Has the electricity network become more weatherproof? Empirical estimate of interruption costs

Abstract

This thesis attempts to estimate the effect of investments that Finnish electricity distribution companies have made into their electricity network to improve the service quality. This is a relevant question because it is possible Finnish rate-of-regulation model might drive companies to make inefficient investments, which would again lead to unnecessarily high transmission prices.

This paper provides an estimate for potentially avoided costs of power cuts, using storms and ground cabling percentages. Estimated avoided costs are around 200 million euros compared to the hypothetical situation that power grid ground cabling levels remained the same than a decade ago. Investments in ground cabling certainly have an impact to interruption cost.

When comparing the avoided costs to investments, there is not clear evidence that distribution companies would have been overinvesting. Current regulation system seems to be successful in this matter. However, results are based on somewhat aggregate data and several assumptions.