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Onsite Backup Generation and Interruption Insurance for Electricity Distribution

Author

Listed:
  • Joseph A. Doucet
  • Shinuel S. Oren

Abstract

This paper extends recent work on interruption insurance for electric power by introducing onsite backup generation capacity as a supplementary form of interruption insurance. The basic model of interruption insurance as a mechanism for differential pricing is reviewed, the incentive for providing onsite backup generation capacity is demonstrated and the interaction between onsite backup generation and interruption insurance is analyzed. Two types of onsite backup, customer and utility owned, are discussed. It is shown that individuals' economic incentives to install onsite backup generation dominate the utility's incentive. Hence customer owned onsite backup decisions will pre-empt the utility's plan to mitigate compensation payments by providing onsite backup generation.

Suggested Citation

  • Joseph A. Doucet & Shinuel S. Oren, 1991. "Onsite Backup Generation and Interruption Insurance for Electricity Distribution," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 79-94.
    • Handle: RePEc:aen:journl:1991v12-04-a05
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    Cited by:

    1. Bernard, Jean-Thomas & Roland, Michel, 2000. "Load management programs, cross-subsidies and transaction costs: the case of self-rationing," Resource and Energy Economics, Elsevier, vol. 22(2), pages 161-188, May.
    2. Adam Rose & Gbadebo Oladosu & Shu‐Yi Liao, 2007. "Business Interruption Impacts of a Terrorist Attack on the Electric Power System of Los Angeles: Customer Resilience to a Total Blackout," Risk Analysis, John Wiley & Sons, vol. 27(3), pages 513-531, June.
    3. Farhad Billimoria & Filiberto Fele & Iacopo Savelli & Thomas Morstyn & Malcolm McCulloch, 2023. "An Insurance Paradigm for Improving Power System Resilience via Distributed Investment," Papers 2302.01456, arXiv.org.

    More about this item

    JEL classification:

    • F0 - International Economics - - General

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