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Using Insurance to Manage Reliability in the Distributed Electricity Sector: Insights From an Agent-Based Model

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  • Rolando Fuentes
  • Abhijit Sengupta

    (King Abdullah Petroleum Studies and Research Center)

Abstract

Our results suggest that consumers would transfer some of the inherent risks of a blackout to the utility for a price lower than their willingness to pay to achieve their desired level of protection, creating economic value. The purchase of insurance would help most consumers avoid a complete loss of power. Our simulations show that of those households that would otherwise experience a complete loss of power, on average between 1% and 15% can fully cover their excess energy needs through insurance. Between 50% and 70% of these households are budget constrained but would still be able to partially cover their excess energy needs.

Suggested Citation

  • Rolando Fuentes & Abhijit Sengupta, 2019. "Using Insurance to Manage Reliability in the Distributed Electricity Sector: Insights From an Agent-Based Model," Discussion Papers ks--2019-dp59, King Abdullah Petroleum Studies and Research Center.
    • Handle: RePEc:prc:dpaper:ks--2019-dp59
    DOI: 10.30573/KS-2019-DP59
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    Cited by:

    1. Dongwei Zhao & Hao Wang & Jianwei Huang & Xiaojun Lin, 2022. "Insurance Contract for High Renewable Energy Integration," Papers 2209.10363, arXiv.org.
    2. Farhad Billimoria & Filiberto Fele & Iacopo Savelli & Thomas Morstyn & Malcolm McCulloch, 2021. "On the Design of an Insurance Mechanism for Reliability Differentiation in Electricity Markets," Papers 2106.14351, arXiv.org.
    3. Chi-Keung Woo & Jay Zarnikau & Asher Tishler & Kang Hua Cao, 2022. "Insuring a Small Retail Electric Provider’s Procurement Cost Risk in Texas," Energies, MDPI, vol. 16(1), pages 1-12, December.
    4. Farhad Billimoria & Filiberto Fele & Iacopo Savelli & Thomas Morstyn & Malcolm McCulloch, 2023. "An Insurance Paradigm for Improving Power System Resilience via Distributed Investment," Papers 2302.01456, arXiv.org.

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    Keywords

    Agent based models; Distributed energy resources; New business models in electricity; Reliability Insurance; Utility death spiral;
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