Shadow Pricing of Electric Power Interruptions for Distribution System Operators in Finland

Sinan Küfeoğlu,Matti Lehtonen,Niyazi Gündüz,Hao Chen

doi:10.3390/en11071831

Sinan Küfeoğlu, Matti Lehtonen + Show 2 more

Open Access

https://doi.org/10.3390/en11071831

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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.

Highlights

Continuity of electric power supply is a key concern for authorities, Distribution System Operators (DSOs) and consumers
We propose that a fairer compensation scheme should be designed to reflect the true costs of the power interruptions incurred from the DSO point of view
Our aim is to increase the amount of energy supplied to the customers, while decreasing the amount of energy not supplied by reducing the customer minutes lost (CML)

Summary

Introduction

Continuity of electric power supply is a key concern for authorities, Distribution System Operators (DSOs) and consumers. As each sector, such as finance, telecommunications, health, entertainment, transportation, etc., become increasingly dependent on electricity, the results of power interruptions become more devastating. There is no surprise that the United States Homeland Security defines the energy sector as “uniquely critical because it provides an “enabling function” across all critical infrastructure sectors” [1] They emphasize the significance of the electric power grid as “the most critical of critical infrastructure” [2]. The three major methodologies which are commonly used by the research society to assess the customer interruption costs (CIC) are: customer surveys, indirect analytical methods and case studies. Customer surveys are the most preferred, and extensively used, approach

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