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Market-based Estimation of Average Electricity Outage Costs in the United States

Author

Listed:
  • Chi Keung Woo
  • A. Tishler
  • Kang Hua Cao
  • Han Qi
  • Raymond Li
  • Jay Zarnikau

    (Centre for Sustainable Development Studies, Hong Kong Baptist University, China)

Abstract

Electricity outage cost (EOC) estimates ($ per kWh unserved) are essential input data for optimal reliability planning and efficient pricing of electricity services. Based on the 2019-2020 market data published by two US government agencies for the lower 48 states, this paper’s EOC estimates by census region and year are median values of $1.39 to $2.93 per kWh unserved, well below the estimate of $9 per kWh unserved adopted by Texas for optimal reliability planning. The policy implications of adopting our lower EOC estimate are (a) a reduction in an electric grid’s optimal planning reserve to improve the grid’s cost efficiency; and (b) a decline in the grid’s marginal cost-based retail price to encourage welfare-enhancing end-use consumption.

Suggested Citation

  • Chi Keung Woo & A. Tishler & Kang Hua Cao & Han Qi & Raymond Li & Jay Zarnikau, 2024. "Market-based Estimation of Average Electricity Outage Costs in the United States," Energy RESEARCH LETTERS, Asia-Pacific Applied Economics Association, vol. 5(2), pages 1-5.
    • Handle: RePEc:ayb:jrnerl:103
    DOI: 2024/07/10
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    References listed on IDEAS

    as
    1. Tishler, Asher, 1993. "Optimal production with uncertain interruptions in the supply of electricity : Estimation of electricity outage costs," European Economic Review, Elsevier, vol. 37(6), pages 1259-1274, August.
    2. Klaus Moeltner & David F. Layton, 2002. "A Censored Random Coefficients Model For Pooled Survey Data With Application To The Estimation Of Power Outage Costs," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 552-561, August.
    3. Cao, K.H. & Qi, H.S. & Tsai, C.H. & Woo, C.K. & Zarnikau, J., 2021. "Energy trading efficiency in the US Midcontinent electricity markets," Applied Energy, Elsevier, vol. 302(C).
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    More about this item

    Keywords

    Electricity outage costs; Market-based estimation; United States;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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