Customers' Valuation of Grid Resilience to Extreme Events: Willingness-to-Pay and Preference Heterogeneity

摘要

In this paper we present an alternative approach to explore consumer preferences and willingness to pay(wtp) for resilience of the electricity grid. We demonstrate the methodological and practical relevanceof this approach using the example of the uk's incentive regulation scheme for electricity distributionnetwork operators (dnos). Customer valuations of the undergrounding of overhead lines and of the gridresilience to storms are in focus. In contrast to the existing models that inform incentive regulation,we exibly account for preference heterogeneity in the population, allow for scale heterogeneity (i.e.heterogeneity in the randomness of choice) and exploit individual posterior distributions for our policyrecommendations. More precisely, we combine the exibility of the generalised multinomial logit (gmnl)model with posterior analysis to improve the estimates. Since our results suggest signicant parameterheterogeneity within and across dnos, we argue that Ofgem's current method to evaluate customers'wtp is likely to result in an inecient level of grid resilience. Our approach is easy to implement, couldimprove policy evaluations and foster more informed and ecient incentive setting.