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Investigation of the Value of Lost Load

The Authority is progressing a review, initiated by the Electricity Commission, of the appropriateness of the current value of lost load (VoLL) (also sometimes referred to as the value of unserved energy (VoUSE)). The review involves undertaking a study to determine a value, or range of values, relevant to New Zealand electricity consumers. Appropriate VoLLs are a critical input into decisions about investments in the New Zealand electricity system, as they are used to estimate the economic impact on consumers of power outages.

The Electricity Industry Participation Code (Code) contains a VoLL of $20,000 / MWh (with $10,000 / MWh and $30,000 / MWh being applied for sensitivity analysis). In 2008 the Electricity Commission commenced a project to investigate whether these values are fit for purpose. Stage 1 of the project consisted primarily of conceptual analysis and research on VoLL. Stage 2, undertaken in 2010, consisted of a major survey of residential, commercial, agricultural and industrial consumers. The survey covered approximately 14,000 New Zealand electricity consumers. The Authority has now commenced the third and final stage of the VoLL project, which consists of further, smaller surveys that build on the work undertaken in 2010, followed by consultation on any Code amendments arising from the findings coming out of the survey analysis.

Stage 1

On 3 September 2008, the Electricity Commission issued a request for information (RFI) for an investigation of the value of lost load (also referred to as unserved energy) (the VoLL project).

Tender process

On 30 September 2008, the Electricity Commission released a request for proposal for stage 1 of the VoLL project noting that it would tender separately for stages 2 and 3 with a single RFT.

A report relating to the value of lost load, undertaken for VENCorp in Victoria, Australia, was appended to the RFT for general information purposes.

On 12 November 2008 the Electricity Commission engaged Concept Economics Pty Ltd and the Centre for Advanced Engineering (CAENZ) to provide consultancy services to the Electricity Commission for Stage 1 of the VoLL project.

Report

The output of stage 1 of the VoLL project was a report by Concept Economics and CAENZ.

Stage 2

Tender process

In November 2009, Strata Energy Consulting Limited was engaged as a preferred supplier of services for stages 2 and 3 of the VoLL project.

A key element of stage 2 of the investigation was a survey of New Zealand electricity consumers. In January 2010, a request for proposal was released for provision of services relating to the actual survey.

In March 2010, UMR Limited was engaged for the provision of services relating to undertaking the survey.

Surveys

A large cross-section of electricity consumers were surveyed in stage 2.

Electricity consumers were categorised according to whether they were residential or non-residential, with the non-residential consumers categorised further by consumption, in accordance with the following levels:

  • Non-residential small: less than 200,000 kWh per annum
  • Non-residential medium: 200,000 kWh up to 999,999 kWh per annum
  • Non-residential large: 1 GWh per annum and above.

A mail survey was not seen as appropriate for very large electricity consumers and hence approximately 35 major electricity users were surveyed via face-to-face interviews.

A trial (or pilot) survey took place in March and April 2010.

Following completion of the pilot survey, the survey forms were refined and a large survey was undertaken during July and August 2010.

The final survey forms can be found below:

Survey results

Significant analysis was undertaken of the completed survey questionnaires received by the Electricity Commission. The analysis indicated that using a single VoLL to measure the value that electricity consumers place on unserved energy is likely to be inappropriate.

Stage 3

Surveys

Commencing in August 2012, the Authority is undertaking similar, but smaller, surveys to the one undertaken in 2010. The purpose of these follow-up surveys is to validate or improve upon the findings in the 2010 survey, as well as test the development of a VoLL for a region of New Zealand, rather than for the entire country.

Next steps

Following completion of these surveys, the Authority intends to consult on the Code implications of the VoLL project findings.

Back to top Last updated on 1 October 2012