A back of the envelope estimate of the average non-residential outage cost in the US

C. K. Woo; A. Tishler; J. Zarnikau; Y. Chen

doi:10.1016/j.tej.2021.106930

A back of the envelope estimate of the average non-residential outage cost in the US

C. K. Woo, A. Tishler, J. Zarnikau^*, Y. Chen

^*Corresponding author for this work

Coller School of Management

Research output: Contribution to journal › Article › peer-review

9 Scopus citations

Abstract

Using the Envelope Theorem, this paper derives a simple formula for market-based estimation of an average non-residential outage cost. Its key finding is that the 2019 estimate for the US is about US$10 per kWh unserved, below the regional estimates of approximately US$20 to US$40 per kWh unserved previously found by a large national study that uses contingent valuation (CV) survey data. This finding's policy implication is reductions in marginal-cost-based electricity prices, an electric grid's need for transmission and generation capacity and demand response resources, a local distribution company's reliability-related investment, an independent system operator's cap for wholesale prices, and a regulator's penalty for reliability deterioration under performance-based regulation.

Original language	English
Article number	106930
Journal	Electricity Journal
Volume	34
Issue number	4
DOIs	https://doi.org/10.1016/j.tej.2021.106930
State	Published - May 2021

Keywords

Envelope theorem
Market-Based estimation
Non-residential electricity outage cost
US$ per kWh unserved
USA

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10.1016/j.tej.2021.106930

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abstract = "Using the Envelope Theorem, this paper derives a simple formula for market-based estimation of an average non-residential outage cost. Its key finding is that the 2019 estimate for the US is about US$10 per kWh unserved, below the regional estimates of approximately US$20 to US$40 per kWh unserved previously found by a large national study that uses contingent valuation (CV) survey data. This finding's policy implication is reductions in marginal-cost-based electricity prices, an electric grid's need for transmission and generation capacity and demand response resources, a local distribution company's reliability-related investment, an independent system operator's cap for wholesale prices, and a regulator's penalty for reliability deterioration under performance-based regulation.",

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A back of the envelope estimate of the average non-residential outage cost in the US

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