How to Estimate the Value of Service Reliability Improvements

TitleHow to Estimate the Value of Service Reliability Improvements
Publication TypeReport
LBNL Report NumberLBNL-3592E
Year of Publication2010
AuthorsSullivan, Michael J., Matthew G. Mercurio, Josh A. Schellenberg, and Joseph H. Eto
Pagination5
Date Published06/2010
PublisherLBNL
CityBerkeley
Keywordspower system reliability publications
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.

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