Evaluating the value of lost load to South Korea's residential electricity consumers by stated and revealed preference methods

This study estimates the value of lost load (VoLL) for the residential sector in South Korea, where an isolated electricity system and the rapid growth of renewable energy sources increase the risk of blackouts. We provide benchmark outage cost estimates using two complementary approaches based on stated preferences (the contingent valuation method, CVM) and revealed preferences (the leisure cost method, LCM). The CVM VoLL is 3,564 KRW/kWh (2.76 USD/kWh), reflecting households' willingness to pay to prevent a 1-h outage. In contrast, the LCM VoLL is 7,473 KRW/kWh (5.78 USD/kWh), representing the opportunity cost of lost leisure. A robustness check applying a two-step classification of protest responses yields 4,857 KRW/kWh (3.76 USD/kWh), narrowing the gap with international benchmarks. The relatively low CVM VoLL reflects the public-good perception of electricity in South Korea, where Korea Electric Power Corporation, a public utility, supplies power under regulated tariffs. By contrast, the higher LCM VoLL highlights the implicit economic value of reliability. Distinguishing protest zeros in stated-preference surveys is therefore critical for accurate estimation. Taken together, these results demonstrate the importance of integrating robust VoLL estimates into electricity market reforms. In the short term, they provide empirical support for addressing the public utility's financial deficit caused by regulated tariffs. In the long term, they can guide the development of capacity and ancillary service markets, and help address the “missing money” problem associated with energy transitions. Beyond Korea, the findings offer insights for other countries with isolated grids or strong public-sector governance, contributing to more reliable and equitable electricity market design.