Consumers don't value grid reliability quite as much as they used to | RenewEconomy

Consumers don’t value grid reliability quite as much as they used to

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Consumers have put a lower value on reliability than they did five years ago, a key input into how much should be invested in networks, emergency reserves, and in the new market design.

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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.


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  1. Bazz12 6 months ago

    Ask many people about reliability and they do not realise that you are talking about sitting on the floor of a lift for a couple of hours, or sitting at home listening to your battery radio.
    Or not being able to get money from the bank or it is closed.
    Then you will get a different story.

  2. Cooma Doug 6 months ago

    Thing to remember here is the disaster that a “system black” can be. We had major outages many years ago last century that were due to inability to back up protection failures. The consequences were not good. As a result they implemented a system called “local backup”
    and it takes steps to cover multiple failures.

    I was involved in more recent events where system black was prevented. But if it occurred there would be a catastrophy. It is described very well in many videos. Give it a google and check out the USA disasters.

    The good news is that the likelyhood of system
    black in a 75% plus renewable grid would be
    unlikely. The load side response capabilities are a huge difference. The nature of the renewable grid is at less risk of large base load failures and capable of more rapid targeted responses.

  3. Mike Westerman 6 months ago

    The latest Lazard LCOS indicates batteries with PV has a LCOS of US$581-843 ($867-1,294)/MWh for residential customers, so if they really valued reliability at $16-30,000/MWh, every household would have batteries. In countries with really atrocious supply, all commercial enterprises have their own diesel genset – very expensive but indication of the real assessment of VOLL.

  4. Peter Farley 6 months ago

    If we take that at face value and a weighted average of $40/kWh, the cost people would have been willing to pay to avoid January’s rolling blackouts would have been about $32 m presumably per year. Over 7 or 8 years that might buy a 250 MW/500 MWh fleet of batteries that might just prevent 2 minutes of downtime per year

  5. Ian 6 months ago

    Reliability of the grid is not one metric but numerous different issues. The article touches on a couple of these but does not really separate out the different aspects of electricity supply reliability.

    For example 1. Reliability could mean the robustness of the transmission network. 1.1Can it withstand fire and wind?
    1.2 Is it vulnerable to large localised fluctuations in demand ie can the lines and transformers carry a wide fluctuation in energy transfers?
    2 reliability of generators
    2.1 is there enough capacity to handle demand at any moment
    2.2 is there a robust energy management system to orchestrate generators , loads and storage?
    3 reliability of the quality of electricity.
    3.1 stability of the AC frequency
    3.2 stability of the waveform and power factor
    3.3 stability of the voltage

    To most lay people reliability means the availability of Sunday roasts or the horror of being stuck in an elevator when you need to pee. So, when the question is asked are you willing to pay extra for reliability? Most would say no and imagine that they could take the stairs or use their mobile phone instead of watching YouTube on the TV, or order a pizza or get a roast chicken from Coles instead of cooking one themselves. The fridge is full of left overs anyway no great loss if the power goes out.

  6. Les Johnston 6 months ago

    There is much more to be gained by integrating technology into reliability valuations. For example, using the network to provide early advice of area shutdowns instead of no warning shutdowns. Integrated smart systems will drive a major shift in community valuations faster than the regulator can adjust to.

  7. Bazz12 6 months ago

    The public generally does not understand reliability. As far as they are concerned it is always there.
    Wait for the screams when it goes off a couple of times a day for an hour.
    Then they will value reliability ! They will remind you that they are voters !

  8. Bazz12 6 months ago

    It would help those such as myself who are not directly in the electricity distribution industry to define abbreviations that are to be used at the start of an article. VCR is today’s example. I am reasonably certain it does not mean Video Cassette Recorder. If the purpose of these articles is to educate the public then a definition would be of great assistance.

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