Valuing disruptions in the supply of electric power

Sunhee Baik and Granger Morgan

Climate change will result in more, and more intense, extreme events

IPCC, 2013: Summary for Policymakers. In: Climate Change 2013: The Physical Science Basis. Contribution of Working Group I to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change.

Climate events, and other system stresses, will likely lead to more frequent

power system disruptions

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Tornados

Ice storms

Hurricanes

Floods/storm surge

There is a large……old, and rather mixed literature on how utility customers value electric service reliability and the cost of electrical outages (Munasinghe and Gellerson, 1979; Woo and Pupp, 1992; EPRI, 1995).

Van der Welle and van der Zwaan (2007) observe that in general customer valuation of supply disruptions "cannot be determined or observed directly from market behavior…because no market exists in which supply interruptions are traded."

Most past estimates of power disruption have been obtained either by estimating the drop in economic activity that occurred during an outage or by asking customers about their willingness to pay to avoid an outage.

Sullivan et al. (2010) explain "Survey-based methods have become the most widely used approach and are generally preferred over other measurement protocols because they can be used to obtain outage costs for a wide variety of reliability and power quality conditions not observable using other techniques."

Examples from the literature

Most studies……of willingness to pay do an inadequate job of characterizing the outage situation and of providing respondents with the information they need to reason about and think through their preferences.

Without substantial assistance, we believe that it is unlikely that customers are able to produce informed answers to questions that involve a variety of highly hypothetical situations.

Ignoring consumer surplusMost past valuation methods have not estimated or considered explicitly consumer surplus.

Yet, for most customers, the first little bit of electricity is worth much more than the last kWh consumed. Consider the D-cell batteries that many of us have in flashlights at our bedside or in our cars. A typical carbon-zinc D-cell can produce roughly 5Wh and retails for about a dollar. That means customers are paying 20¢ per watt-hour or $200 per kWh.

Rural IndiaIn recognition of the great value associated with the first bit of electricity that a consumer obtains, we have begun to work on developing more realistic strategies for valuing outages (Harish et al., Energy Policy, 2014).

Developing an understanding of this issue for different customers and uses in a U.S. context is important because one of the resilience strategies we propose to explore involves the ability to provide customers with reduced service in times of emergency (e.g., dropping from 150 to 30 amp service).

From: Santosh M. Harish, M. Granger Morgan, Eswaran Subramanian, “When does unreliable grid supply become unacceptable policy? Costs of power supply and outages in rural India” Energy Policy, 68, pp. 158-169, 2014.

Basic idea for Sunhee's first study

StatusSunhee has performed a literature review, developed and tested an experimental protocol. She has secured IRB approval. As soon as she is back from her short trip to Korea she'll start running interviews.

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In future she may:Calibrate responses against Pecan Street and other data.

Build an on-line tool in place of her card stacking manual system.

Develop similar strategies for assessing other customer classes.

Use results to build on the earlier work of Anu Narayanan.

Narayanan & Morgan, Risk Analysis, 2011.

Work supported to date by EPP Academic Funds and Lord Chair. Will soon be supported by CEDM.