Economic Perspectives on Power System Dependability

Abstract

Electricity reliability is a foundational element for modern economies, yet its economic valuation and the optimal mechanisms for ensuring it remain complex challenges. This article explores the economic dimensions of power system dependability, examining the costs of unreliability, the efficacy of various market designs and regulatory frameworks in promoting adequate investment, and the evolving considerations driven by decarbonization and distributed energy resources. Drawing upon a comprehensive review of economic literature, we discuss the methodologies for quantifying the Value of Lost Load (VOLL), analyze the performance of capacity markets and traditional utility regulation, and highlight the implications of renewable energy integration for grid stability. The paper synthesizes insights into the drivers of outages, their multifaceted impacts on households and industries, and the policy levers available to enhance grid resilience. Ultimately, it underscores the necessity of robust economic frameworks to guide investment and operational decisions in a rapidly transforming electricity sector, aiming to balance reliability imperatives with efficiency and sustainability goals.