Economic impacts of planned and unplanned outages

Posted on March 16, 2016  /  0 Comments

In our teaching-focused comparative work on electricity, we found there was a fundamental difference in the way the problem of costs was approached in Sri Lanka and on the sub-continent. In Sri Lanka, the focus was on the costs of NOT having power. In India, the focus was still on the costs of inputs, per se. That is, they cared about the costs of switching on another power source to meet peak demand. On that basis, they got along with load shedding and low prices, around half that charged from Sri Lankan subscribers.

My guess is that the switch in the way of looking at costs happened in 2002, when Sri Lanka experienced horrible planned outages as result of successive government not taking the hard decisions to build generating capacity. I had just arrived from the Netherlands and paid little attention to the publicity. So I found myself crawling on hands and knees to the core of the World Trade Center from my pitch black office. I was reminded of that when I heard today that the WTC backup power had failed today during another planned outage, this time caused by the time needed to get the coal-powered generator back online after the unplanned outage on Sunday. How does one measure the economic costs of foreigners, including I suppose potential investors, stuck in a WTC elevator because this time, even the core was without power?

This 2004 article appears to have taken a run at the problem of estimating the costs of not having electricity:

This paper presents the outcome of the Sri Lanka case study on assessing the economic impact of power interruptions on industry in the South Asia region, comprising the countries of Sri Lanka, Nepal, Bangladesh and India. The technical assessment evaluates the cost to the country’s economy in terms of the industrial loss due to supply interruptions and environmental impacts from standby generation used to supplement the power requirements of the industrial sector. The study found that the main economic impact of the power interruptions, both planned and unplanned, is the loss of output in the industrial sector. In a typical year of power shortages, such as 2001, arising from a deficit in generation capacity, these losses can be as high as approximately US$ 81 million a year, which is approximately 0.65% of the country’s gross domestic product (GDP). Also, the economic impact due to unplanned outages can be around US$ 45 million (0.3% of GDP) in a typical year. On average, these values for planned and unplanned outages are US$ 0.66 and US$ 1.08 per kW h of energy loss, respectively. It is also observed that 92% of the sampled industries have standby generation facilities to satisfy either, in full or partially, their own power requirements, which produced approximately 146 GW h of energy in 2001.

We at LIRNEasia are beginning to explore the question of not having access to infrastructure services. All this time, the focus was on the costs of those services, and on the benefits of having those services. Now that access is approaching universality, it seems the time is right to switch emphasis.

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