Estimating the economic value of residential electricity use in the Republic of Korea using contingent valuation

This study attempts to estimate the economic value of residential electricity use in the Republic of Korea. According to micro-economic theory, the economic benefit of residential electricity consumed is the sum of the actual residential electricity price and the additional WTP (willingness to pay) for the consumption. We apply the dichotomous choice contingent valuation method to assess the additional WTP. Moreover, the spike model is applied to dealing with the zero WTP responses. The results show that the mean additional WTP for the residential electricity is estimated to be KRW 15.38 (USD 0.01) per kWh. Given that the average price of residential electricity is KRW 103.40 (USD 0.10) per kWh at the time of the survey, the economic benefit that ensues from the residential electricity consumption is computed as KRW 118.78 (USD 0.11) per kWh. This information can be beneficially utilized in conducting an economic feasibility study for a new project related to residential electricity supply service.