Value of Lost Load: How much is supply security worth?

In the current operation of power systems, the paradigm states that the customer should, with a very high probability, be supplied with power. This can also be stated as the probability of losing supply being very small, typically on the order of days per decade. The adherence to this paradigm may cause unnecessarily high costs. In order to operate a system where a supply-outage to customers is used as an acceptable, albeit expensive operative decision, it is essential to know the cost of this shedding. The classical method of calculating the Value of Lost Load (VOLL) has been the use of customer surveys. Due to their nature, surveys cover only a snapshot of the spectrum of parameters which affect the valuation. Moreover, VOLL is often expressed as a function of a single parameter such as duration of the outage or frequency of recurrence. This is inadequate modelling because a variety of parameters influence the magnitude of the costs incurred on account of an outage. The study in this paper presents an approach of using data from choice experiment surveys along with available interruption cost functions to introduce a more dynamic nature to the VOLL. Several parameters which affect the cost of an outage have been identified, classified and suitably incorporated into the model developed. The results from sensitivity analysis of the outage costs to these parameters show the possibility of using the concept of VOLL in short-term operative planning and contingency schemes of a power system, in addition to the more traditional use so far in long-term reliability planning.