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Estimating the Economic Value of Smart Grid Reliability Benefits | Demand Response

An important and potentially large value stream that is rarely included in the business cases for smart grid investments is the improvement in reliability that customers experience.  This value stream could be as large as, or even larger than, the demand response benefits that have become a common component of business cases and utility AMI applications.  Below is a brief summary of some recent work and useful tools that are in the public domain.  These resources can be used to incorporate reliability improvements in AMI applications or quantify value streams associated with other types of smart grid investments.

In a recent article for Renew Grid magazine, Freeman, Sullivan & Co. (FSC) proposes an approach for estimating the economic benefits customers receive from reliability improvements.  This article summarizes a report that FSC prepared for NARUC as part of the State Electricity Regulators Capacity Assistance and Training Program (SERCAT).  This approach can be readily implemented by many utilities because it relies on well-established reliability statistics that are collected on a routine basis (e.g., SAIFI, CAIDI, SAIDI).  By implementing this approach, planners can accurately incorporate this important benefit into their smart grid cost-benefit studies.

The calculations required to estimate the economic value of reliability are complicated and require information about interruption costs that many utilities do not have.  Correspondingly, FSC has developed a publicly available online interruption cost calculator that is based on econometric estimates of interruption costs.  These estimates were derived from a meta analysis of 28 interruption cost studies conducted over a 16-year period in the United States.  A BETA version of the online interruption cost calculator can be found at www.icecalculator.com.