News & insights
Date: October 2018 | Client: ACER | Sector: Energy | Energy markets | Expertise: Modelling
Estimating the value of lost load for electricity in Europe
Our study demonstrated that there are regional differences in the value of lost load and, as expected, the value is higher for domestic consumers.
The two key objectives of the study were to:
- Review and assess the concept of VoLL in electricity markets including identifying relevant methodological approaches to estimating VoLL and relevant consumer groups; and
- Provide numerical estimates of VoLL per each consumer type/group per Member State.
How we did it
CEPA conducted a literature review of existing studies assessing VoLL across multiple European countries, considering the range of methodologies used to reach VoLL estimates. CEPA then explored the actual and potential regulatory applications of VoLL and set out where a common EU-wide methodology may be most applicable.
In the second phase of the project, CEPA developed numerical estimates of VoLL for both domestic consumers and various non-domestic sectors for countries across Europe. As well as using production function techniques with macroeconomic data to estimate VoLL, CEPA performed primary research including willingness-to-accept analysis in order to improve upon assumptions previously made in the literature.
What we found
The study provided practical results that can be used in the context of updating and improving security of supply aspects of the electricity cost-benefit analysis (CBA) methodologies. Our study demonstrated that there are regional differences in the value of lost load and, as expected, the value is higher for domestic consumers.
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