Scoping study on trends in the economic value of electricity reliability to the U.S. economy

Eto, Joseph H.; Koomey, Jonathan; Lehman, Bryan; Martin, Nathan; Mills, Evan; Webber, Carrie A.; Worrell, Ernst

doi:10.2172/787133

Cited by 45 publications

(43 citation statements)

References 76 publications

(37 reference statements)

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“…There have been some systematic efforts to assess the overall vulnerability of customers to reliability events that focus on specific processes (e.g., cleanrooms) or equipment types (e.g., office equipment) that may be especially sensitive to these issues. For more information, please refer to Eto et al 2001.…”

Section: Vulnerability To Reliability Eventsmentioning

confidence: 99%

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Understanding the cost of power interruptions to U.S. electricity consumers

LaCommare¹,

Eto²

2004

130

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The massive electric power blackout in the northeastern United States and Canada on August 14-15, 2003 resulted in the U.S. electricity system being called "antiquated" and catalyzed discussions about modernizing the grid. Industry sources suggested that investments of $50 to $100 billion would be needed. This report seeks to quantify an important piece of information that has been missing from these discussions: how much do power interruptions and fluctuations in power quality (power-quality events) cost U.S. electricity consumers? Accurately estimating this cost will help assess the potential benefits of investments in improving the reliability of the grid.We develop a comprehensive end-use framework for assessing the cost to U.S. electricity consumers of power interruptions and power-quality events (referred to collectively as "reliability events").The framework expresses these costs as a function of:• Number of customers by type in a region;• Frequency and type of reliability events experienced annually (including both power interruptions and power-quality events) by these customers; • Cost of reliability events; and• Vulnerability of customers to these events.The framework is designed so that its cost estimate can be improved as additional data become available.Using our framework, we estimate that the national cost of power interruptions is about $80 billion annually, based on the best information available in the public domain. However, there are large gaps in and significant uncertainties about the information currently available. Notably, we were not able to develop an estimate of power-quality events. Sensitivity analysis of some of these uncertainties suggests that the total annual cost could range from less than $30 billion to more than $130 billion. Because of this large range and the enormous cost of the decisions that may be based on this estimate, we encourage policy makers, regulators, and industry to jointly undertake the comparatively modest-cost improvements needed in the information used to estimate the cost of reliability events. Specific areas for improvement include: coordinated, nationwide collection of updated information on the cost of reliability events; consistent definition and recording of the duration and frequency of reliability events, including powerquality events; and improved information on the costs of and efforts by consumers to reduce their vulnerability to reliability events.

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Section: Vulnerability To Reliability Eventsmentioning

confidence: 99%

“…This report is the first systematic effort to estimate the national economic cost of power interruptions including power quality (Primen 2001). Building on insights gained from an earlier EPRI-commissioned literature review (Eto et al 2001), the Primen study addressed several shortcomings of earlier estimates:…”

Section: Primen's Estimate Of $119 Billion Per Yearmentioning

confidence: 99%

Understanding the cost of power interruptions to U.S. electricity consumers

LaCommare¹,

Eto²

2004

130

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“…Efforts have been made to measure outage costs or value of service using a range of methods and techniques. Despite these efforts, Eto, et al (2001) note that:…”

Section: Introductionmentioning

confidence: 99%

A framework and review of customer outage costs: Integration and analysis of electric utility outage cost surveys

Lawton¹,

Sullivan²,

Liere³

et al. 2003

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A clear understanding of the monetary value that customers place on reliability and the factors that give rise to higher and lower values is an essential tool in determining investment in the grid. The recent National Transmission Grid Study recognizes the need for this information as one of growing importance for both public and private decision makers. In response, the U.S. Department of Energy has undertaken this study, as a first step toward addressing the current absence of consistent data needed to support better estimates of the economic value of electricity reliability. Twenty-four studies, conducted by eight electric utilities between 1989 and 2002 representing residential and commercial/industrial (small, medium and large) customer groups, were chosen for analysis. The studies cover virtually all of the Southeast, most of the western United States, including California, rural Washington and Oregon, and the Midwest south and east of Chicago. All variables were standardized to a consistent metric and dollar amounts were adjusted to the 2002 CPI. The data were then incorporated into a meta-database in which each outage scenario (e.g., the lost of electric service for one hour on a weekday summer afternoon) is treated as an independent case or record both to permit comparisons between outage characteristics and to increase the statistical power of analysis results.Unadjusted average outage costs and Tobit models that estimate customer damage functions are presented. The customer damage functions express customer outage costs for a given outage scenario and customer class as a function of location, time of day, consumption, and business type. One can use the damage functions to calculate outage costs for specific customer types. For example, using the customer damage functions, the cost experienced by an "average" customer resulting from a 1 hour summer afternoon outage is estimated to be approximately $3 for a residential customer, $1,200 for small-medium commercial and industrial customer, and $82,000 for large commercial and industrial customer. Future work to improve the quality and coverage of information on the value of electricity reliability to customers is described.ii Acknowledgement

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“…Some studies are cursory, simply applying a stipulated "value" per unit of electricity to each un-served unit over the course of a given outage. Few prior studies have looked in depth at the insurance industry's perspective on the value of electricity reliability (Lecomte et al, 1998, Eto et al, 2001, and Lineweber and McNulty 2001RMS 2004).…”

mentioning

confidence: 99%