The Value of Lost Load in Swedish Industry

The power system is undergoing a drastic transition towards both a high degree of intermittency and sectors requiring more electricity overall, with increasing risks of interruptions and power outages as a result. To decide how much resources to spend on a fully reliable power supply, it is critical to know its value to the society. The most common measure of the interruption cost is the value per unit of electricity not delivered, i.e., the value of lost load , VoLL. A characteristic of VoLL is that the implied duration of the interruption will differ between firms and sectors, causing problems for cost comparisons for given durations. In benefit-cost assessments to mitigate the risk of interruptions, a cost per unit of duration, such as e.g., cost per hour (CpH), would be more useful. Our estimates are based on firms’ actual electricity use and values created. The costs of interruptions are considerable and seems to have increased over time. In 2016 the estimated cost of a one-hour outage for an average industrial facility in Sweden was approximately 23 times larger than the value of the electricity not delivered (SEK 9502 versus SEK 400), whereas the cost in 2004 was approximately 13 times the value not delivered. These numbers should be interpreted with care since they assume that the interruption corresponds exactly to the duration of the outage, but also that the production losses are lost forever and cannot be compensated for. The study also concludes that there is a lot of heterogeneity across firms and sectors, and that it is important to distinguish between VoLL and CpH