News & insights
Date: October 2019 | Sector: Energy | Energy retail & consumers | Energy markets | Expertise: Modelling
CEPA Outage Cost Calculator
This calculator lets you estimate how much you would need to be compensated if you were to experience a temporary household electricity blackout.
Security of supply is a complex area and this calculator is a simple tool. It is intended as a bit of fun and should not be used for any other purpose. You can find further information about how the tool works below.
How we estimate outage costs
This calculator lets you estimate how much you would need to be paid to voluntarily experience a temporary household electricity blackout and compare this with others. As well as a household consumer, you can estimate direct costs for a ‘services based’ electricity consumer anywhere in Europe. Security of supply is a complex area and this calculator is a simple tool. It is intended as a bit of fun and should not be used for any other purpose.
The calculator allows you to compare your entry with the average amount estimated for consumers of the same type in the same country and across Europe. We have calculated these averages based on our research into electricity security of supply events across Europe. The simplified estimates presented here are based on the average cost to consumers in any hour of the year. They do not represent the costs to consumers for outages which occur at times of peak demand. Neither do they incorporate seasonal variation for example.
These estimates only cover 'direct' costs - i.e. those which relate directly to the loss of electricity for an individual consumer. In practice, indirect costs such as the impact on transport, crime or public health may be larger (potentially significantly larger) than the direct costs estimated here.
CEPA has carried out a number of projects exploring electricity security of supply outages, the willingness of consumers to accept payment for these outages and on the value of lost load. For example, see our report for the Agency for the Cooperation of Energy Regulators (ACER) on value of lost load in Europe.
Based on this research, we have developed a methodology for calculating outage costs that takes into account a number of variables, only some of which are included in this simple tool. For example, we take into account the fact that you may still be able to do some of your valued activities (such as playing sport… or sleeping) even without electricity. We have considered the impact of the time of day, week and season in which an outage occurs as well as whether notice could be provided in advance. We have also explored the interaction between the length of an electricity outage and the amount of money that a consumer would need. For most consumers, the relationship is not linear.
The approach can be scaled up from the individual consumer level to explore outages at a more generalised level, for example within a certain region or country.
Security of supply
Security of supply refers to the provision of the appropriate electricity system capabilities (such as generation and transmission capacity) to maintain normal supply to consumers.
Value of lost load (VoLL)
VoLL places a value on the loss of socio-economic activity which takes place when electricity is not provided to consumers. It can be used to measure the marginal benefits of improving the level of security of electricity supply.
Willingness to pay (WTP)/ Willingness to accept (WTA)
WTP/WTA measures the monetary value that consumers ascribe to a certain level of service provision. In the context of security of supply, it can be used to estimate the amount that they are prepared to pay (WTP) or accept (WTA) to avoid (WTP) or experience (WTA) an electricity outage
Production-function approaches make use of macroeconomic data to estimate the impacts of an electricity outage on productive output and on the value of leisure time. The approach is based on the assumption that electricity is an important input for consumers into the production and consumption of goods and services, such that production or leisure enjoyment is partially or fully reduced when there is a supply disruption.
The substitutability factor is used to measure the proportion of productive output or leisure value which is dependent on electricity. It accounts for the fact that some activities are partly or wholly independent of electricity use. Our research has developed estimates of the substitutability factor for different types of consumers for the first time.
When provided with notice, consumers may be able to re-structure their activities to reduce the negative impacts of an outage. In previous research, we have defined a ‘notice factor’ which has allowed us to take into account the impact of notice on consumers’ willingness to accept and VoLL.
Decreasing marginal VoLL/WTA
The relationship between the duration of an outage and the value that a consumer places on the lost electricity can be complex. In general, we have found that the total value placed on the lost electricity increases with the duration of an outage but that the marginal increase in value is decreasing (i.e. the next hour of lost electricity is less valuable to the consumer than the previous hour).
To find out more, please contact our experts listed below.