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Electricity Supply Interruptions: Sectoral Interdependencies and the Cost of Energy Not Served for the Scottish Economy

Abstract:
Modern economies and infrastructure sectors rely upon secure electricity supplies. Due to sectoral interdependencies, major interruptions cause cascading effects in the economy. This paper investigates the economic effects of major power supply disruptions taking such interdependencies into account. We apply a dynamic in-operability input-output model (DIIM) to 101 sectors, including households, of the Scottish economy in 2009 to explore the direct, indirect, and induced effects of supply interruptions. We estimate the societal cost of energy not supplied (SCENS) due to an interruption. The results show that the most economically affected industries, following an outage, are different from the most inoperable ones. The results also indicate that SCENS varies with the duration of a power cut, ranging from �4,300/MWh for a one-minute outage to �8,100/MWh for a three-hour (and higher) interruption. The results can be used to design policies for contingencies and preventive investments in the power sector.

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Energy Specializations: Electricity – Generation Technologies; Electricity – R&D and Emerging Technologies; Electricity – Markets and Prices ; Electricity – Local Distribution; Electricity – Transmission and Network Management

JEL Codes:
Q2 -
O32 - Management of Technological Innovation and R&D
D42 - Market Structure, Pricing, and Design: Monopoly
D44 - Auctions

Keywords: Power blackout, inoperability input–output model, interdependent economic systems, cost of energy not supplied

DOI: 10.5547/01956574.38.1.rpou

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Published in Volume 38, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.