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The Cost of Electric Power Interruptions in the Industrial Sector: Estimates Derived from Interruptible Service Programs

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  • Douglas W. Caves
  • Joseph A. Herriges
  • Robert J. Windle

Abstract

The electric power industry has become increasingly interested in the value customers place upon service reliability, with the demand for reliability couched in terms of outage or shortage costs. The survey-based method of eliciting these costs dominates the literature. This paper explores and demonstrates a method for estimating outage and shortage costs based upon behavioral data. A discrete choice model is developed for estimating shortage costs using observed decisions of industrial customers regarding participation in interruptible service programs. The resulting shortage cost estimates of $4 per kWh unserved for a one-hour interruption are consistent with previous survey-based estimates.

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Bibliographic Info

Article provided by University of Wisconsin Press in its journal Land Economics.

Volume (Year): 68 (1992)
Issue (Month): 1 ()
Pages: 49-61

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Handle: RePEc:uwp:landec:v:68:y:1992:i:1:p:49-61

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Web page: http://le.uwpress.org/

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Cited by:
  1. de Nooij, Michiel & Koopmans, Carl & Bijvoet, Carlijn, 2007. "The value of supply security: The costs of power interruptions: Economic input for damage reduction and investment in networks," Energy Economics, Elsevier, vol. 29(2), pages 277-295, March.
  2. Pepermans, Guido, 2011. "The value of continuous power supply for Flemish households," Energy Policy, Elsevier, vol. 39(12), pages 7853-7864.
  3. David F. Layton & Klaus Moeltner, 2000. "A Censored Random Coefficients Model for Pooled Survey Data with Application to the Estimation of Power Outage Costs," Econometric Society World Congress 2000 Contributed Papers 0912, Econometric Society.
  4. Steinbuks, J. & Foster, V., 2010. "When do firms generate? Evidence on in-house electricity supply in Africa," Energy Economics, Elsevier, vol. 32(3), pages 505-514, May.
  5. Luise Röpke, 2013. "The Development of Renewable Energies and Supply Security: A Trade-Off Analysis," Ifo Working Paper Series Ifo Working Paper No. 151, Ifo Institute for Economic Research at the University of Munich.
  6. Röpke, Luise, 2013. "The development of renewable energies and supply security: A trade-off analysis," Energy Policy, Elsevier, vol. 61(C), pages 1011-1021.

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