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The costs of electricity interruptions in Spain. Are we sending the right signals?

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  • Linares, Pedro
  • Rey, Luis

Abstract

One of the objectives of energy security is the uninterrupted physical availability of energy. However, there is limited information about how much is the cost of energy supply interruptions. This information is essential to optimize investment and operating decisions to prevent energy shortages, or, alternatively, to determine the strength of the signals to be sent to the agents so that they may invest accordingly. In this paper, we estimate the economic impact of an electricity interruption in different sectors and regions of Spain. Although there are several caveats in our analysis, we find that in 2008 the cost for the Spanish economy of one kWh of electricity not supplied was above €4 even in a conservative scenario, which is higher than the signals currently being sent as incentives to avoid these interruptions. This might result in an underinvestment in short-term energy security, particularly when we add the usual risk aversion of most consumers.

Suggested Citation

  • Linares, Pedro & Rey, Luis, 2013. "The costs of electricity interruptions in Spain. Are we sending the right signals?," Energy Policy, Elsevier, vol. 61(C), pages 751-760.
    • Handle: RePEc:eee:enepol:v:61:y:2013:i:c:p:751-760
    DOI: 10.1016/j.enpol.2013.05.083
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    More about this item

    Keywords

    Energy security; Electricity interruptions; Value of lost load;
    All these keywords.

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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