Electric utility valuations of investments to reduce the risks of long-duration, widespread power interruptions, part I: Background

Power industry stakeholders are devoting increasing attention to the risks of long-duration, widespread interruptions (LDWIs) in electricity service. There is concern that these risks are heightening due to more frequent and severe extreme weather events. Numerous studies have examined various aspects of the problem, primarily from an engineering and conceptual perspective. This is the first of two papers reporting the results of a study of LDWIs that focuses on their economic aspects, takes an empirical approach, and includes consideration of institutional factors affecting utilities’ efforts to reduce their vulnerabilities to these disruptions. This paper presents background on the problem, including cost concepts relevant to economic valuation of measures to reduce the risks of LDWIs, valuation methods, and the role of the concept of ‘resilience’ in shaping analysis in this area. This material provides context and motivation for the second paper, which reports on a series of case studies.