Value Of Lost Load Research Articles

Valuing flexible resources in the Korean electricity market based on stated preference methods

This study quantifies the value of lost load (VoLL) for the manufacturing sector in South Korea using stated preference methods. VoLL represents the cost of a stable electricity supply, which serves as a public good without a market price to compensate for flexible resources in the electricity market. The contingent valuation and choice experiment showed VoLL ranges from 0.35 to 0.80 USD per kWh unserved, below the industrial VoLL estimates in the existing literature. This finding suggests that outages may have lower costs for electricity consumers than investing in flexible resources. Using the correct estimate of outage costs is required to ensure capacity adequacy.

Operating Reserve Demand Curves for the Integration of Variable Renewable Energies in the Chilean Power System

When incorporating non-dispatchable renewable sources into an electric power system, it's important to consider how this affects the optimal definition of operating reserves. In order to ensure effective short and long-term investments in new capacity, appropriate price signals must be put in place. The mechanisms used to define the optimal price of new capacities associated with operational reserve must reflect the temporality of the reliability and safety of the electric power system. Society places a high value on electricity consumption, as evidenced by the Value of Lost Load (VOLL). Therefore, the incremental value of reserves that reduce the probability of a loss event (Loss of Load Probability - LOLP) must be greater than zero when reserves are not abundant. To evaluate the adequate reserve requirements that a system needs, operating reserve demand curves (ORDC) are an explicit and dynamic administrative mechanism. They consider multiple sources of uncertainty in the system that cause imbalances between generation and demand, setting a dynamic price based on its contribution to improving the reliability of the system. This provides effective signals of the actual condition of the scenario through its impact on marginal cost. In a market such as the Chilean, introducing this strategy allows operators to increase prices during scarcity events as prices are determined by the marginal cost of the most expensive generation unit operating in the system. Introducing this scarcity mechanism will substantially impact investment incentives, delivering appropriate signals to encourage and support new technologies linked to the new path that Chile is advancing. This paper proposes a methodology to optimally incorporate renewable sources such as wind and sun into systems with hydrothermal characteristics, such as the Chilean one.

Value of lost load estimation for the South Korea's manufacturing sector—finding the gap between the supply and demand side

This study evaluates the value of lost load (VoLL) for the manufacturing sector in South Korea, focusing on the gap between the state-preference method and the production-side approach. The two methods are different in that the former measures the value of stable electricity in the view of consumer goods, while the latter calculates it in the view of producer goods. This study utilized an own-developed production side approach and the contingent valuation method (CVM) as a state-preference method. With data from a survey of 1023 firms, empirical research found the gap between the VoLLs by estimation methods, deriving production side VoLL that is six times higher than CVM results. This study presumes that this gap is mainly sourced from the weak recognition of respondents on the importance of electricity security owing to the absence of outage experience. Additional logit results also supported the hypothesis. Although the production side VoLL is more appropriate, CVM results are notable, being related to the public acceptability of the increases in electricity tariff. Therefore, it is recommended to reduce the gap between the two methods by improving the recognition of a stable electricity supply to secure flexible resources in the electricity market. It ultimately facilitates the construction of a compensation system of flexible resources.

Optimal battery energy storage system deployment from perspectives of private investors and system operators for enhancing power system reliability

Due to their intermittent nature, high penetration of renewable energy resources (RES) can deteriorate power system reliability. A battery energy storage system (BESS) offers an opportunity to reduce the uncertainty associated with RES and hence improve power system reliability. In the last decade, the cost of BESS has declined so its deployment has become increasingly feasible, but the decision ultimately depends on its Net-Benefit to the investor. Depending on the perspective of the investor, the deployment decision involves discovering the most optimal location, capacity, and technology of BESS. A sensitivity analysis based on the Z-bus matrix is used for selecting the optimal location. In this paper, from the narrow perspective of a private investor, the Net-Benefit function is the energy arbitrage value of BESS minus its overall cost. However, the system operator additionally values BESS because it enables more reliable system operation at reduced operating costs. After examining multiple power system reliability indices, the product of Expected Unserved Energy (EUE) and Value of Lost Load (VoLL) is incorporated into the Net-Benefit function of the system operator. MATPOWER Optimal Scheduling Tool (MOST) is used for testing the proposed Net-Benefit functions on a standard reliability test system (RTS) known as RTS-GMLC. Three diverse case studies are examined in three exploration phases; the first phase helps determine search space whereas the second one narrows it down and the third phase finds the optimal BESS solution. Presented research results demonstrate that, over a period of 15 years, optimal BESS deployment can offer as much as $M164.8 and $M33.6 Net-Benefits to the system operator and private investor respectively.

An integrated home energy management system by the load aggregator in a microgrid using the internet of things infrastructure

<span lang="EN-US">Smart technologies enable the significant participation of consumers in demand-side management programs. In this paper, the management of electrical energy consumption for a set of residential houses in a microgrid by a load aggregator for a 24-h planning horizon is studied. In this study, consumption management programs are implemented on controllable equipment by sending binary codes by the load aggregator via the internet of things (IoT) infrastructure to residential sockets. To increase the level of customer convenience and provide more flexibility for consumers to participate in demand response programs, a parameter called the value of lost load (VOLL) has been introduced. According to the results, in addition to no need to use the energy management system for each residential house, only by moving shiftable loads to off-peak hours, 18.34% of energy consumption costs are saved daily. Also, from the load aggregator’s viewpoint for every 10% change in status from normal to the scheduled priority, there is a reduction of about 3.4% in the consumer’s peak-load cost. If solar arrays and storage resources are used, more than 18% of the total consumption cost can be saved.</span>

The quest to quantify the value of lost load: A critical review of the economics of power outages

Estimating the benefits of policies that improve the reliability of the electricity grid is challenging. This paper critically examines the Value of Lost Load (VoLL) literature and provides a framework to describe the complexity of measuring the costs of power outages. The VoLL metric, which is too often presented as a singular point estimate, influences electric reliability decision-making. This paper improves on prior work by clearly distinguishing applications of the VoLL metric between (1) cost-benefit analyses which inform centralized, reliability-enhancing infrastructure investments and (2) decentralized rationing decisions during times of electric supply shortage. Revealed preference approaches to VoLL estimation are introduced that offer attractive theoretical advantages over traditional estimation methods. The underlying uncertainty inherent to estimating the costs of power outages implies that cost-effectiveness analysis should remain a key tool for electric reliability decision-makers.

How Valuable is the Reliability of Residential Electricity Supply in Low-Income Countries? Evidence from Nepal

We use contingent valuation to estimate the willingness to pay (WTP) for improved electricity service in Nepal following the end of the country’s load-shedding crisis of 2007-2016. Using a nationally representative survey of grid-connected Nepali households, we calculate the WTP per outage-day avoided and the value of lost load (VoLL) for residential customers and analyze their key drivers, including income, education, and investments in own generation or electricity storage equipment. Households are willing to pay, on average, 123 NR ($1.11) per month for improved quality of power supply. In other words, they would be prepared to see a 65% increase in their monthly bill to avoid outages. Our preferred estimates of the VoLL range from 5 to 15 NR/kWh (04.7-014/kWh). These estimates are below the marginal cost of avoided load shedding, and are virtually the same as valuations at the beginning of the load-shedding crisis.

The Value of Lost Load in Swedish Industry

The power system is undergoing a drastic transition towards a system with high degree of intermittency at the same time as the transition in other sectors will require more electricity. Taken together this will make it more challenging to keep the instantaneous balance between demand and supply in the power market with increasing risks of interruptions and power outages as a result. The objective of this study is to estimate the cost of power outages in the Swedish industrial sector by using firm- level, production data. Our estimates of interruption costs are based on firms’ actual behavior concerning their use of electricity and the values created. The main approach is complemented with a qualitative study based on a questionnaire targeting key-persons in a small number of industrial production facilities. The purpose with this is to identify firm or facility specific aspects that that are not revealed by annual firm level data. The main conclusion from this study is that the costs for the industry of supply interruptions are considerable, and seems to have increased over time, suggesting that the industrial sector has become more vulnerable to supply disturbances. In 2016 the estimated cost of a one-hour outage for an average industrial facility in Sweden was approximately 23 times larger than the value of the electricity not delivered (SEK 9502 versus SEK 400), whereas the cost in 2004 was approximately 13 times the market value of the electricity not delivered. However, there is substantial variation across firms and sectors. For an average facility in the electro and motor vehicle industry, for example, a one-hour cost is, according to our estimates, about 120 and 105 times the market value of the electricity not delivered, respectively (SEK 43680 versus SEK 415 for an average motor vehicle firm). In the pulp and paper industry, on the other hand, the outage cost is only about 5 times the value of undelivered electricity in spite of a relatively high outage cost in absolute value (SEK 27730). The reason for the relative low ratio for the pulp and paper industry is the very high level of electricity intensity. The estimated costs should however be interpreted with care since they are based on the assumption that the interruption in production processes corresponds exactly to the duration of the outage, but also that the production losses during the outage are lost forever and cannot be compensated for in any way. Importantly, according to the results from our survey most firms or production facilities reported that the production interruption becomes noticeable longer than the power outage itself. In addition, most of them reported additional costs because of an outage, such as costs for overtime and delivery delays. On the other hand, several facilities firms reported that they may be able to “take back” the production losses during a year. Altogether, the first effects seem to dominate according to the survey results and the cost estimates reported should therefore be interpreted as lower bounds.

Global Methodology for Electrical Utilities Maintenance Assessment Based on Risk-Informed Decision Making

Modern electrical power utilities must deal with the replacement of large portions of their assets as they reach the end of their useful life. Their assets may also become obsolete due to technological changes or due to reaching their capacity limits. Major upgrades are also often necessary due to the need to grow capacity or because of the transition to more efficient and carbon-free power alternatives. Consequently, electrical power utilities are exposed to significant risks and uncertainties that have mostly external origins. In this context, an effective framework should be developed and implemented to maximize value from assets, ensure sustainable operations and deliver adequate customer service. Recent developments show that combining the concepts of asset management and resilience offers strong potential for such a framework—not only for electrical utilities, but for industry, too. Given that the quality and continuity of service are critical factors, the concept of Value of Lost Load (VoLL) is an important indicator for assessing the value of undelivered electrical energy due to planned or unplanned outages. This paper presents a novel approach for integrating the power grid reliability simulator into a holistic framework for asset management and electrical power utility resilience. The proposed approach provides a sound foundation for Risk-Informed Decision Making in asset management. Among other things, it considers asset performance as well as the impact of both current grid topology and customer profiles on grid reliability and VoLL. A case study on a major North American electrical power utility demonstrates the applicability of the proposed methodology in assessing maintenance strategy.

Generation expansion planning considering efficient linear EENS formulation

Power system equipment outages are one of the most important factors affecting the reliability and economy of power systems. It is crucial to consider the reliability of the planning problems. In this paper, a generation expansion planning (GEP) model is proposed, in which the candidate generating units and energy storage systems (ESSs) are simultaneously planned by minimizing the cost incurred on investment, operation, reserve, and reliability. The reliability cost is computed by multiplying the value of lost load (VOLL) with the expected energy not supplied (EENS), and this model makes a compromise between economy and reliability. Because the computation of EENS makes the major computation impediment of the entire model, a new efficient linear EENS formulation is proposed and applied in a multi-step GEP model. By doing so, the computation efficiency is significantly improved, and the solution accuracy is still desirable. The proposed GEP model is illustrated using the IEEE-RTS system to validate the effectiveness and superiority of the new model.

A shortage pricing mechanism for capacity remuneration with simulation for the Greek electricity balancing market

In a shortage pricing (or else scarcity pricing) model, the goal is to create extra revenues whenever the electric system approaches a shortage situation and send market signals that will drive capacity investments. Shortage pricing aims at producing a substantial increase in prices under shortage conditions, thus providing better incentives for new flexibility capacity investment and operation while keeping the security of supply within strict acceptable levels. The shortage price is based on the Loss of Load Probability and the Value of Lost Load. The purpose of this study is to simulate the hypothetical implementation of a shortage pricing mechanism in the Greek balancing market in order to discover cases of reserve capacity scarcity and provide indications for further considerations toward capacity remuneration mechanisms for this system. A real dataset from the Greek TSO data portfolio was used for this purpose. We examine two case studies showcasing that the proposed shortage pricing function can considerably increase the shortage prices exactly when needed by the electric system. Finally, policy implications are provided regarding the future use of the shortage pricing in Greece and its integration in the EU balancing market platforms currently under development.

Equilibrium Pricing with Duality-Based Method: Approach for Market-Oriented Capacity Remuneration Mechanism

The crucial design elements of a good capacity remuneration mechanism are market orientation, insurance of long-term power system adequacy, and optimal cross-border generation capacity utilization. Having in mind these design elements, this research aims to propose a financially fair pricing mechanism that will guarantee enough new capacity and will not present state aid. The proposed capacity remuneration mechanism is an easy-to-implement linear program problem presented in its primal and dual form. The shadow prices in the primal problem and dual variables in the dual problem are used to calculate the prices of firm capacity which is capacity needed for long-term power system adequacy under capacity remuneration mechanism. In order to test if the mechanism ensures sufficient new capacity under fair prices, the mechanism is tested on the European Network of Transmission System Operators for Electricity (ENTSO-E) regional block consisting of Austria, Slovenia, Hungary, and Croatia with simulation conducted for a period of one year with a one-hour resolution and for different scenarios of the credible critical events from a standpoint of security of supply; different amounts of newly installed firm capacity; different short-run marginal costs of newly installed firm capacity; and different capacity factors of newly installed firm capacity. Test data such as electricity prices and electricity load are referred to the year 2018. The results show that the worst-case scenario for Croatia is an isolated system scenario with dry hydrology that results with high values of indicators expected energy not served (EENS), loss of load expectation (LOLE), and loss of load probability (LOLP) for Croatia. Therefore, new capacity of several hundred MW is needed to stabilize these indicators at lower values. Price for that capacity depends on the range of installed firm capacity and should be in range of 1000–7000 €/MW/year for value of lost load (VoLL) in Croatia of 1000 €/MWh and 3000–22,000 €/MW/year for VoLL of 3100 €/MWh that correlates with prices from already established capacity markets. The presented methodology can assist policymakers, regulators, and market operators when determining capacity remuneration mechanism rules and both capacity and price caps. On the other hand, it can help capacity market participants to prepare the most suitable and near-optimal bids on capacity markets.

Enhanced nZEB concept incorporating a sustainable Grid Support Scheme

The building sector in Europe represents a large amount of the total energy consumption. European Union policies urge energy management systems installation in buildings, to achieve the nZEB targets and mitigate the climate change. Except for renewable energy sources, the incorporation of energy storage units (ESUs) is of major importance for building energy management, in order to increase self-consumption levels. The present work contributes to the mass installation of ESUs in building sector, as a tool to provide flexibility in the distributed production of energy. This concept is an enhanced version of nZEBs that is able to compete in the Electricity Market, and to contribute to the reliability and flexibility of the electricity grid as an alternative to centralized ESUs investments. In this context, the present work proposes a new type of grid ancillary services for building sector and a novel Grid Support Scheme (GSS) that considers both the energy fluctuations of the available energy in the ESU as well as the energy transactions with the grid. The proposed GSS model concludes to a pricing policy relying on the Value of Lost Load (VoLL), in order that the proposed grid support investment becomes sustainable. The validation of the GSS is performed by means of Life Cycle Cost Assessment.

The Value of Lost Load in Swedish Industry

The power system is undergoing a drastic transition towards a system with high degree of intermittency at the same time as the transition in other sectors will require more electricity. Taken together this will make it more challenging to keep the instantaneous balance between demand and supply in the power market with increasing risks of interruptions and power outages as a result. The objective of this study is to estimate the cost of power outages in the Swedish industrial sector by using firm-level, production data. Our estimates of interruption costs are based on firms’ actual behavior concerning their use of electricity and the values created. The main approach is complemented with a qualitative study based on a questionnaire targeting key-persons in a small number of industrial production facilities. The purpose with this is to identify firm or facility specific aspects that that are not revealed by annual firm level data. The main conclusion from this study is that the costs for the industry of supply interruptions are considerable, and seems to have increased over time, suggesting that the industrial sector has become more vulnerable to supply disturbances. In 2016 the estimated cost of a one-hour outage for an average industrial facility in Sweden was approximately 23 times larger than the value of the electricity not delivered (SEK 9502 versus SEK 400), whereas the cost in 2004 was approximately 13 times the market value of the electricity not delivered. However, there is substantial variation across firms and sectors. For an average facility in the electro and motor vehicle industry, for example, a one-hour cost is, according to our estimates, about 120 and 105 times the market value of the electricity not delivered, respectively (SEK 43680 versus SEK 415 for an average motor vehicle firm). In the pulp and paper industry, on the other hand, the outage cost is only about 5 times the value of undelivered electricity in spite of a relatively high outage cost in absolute value (SEK 27730). The reason for the relative low ratio for the pulp and paper industry is the very high level of electricity intensity. The estimated costs should however be interpreted with care since they are based on the assumption that the interruption in production processes corresponds exactly to the duration of the outage, but also that the production losses during the outage are lost forever and cannot be compensated for in any way. Importantly, according to the results from our survey most firms or production facilities reported that the production interruption becomes noticeable longer than the power outage itself. In addition, most of them reported additional costs because of an outage, such as costs for overtime and delivery delays. On the other hand, several facilities firms reported that they may be able to “take back” the production losses during a year. Altogether, the first effects seem to dominate according to the survey results and the cost estimates reported should therefore be interpreted as lower bounds.

TNEP and the effects of wind generation on market prices, network reliability, and line failures in TNEP

in this paper we will show how wind farms affect local marginal prices (LMPs), rates of line failure, reliability of transmission and generation, and operation costs for TNEP in the market.In order to model the transmission reliability, load shedding (LS) criterion LMP and outage durations were used in a single line failure or concurrent failure of wind and line units. Outage duration is a period that a line fails and a time required to reestablish the failed line. In generation reliability formulation, loss of load (LOL) and LS criteria were utilized as a consequence of wind unit outage, generation and congestion in transmission other than the value of lost load (VOLL), LMP and outage periods (failure and repair periods of units). In addition, the relation between wind unit and line loading was used to formulate the effects of wind units on LMP and line failure rates. Operation expense of generation system that includes pollution cost, fuel cost, and generation charge of energy by wind units is calculated using optimal power flow (OPF). Moreover, the status of network loss is influenced by the wind units is modeled via the bonding between line loading and wind units. The suggested model was used to evaluate the IEEE Reliability Test System (IEEE RTS).Finally, the results will be discussed.

How detailed value of lost load data impact power system reliability decisions

The value of lost load (VOLL) is an essential parameter for power system reliability. It represents the cost of unserved energy during power interruptions. Various studies have estimated this parameter for different countries and more recently, for different interruption characteristics – such as interruption duration, time of interruption and interrupted consumer. However, it is common practice in system operation and the literature to use only one uniform VOLL. Our theoretical analysis shows that using more-detailed VOLL data leads to more cost-effective transmission reliability decisions. Using actual consumer- and time-differentiated VOLL data from Norway, Great Britain and the United States, numerical simulations of short-term power system reliability management indicate a potential operational cost decrease of up to 43% in a five-node network, and between 2% and 18% in a more realistic 118-node network – mainly because of lower preventive redispatch costs in response to lower expected interruption costs. However, changed reliability practices could lead to opposition, if some consumers are disproportionately interrupted and not adequately compensated. Although the first policy measures to collect more detailed and harmonized VOLL data have been taken, future policy should improve transmission-distribution coordination and enable the participation of all consumers in curtailment programs, through smart meters and smart appliances.

Renewable electricity trading through SLAs

Energy systems are in transition towards more sustainable generation portfolios. In the envisioned smart grid generation will primarily depend on renewable power sources making uncertain quantities of electricity available, the delivery of which cannot be guaranteed. Current electricity tariffs promise certain delivery, and are thus not well-suited to trade uncertain quantities. However, if not traded the electricity might need to be curtailed, foregoing potential benefits for both supply and demand sides. We propose to adopt service level agreements (SLAs) that comprise quantity, reliability, and price, for electricity trading in settings where supply depends on volatile power sources. We define a characterization of the value degradation of tolerant and critical buyers with regards to the uncertainty of electricity delivery generalizing the widely used value of lost load (VoLL). This captures buyers’ varying abilities to cope with uncertainty. We consider allocating SLAs to buyers using either a sequential second-price auction or the combinatorial Vickrey-Clarke-Groves (VCG) mechanism that is known to elicit truthful bids, and discuss the settings in which we can obtain truthfulness in the sequential setting. In addition, we empirically compare their performance and demonstrate that VCG dominates alternative allocations and vastly improves the efficiency of the proposed system, when compared to baseline allocations that only use the VoLL. This article hence contributes an essential component to the future smart grid by facilitating distributed energy trading under uncertainty.

Constructing Demand Curves in Forward Capacity Market

This paper presents an economic framework for designing demand curves in Forward Capacity Market (FCM). Capacity demand curves have been recognized as a way to reduce the price volatility inherited from fixed capacity requirements. However, due to the lack of direct demand bidding in FCM, obtaining demand curves that appropriately reflect load's willingness to pay for reliability is challenging. The proposed framework measures the value of reliability by the avoided cost of unserved energy (CUE), i.e., Expected Unserved Energy (EUE) multiplied by Value of Lost Load (VOLL). The total cost of capacity and CUE are then minimized, allowing economic tradeoffs between different reliability levels. EUE, a multivariate function of the total system capacity and its distribution among capacity zones, is decomposed into single-variable functions, which form the base for system and zonal demand curves. VOLL is implied from the Net Cost of New Entry (Net-CONE) based on long-term market equilibrium properties. The proposed framework is applied to a multizone ISO New England system to demonstrate its effectiveness.

Reserve Management in Restructured Power System Considering Loads Reliability

Determining the spinning reserve capacity is amongst the most important tasks of system operator to insure safe and reliable operation of power system. So far, various methods are proposed to determine reserve capacity which are based on deterministic or probabilistic criteria. Due to considering the stochastic nature of system events, probabilistic approaches are more preferable in comparison to deterministic approaches. In practice, the value of interrupted loads are not the same for all consumers and some of them like industrial ones have higher value of lost load (VOLL). Thus, consumes with higher values of lost load are willing to pay more in order to gain higher reliability levels than consumers with less VOLL. In other words, they are more concerned with their individual load point reliability. In this paper a new method is presented to optimally determine the system spinning reserve requirement in a competitive simultaneous energy and reserve market render based on cost-benefit analysis and stochastic programming technique is proposed considering different values of lost load at each bus. Including units and lines outages and their corresponding likelihoods in the objective function, regard for loading rate of the generators constraints and transmission flow constraints are the advantages of the proposed method. Simulations performed on the 14-bus IEEE test system demonstrate effectiveness of the presented approach.

Reserve Management in Restructured Power System Considering Loads Reliability

Determining the spinning reserve capacity is amongst the most important tasks of system operator to insure safe and reliable operation of power system. So far, various methods are proposed to determine reserve capacity which are based on deterministic or probabilistic criteria. Due to considering the stochastic nature of system events, probabilistic approaches are more preferable in comparison to deterministic approaches. In practice, the value of interrupted loads are not the same for all consumers and some of them like industrial ones have higher value of lost load (VOLL). Thus, consumes with higher values of lost load are willing to pay more in order to gain higher reliability levels than consumers with less VOLL. In other words, they are more concerned with their individual load point reliability. In this paper a new method is presented to optimally determine the system spinning reserve requirement in a competitive simultaneous energy and reserve market render based on cost-benefit analysis and stochastic programming technique is proposed considering different values of lost load at each bus. Including units and lines outages and their corresponding likelihoods in the objective function, regard for loading rate of the generators constraints and transmission flow constraints are the advantages of the proposed method. Simulations performed on the 14-bus IEEE test system demonstrate effectiveness of the presented approach.