How to estimate the value of service reliability improvements

Abstract

Abstract--A robust methodology for estimating the value of service reliability improvements is presented. Although econometric models for estimating value of service (interruption costs) have been established and widely accepted, analysts often resort to applying relatively crude interruption cost estimation techniques in assessing the economic impacts of transmission and distribution investments. This paper first shows how the use of these techniques can substantially impact the estimated value of service improvements. A simple yet robust methodology that does not rely heavily on simplifying assumptions is presented. When a smart grid investment is proposed, reliability improvement is one of the most frequently cited benefits. Using the best methodology for estimating the value of this benefit is imperative. By providing directions on how to implement this methodology, this paper sends a practical, usable message to the industry.

Impact-Based Decision Support Services and the Socioeconomic Impacts of Winter Storms

“…Lupski, PSEG, 2017, personal communication). We then applied data from Sullivan et al (2013) to monetize the cost of power outages to customers. Sullivan et al (2013) provided estimated average electric customer interruption costs by customer type-including residential, small commercial, and medium and large commercial-and duration of power outages.…”

“…We then applied data from Sullivan et al (2013) to monetize the cost of power outages to customers. Sullivan et al (2013) provided estimated average electric customer interruption costs by customer type-including residential, small commercial, and medium and large commercial-and duration of power outages. We used the U.S. Energy Information Administration number of retail customers by state for the State of New York to obtain a distribution of customer types, and we assumed that the power outages affect customer types in a manner consistent with the distribution of customer types across the state.…”

Evaluating the Potential Impact of Smart Grid Funding on Reducing the Economic Impact of Large Outage Events in the United States from 2003 to 2017

“…We use the duration of the event to determine the impact of service based on customer class. Since value of service does not increase linearly, we assign the value of service impact based on the closest match to durations of 0, 1, 4, and 8 hours and their expected cost to different customer classes [15]. We also cap the longest duration at 8 hours, since some studies have shown that the impact of the outage flattens out and does not necessarily lead to additional economic losses to the customer.…”

Financial and environmental benefits of activedistribution networks

“…In [16], Costa et al presents the benefit based on typical reliability indexes without concerning the value of reliability itself. For a guide to outage valuation see [34]; moreover [35] analyzes problems of usual practices for reliability improvement valuation. Further information can be founded in [14].…”