Cost of blackouts may require ‘fresh look’

The cost of blackouts may require a “fresh look” following the power cut in August that left millions of customers without electricity and brought widespread disruption to the transport network.

Iain Staffell, senior lecturer in sustainable energy at Imperial College London, said the cost suggested by the current Value of Lost Load – a measure used to determine security of supply standards – “doesn’t really tie up” with the experiences of those affected by the incident.

The latest estimates come from a 2013 study by London Economics which used two methods to calculate the economic impact of power cuts.

For industrial and commercial customers, their economic output was divided by the amount of electricity they consume. The answer was then weighted to reflect the varying importance of power supplies to different users within this category, producing a final figure of £1,400/MWh.

The values for domestic customers and SMEs were instead derived from choice experiments in which subjects were asked how much they would have to be paid to willingly suffer a power cut.

They produced figures of £10,289/MWh for domestic users and £35,488/MWh for SMEs, and a weighted average of 16,940/MWh. It is this last number, which is used to determine security of supply standards.

Multiplying it by the volume of power that was cut off during August’s blackout suggests a cost for the incident of £15 million, according to Staffell. He believes this is not reflective of its true impact given the significant disruption to infrastructure and services.

Speaking to Utility Week, Staffell said power cuts are so infrequent in the developed world there is limited data on which to base valuations. Historic estimates for Great Britain have varied between £1,000/MWh and £70,000/MWh: “It just tells you that it’s really difficult to try and understand what this value should be for trying to avoid disruption.”

But commenting on the choice experiments conducted by London Economics, he remarked: “I don’t think that kind of question is really going to get you to a realistic answer, or certainly an answer that’s going to factor in all of the knock on implications of a power disruption.”

“We probably need to have more evidence and maybe a fresh look at how much we should valuing this stuff,” he added. “If we had a much higher valuation of discontinuity of supply that might change the way that things are being run and operated.”

This could, for instance, mean the electricity system operator (ESO) holding more frequency response in reserve, as called for by Anesco chairman Steve Shine in the wake of the blackout.

The ESO’s final report into the incident found it was caused by a lightning strike on a transmission line that triggered several “extremely rare and unexpected” events, including an outage at the Hornsea One offshore windfarm. It nevertheless called for a review of security of supply standards to ensure they are set correctly.

Staffell said this will become increasingly important as the proliferation of renewables makes the electricity system harder to operate.