The Electricity Shortage Cost in Iran: An Input-Output Analysis and Linear Programming

Abstract

The electricity supply security has played a vital role in the economic development of Iran. However, a large number of electricity supply disruptions has been happened in recent years, which lead to the electricity shortage costs in the level of economic sectors. Using a combination of Input-Output analysis and the Linear Programming method, this study measures the producer price index as average costs of Iranian economic sectors after imposing a unique scenario of 30% potential electricity shortage supply. In this regard, we employ an Iranian symmetric Input-Output 14I14 industry-by-industry Table for the year 2011. The results of this study indicate that the most shortage cost occurs for the manufacture of wood and paper products, while the services have the lowest cost after electricity supply disruption. Besides, increasing the costs of non-electricity sectors in the Iranian economy after electricity supply shock is 175.63% on average. The quantitative results are useful for policymakers attempting to set strategic plans to reduce the electricity cost in manufacturing sectors and optimal distribution of limited electricity resources to reduce the overall cost of blackouts.