 Pricing power outages in the NetherlandsBarbara Baarsma and J. Peter Hop Energy, 2009, vol. 34, issue 9, 1378-1386 Abstract: In most Western countries, the power grid provides electricity more than 99% of the time. To maintain reliability at such high levels, energy companies have to continually invest in electric transmission- and distribution systems. Since customers of electricity cannot switch from one distribution network to another, no economic incentive exists that matches the supplied reliability to customer preferences. Either under- or over-investment in reliability may thus result. In order to introduce market-like incentives, the Dutch Energy Regulator introduced a regulatory system based on the (perceived) costs of power outages. An essential ingredient of the regulation is the cost of a power outage of a particular duration (i.e., 1minute). This paper measures these outage cost by using conjoint analysis. We find that the social cost of the present Dutch level of reliability — that is, one outage of two hours every four years — is €2.80 on average for every household, and €33.10 on average for every SME firm. The total costs to Dutch society are almost €50million. Keywords: Electricity; Outages; Economic valuation; Conjoint analysis; Regulation of reliability; Yardstick competition; Network company (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:34:y:2009:i:9:p:1378-1386 DOI: 10.1016/j.energy.2009.06.016 Access Statistics for this article Energy is currently edited by Henrik Lund and Mark J. Kaiser More articles in Energy from Elsevier |
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