Report Identifies Value Of Lost Load In ERCOT
June 24, 2013
ERCOT might have the highest price cap in the country, but even the $9,000/MWh cap that will hit in 2015 is not based on the “value of lost load” (VOLL), said a report from London Economics. The only economic rationale for setting a price cap that high is that it is costly when the power goes out – so, ideally, the cap would be near the value of lost load, added the report, which was released by the Texas grid operator. Commercial and industrial customers have a VOLL that ranges from $3,000/MWh to $53,907/MWH, the report said. Small C&I customers tend to have higher VOLLs than their larger counterparts because they are less likely to have made backup plans. Residential customers have a VOLL that ranges from $0/MWh to $17,967/MWh, and they are more likely to be impacted by any rolling outages in ERCOT than are industrials, who take service directly from the transmission grid. VOLLs change across time and customer type and are generally higher in the summer. C&I customers put more value on not losing service during the week while residential customers prefer to keep their lights on over the weekend.