‘Amenity’ or ‘eyesore’? Negative willingness to pay for options to replace electricity transmission towers

Abstract

A frequent scenario in public decision-making is that of choosing between a number of proposed changes from the status quo. In such a case, stated preference surveys, such as the contingent valuation method, are often undertaken to assess the size of the benefits associated with each proposed change. For certain undesirable options, respondents may prefer the status quo; however, it may not be credible to directly elicit negative willingness to pay or willingness to accept to endure the change. This study, using contingent valuation, outlines an indirect means of measuring negative willingness to pay – for the problem of visual disamenity arising from alternative electricity transmission tower designs – based on the elicitation of indicators of how inconvenienced respondents would feel if a less preferred option were to replace the status quo; that is, the time and cost respondents were prepared to commit to opposing the change. The results show that taking account of negative willingness to pay matters and this significantly changes value estimates for some of the least liked options.

Acknowledgements

This paper draws on a study funded by National Grid Company (NGC) plc. The views expressed in this paper are not necessarily shared by the NGC plc. We are also extremely grateful to David Pearce for valuable advice throughout the study.

Notes

¹ All new designs satisfy engineering and design parameters determined by National Grid plc.

² The part of the bill which is independent of electricity usage.

³ Indeed, such reductions are not unprecedented. Since the restructuring of the electricity industry in the UK in 1990, OFGEM has overseen a 28% reduction in the price of electricity to UK consumers.

⁴ While, in practice, new tower designs will primarily be relevant to newly constructed OTLs, respondents were asked about the design of existing towers in the area in which they live because it was reasoned that preferences for new OTLs will be affected by a range of disamenities in addition to those affecting visual appearance of landscape.

⁵ For a more detailed discussion of the survey see Atkinson et al. (2003).

⁶ To calculate the survivor function at a particular value, say x, first count the number of respondents with a value greater than this amount. An obvious estimate of the probability of having a value greater than x is given by dividing this count by the total number of respondents in the sample. Note that, in estimating the survivor functions in Figure 2, the sample data is used to dictate the specific form taken by the function.

⁷ In all cases, median WTP is zero.

⁸ Given the interval nature of payment card data, the means reported here are lower bounds. These can be calculated directly from the survivor functions as the sum of a positive component and a negative component. The positive component is the area below the step function and above zero for positive WTP, the negative component the area above the step function and below one for negative WTP. Confidence intervals are calculated using a nonparametric bootstrap procedure.