Natural Disasters and Willingness to Pay for Reliable Electricity: The 2021 Winter Storm in Texas as a Natural Experiment

Abstract

Winter Storm Uri led to power outages in many Texas households in February 2021, unveiling crucial deficits in the state's electricity grid. We exploit a quasi-natural experiment to analyze how individuals' differential experiences with power outages affect their willingness to pay (WTP) for policies aimed at increasing the reliability of the supply of electricity. We find that those who experienced longer outages are less willing to pay for reliable energy than individuals who experienced shorter outages and those who did not have an outage during the Winter storm. Our results remain robust to a battery of sensitivity checks. We further explore a mechanism that could explain the differences in WTP for reliable power: the perception of the public authority and the power companies' inability to address the deficits of the Texas power grid.

Keywords: Texas, willingness to pay, conjoint, electric grid, energy policy