Assessing energy supply security: Outage costs in private households

The objective of this paper is to contribute to the topic of energy supply security by proposing a Monte Carlo-based and a survey based model to analyze the costs of power interruptions. Outage cost estimations are particularly important when deciding on investments to improve supply security (e.g. additional transmission lines) in order to compare costs to benefits. But also other policy decisions on measures that have direct or indirect consequences for the supply security (e.g. a phasing out of nuclear energy) need to be based on results from outage cost estimations. The main focus of this paper lies with residential consumers, but the model is applied to commercial, industrial and governmental consumers as well. There are limited studies that have approached the problem of evaluating outage cost. When comparing the results of these studies, they often display a high degree of diversification. As consumers have different needs and dependencies towards the supply of electricity because of varying circumstances and preferences, a great diversity in outage cost is a logical consequence. To take the high degree of uncertainties into account, a Monte Carlo simulation was conducted in this study for the case of private households in Germany.

► A macroeconomic model to assess outage cost is proposed.
► Possibilities for substitution are considered by analyzing individual preferences for the time-use.
► Uncertainties are taken into account by using a Monte Carlo simulation.
► This study reveals the distribution of outage costs to different electricity consumers.
► Implications for energy policy decisions are discussed.