Relationship between the economic cost and the reliability of the electric power supply system in city: A case in Shanghai of China

This paper presents a model to quantify the impact of electric power outages on GDP by using Cobb–Douglas production function to develop an economic relationship between the reliability of the electric power supply system and the cost of electric energy unserved. Our findings show that average costs for providing a stable power supply are much lower than disruption costs, which is supported by recurring to the data available of Shanghai. Estimated by using Shanghai’s macroeconomic data of 1990–2006, this relationship indicates that the impact of electricity service disruption on Shanghai’s GDP is about 48.18 × 108 CNY in 2006, matching an alternative “back-of-envelope” estimate of 50.91 × 108 CNY. The estimated costs per kWh unserved are 1.81–10.26 CNY in 1990–2006, mirroring the increasing importance of electricity in the period’s economic development. These results demonstrate the usefulness of our approach for quantifying the reliability benefits of investments in electricity infrastructure.