Regulation for energy system resilience needs good metrics – CERRE

A new paper from the Centre on Regulation in Europe (CERRE) points the way to regulatory pathways for fostering resilience in the energy system.

As the occurrence of extreme weather events has increased with the potential for serious damage to power systems among other critical infrastructures, ‘resilience’, i.e. the ability to withstand such events, has become increasingly important.

While improving the resilience of power systems is obviously important, there are trade-offs between costs and benefits and the benefits of improved resilience are not well understood, the CERRE paper states.

The paper points out that EU energy legislation addresses several sides of resilience in a targeted and efficient manner, although the approach is often limited to specific aspects, focusing on energy system performance, i.e. adequacy, security of supply, reliability and frequency stability.

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Thus a more holistic and comprehensive approach should be promoted. Moreover, the specificities of the different energy carriers and of the different energy production types must be acknowledged.

Gas and electricity transport assets are impacted differently by natural disasters. Similarly, distributed renewable generation, nuclear power plants and hydropower plants are not subject to weather stress conditions in the same manner.

A central question in terms of regulatory approach is to know whether ‘resilience’ should be part of the economic regulatory model for operators with economic incentives to invest in it or whether it should not be monetised and therefore regulated as a separate issue, the paper comments.

Metrics for resilience

The paper highlights cost-benefit analyses (CBAs) as crucial for investments in transmission and distribution networks.

However, CBA guidelines tend to use reliability metrics such as SAIDI and SAIFI combined with estimates of the ‘Value of Lost Load’ or in the case of gas the ‘Cost of Disruption of Supply’, which are aimed at short-term events and small-scale impacts.

A metric measuring and/or monetising resilience needs to consider the low probability, but high impact and long duration aspects of extreme weather events.

The consequence is that operators may not be adequately incentivised to improve resilience. In particular, the ability to recover from shocks may not be taken sufficiently well into account.

“Good metrics for measuring resilience are extremely important: without such metrics, resilience aspects are likely to be underestimated and inadequately incentivised.”

The paper concludes that multicriteria approaches using several indicators, where some may not be monetised, may represent a way forward. But then it needs to be clear how resilience is considered in regulatory decision making.

One approach that appears to have promise is a valuation method which incorporates duration-dependent customer damage functions into planning and operation models to value (monetise) resilience. But further research is required before this or other possible resilience metrics are included in regulation.