Determining the 'Value of Lost Load' of Electricity in the Netherlands
On average, Dutch electricity consumers are willing to pay around 69 thousand euros to avoid a power failure the size of one MWh. Broken down by different types of electricity consumers, we find a range that varies from around 20 thousand euros per MWh for industrial SMEs to more than 100 thousand euros per MWh for companies in the transport sector. This willingness to pay is known as the Value of Lost Load and is a useful input for determining the optimal balance point between securing electricity supply and ensuring its affordability.
The Value of Lost Load (or ‘VoLL’) is a quantitative measure of electricity customers’ willingness to pay for security of supply. The VoLL is a useful input for determining the optimal balance point between securing electricity supply and ensuring its affordability.
The aim of this study was to determine the Dutch VoLL expressed in euros per MWh for the Dutch Authority Consumer & Market. Our approach to determining the VoLL followed the ACER methodology and fleshed it out where necessary. The main methodological choice we made was to determine electricity customers’ willingness to pay using a conjoint analysis and vignette experiment.
We determined the VoLL based on the load shedding sequence used by national and regional grid operators in the event of a power outage. This load shedding sequence determines which type of electricity consumers are decoupled from the grid earlier than others during a power outage. For a typical power outage, the national VoLL is around 69 thousand euros per MWh. For a power outage with a magnitude of 10 percent of the national electricity consumption, this corresponds to a total economic loss of about 87 million euros. We also looked at the VoLL of different consumer segments (e.g., different types of households and businesses). The range of these consumer-specific or so-called ‘sectoral’ VoLLs is 20 thousand to 105 thousand euros per MWh.
The Dutch VoLL is found to be significantly higher than those of other EU member states whose VoLLs have been disclosed. In our study, we consider possible explanations for these differences.
For more information, please read our full report (pdf).