How to Estimate the Value of Service Reliability Improvements

TitleHow to Estimate the Value of Service Reliability Improvements
Publication TypeConference Paper
LBNL Report NumberLBNL-3592E
Year of Publication2010
AuthorsSullivan, Michael J., Matthew G. Mercurio, Josh A. Schellenberg, and Joseph H. Eto
Conference NameIEEE Power and Energy Society General Meeting
Date Published07/2010
Conference LocationMinneapolis, MN
Keywordselectricity reliability trends, power system economics, power system reliability publications, value of service reliability

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.