Download Alternative approaches to assess the value of preventing electricity

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
Tornados
Hurricanes
Floods/storm surge
Ice storms
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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 surplus
Most 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 India
In 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
Status
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Sunhee 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.
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.