The headlines may scream outrage at even the prospect of electricity outages, but it seems that the average consumer does not value grid reliability as much as they used to.
A comprehensive new survey conducted by the Australian Energy Regulator finds that consumers across the country have lowered their “value of consumer reliability” by significant amounts since the last survey in 2014. In Tasmania, the value has dropped by half.
The one exception is the Adelaide CBD, perhaps because they have had more than their fair share in recent years and their reliability valuation is more acute.
The value of customer reliability is a key factor in regulatory decisions about network planning, and how much should be spent on making them even more secure and reliable. Australia has one of the strictest reliability standards in the world, at 99.998 per cent.
The value of reliability is also used in putting a value of how much generation should be in reserve – in the case of extended heatwaves that may put a stress on coal and gas generators, as the country is experiencing this week.
From March next year, it will play a key role in how much the Australian Energy Market Operator can spend on its reserve trader mechanism, a key tool for it to keep the lights on in summer. The principle will be that the RERT costs should not exceed the average VCR.
And the AER’s calculations will also be a key part of the market redesign that is being put together by the Energy Security Board, which are due to come into effect from 2025, and which will – hopefully – recognise and facilitate the transition to renewables, and to a more distributed rather than centralised grid.
It should be remembered that network faults account for the bulk of all outages – 95 per cent, according to the AER. Just 0.29 per cent of outages and interruptions are caused by insufficient supply.
Total outages – including network faults (blown transformers, falling trees, bushfires etc) – amount to an average 28 minutes a year in the CBD, 130 minutes for urban feeders, and up to 628 minutes for those living on long rural feeders, which are particularly vulnerable to storms and fires.
And although insufficient supply represents an average of less than one minute of outages per year for customers on urban feeders, or an average of three seconds of outages per CBD customer, it accounts for 99 per cent of headlines and 500 per cent of genuine and confected outrage from commentators.
The VCR is a complex calculation and depends widely on individual circumstances, their location, the season, the day, the time of day, and what sort of appliances they may wish to use at the time – ovens, lights, air conditioners etc. Customers are asked how much more they would be willing to pay to keep the lights on.
Customers in South Australia had a preference to avoid outages in summer, while NSW customers had a weak preference to avoid outages in winter.
Unsurprisingly, there was a general preference for localised over widespread outages, shorter duration outages over longer duration outages, and off peak time outages over peak time outages. Residential owners of electric vehicles and those who live more comfortably are willing to pay more for reliability than other customers.
For business customers, outages may mean a loss of production, or spoilage from the loss of refrigerated goods. That’s why, on average, business puts a value on reliability of nearly double that of residential customers, but even that varies significantly from the service industries to industrial companies, and mine operators.
The assessments of these reliability valuations were based on short outages of one to two hours. The AER will publish VCR values for widespread and long duration outages in early 2020.