The Cost of Residential Electric Shortage in Chile: An Estimation Using the Demand Curve

18 Pages Posted: 3 Sep 2008

See all articles by Jose Miguel Benavente

Jose Miguel Benavente

University of Chile - Department of Economics

Alexander Galetovic

Universidad Adolfo Ibáñez; Stanford University - The Hoover Institution on War, Revolution and Peace; University of Padua - CRIEP

Ricardo Sanhueza

Universidad de los Andes, Chile - School of Economics and Managerial Sciences

Pablo Serra

World Bank

Date Written: December 1, 2005

Abstract

This paper estimates the residential outage cost in Chile's Central Interconnected System (SIC), using consumer's willingness to pay for energy. We first estimate the cost of reducing energy consumption efficiently, that is only the less valuable kWh (as indicated by the market demand curve) are rationed. Then we estimate the per-kWh cost of rationing by cutting off service. We find that the outage cost varies considerably depending on the length of the rationing period; and on how energy is rationed. Longer restrictions allow users to adjust more, and hence are cheaper. Similarly, we estimate that rationing efficiently is between two and six times cheaper than rationing by cutting off service.

Note: Downloadable document is in Spanish.

Keywords: Chile, Demand, Duality, Elasticity, Energy, Rationing

JEL Classification: L94

Suggested Citation

Benavente, Jose Miguel and Galetovic, Alexander and Sanhueza P., Ricardo and Serra, Pablo, The Cost of Residential Electric Shortage in Chile: An Estimation Using the Demand Curve (December 1, 2005). Revista de Analisis Economico, Vol. 20, No. 2, 2005. Available at SSRN: https://ssrn.com/abstract=1262483

Jose Miguel Benavente

University of Chile - Department of Economics ( email )

Diagonal Paraguay 257
Torre 26, Of. 1801
Santiago
Chile

Alexander Galetovic

Universidad Adolfo Ibáñez ( email )

Peñalolén
Santiago
Chile

Stanford University - The Hoover Institution on War, Revolution and Peace ( email )

Stanford, CA 94305-6010
United States

University of Padua - CRIEP ( email )

Padua
Italy

Ricardo Sanhueza P.

Universidad de los Andes, Chile - School of Economics and Managerial Sciences ( email )

Chile

Pablo Serra (Contact Author)

World Bank

1818 H Street, N.W.
Washington, DC 20433
United States

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