8 million and a monthly willingness to pay of US$6.2 million for improved electricity supply, on top of the regular electricity bill. The study underscores that connection to electricity is not enough; the reliability of its supply is also important. •Limited attention to the adverse impacts of the recurrent power outages in developing countries.•I estimate defensive expenditure and willingness to pay for improved electricity supply at household level in Ethiopia.•The estimated average defensive expenditure is more than double the estimated willingness-to-pay for reliability.•Connection to electricity is not enough; the reliability of its supply is vital to enjoy the benefit of electrification.