Shadow pricing of electric power interruptions for distribution system operators in Finland

Abstract

Increasing distributed generation and intermittencies, along with the increasing frequency of extreme weather events, impose a serious challenge for electric power supply security. Understanding the costs of interruption is vital in terms of enhancing the power system infrastructure and planning the distribution grid. Furthermore, customer rights and demand response techniques are further reasons to study the worth of power reliability. In this paper, the authors make use of directional distance function and shadow pricing methods in a case study of Finland. The aim is to calculate the cost of one minute of power interruption from the perspective of the distribution network operator. The sample consists of 78 distribution network operators from Finland, and uses cost and network information between 2013 and 2015.