The economic benefits of mitigating the risk of unplanned power outages

This paper takes on a novel perspective to the overloading of distribution substations by considering the common-pool characteristics of electric infrastructure capacity. Using firmand substation-level data from a sample of Nepalese firms, the results provide evidence of common-pool resource (CPR) problems across substations' ownership boundaries: firms with captive substations experience fewer and shorter unplanned outages than firms connected to shared substations. Based on these findings, private investments in captive substations emerge as a coping mechanism against unreliable electricity supply. Lastly, an appraisal framework for such investments is developed and used to quantify the economic benefits to Nepal's economy.