De-central Power Generation as Suitable Supplement to Urban Power Distribution Systems? Results from a Choice Experiment in India

"The power sector in the south IndianState of Andhra Pradesh faces a significant supply deficit as well as restrictions in the national availability of fossil resources and grid capacity. Moreover, electricity supply is of low quality in terms of scheduled and unscheduled power cuts and peak deficit is continuously growing. Planned installments of new generation power plants – mainly coal fired – will be carbon intensive but insufficient to cover power demand with growth rates of eight to ten percent per year. These developments highlight the importance of energy efficiency improvements to moderate growth in power demand. In the case of Hyderabad, characterized by rapid growth of power demand in the sectors of domestic and industrial customers, renewable energies for power generation have become more important during the last years. Consideration of demand for service quality improvements and stable security of supply requires precise knowledge of individual preferences in terms of marginal values of willingness to pay (WTP) and the determinants of these values. Until now research on energy efficiency measures rarely considers consumers’ preferences. In order to increase understanding of the WTP for improved electricity quality we use a choice experiment to estimate how consumer surplus changes with the introduction of energy efficiency measures and in how far consumers are willing to bear additional costs due to these initiatives. With a survey of 800 private households we estimated the marginal WTP for improvements of power supply quality in terms of reduced scheduled and unscheduled power cuts, for renewable energy and preferences of organizational form of the distribution company. With the results of this study we discuss how preferences for local applications of efficiency technologies can be realized and what are the pre-conditions on the policy level."