Risk assessment of distribution system: Real case application of value at risk metrics

The risk oriented asset management is a new trend for optimization of investments in distribution grids. The approach is based on the derivation of operational risk metrics in accordance with the reliability indices of the system components (or assets) and outage costs. The big challenge of risk assessment methods is to find out the appropriated risk metric which equally reflects the severity and the likelihood of some contingences of considered distribution systems. The wide used metric of risk assessment in the finance and insurance industries as well as nowadays in energy trading is the Value at Risk method (VaR). VaR is the large applied metric for estimation of losses within defined confidence limits and considered time period. The proposed approach is based on the Loss Distribution Approach (LDA) and VaR derivation as measure for risk. Application of LDA and VaR has its roots in a traditional field of insurance risk theory.