Dr. Hao Chen recently had a paper published in the Energy Policy.The paper titled‘Estimating the marginal cost of reducing power outage durations in China:A parametric distance function approach’, was coauthored with Xi Chen, Jinye Niu, Mengyu Xiang from School of Economics and Management, China University of Geosciences, Weijun He from School of Economics and Management, University of Science and Technology Beijing, Sinan Küfeoglu from Department of Industrial Engineering, Istanbul Technical University and Department of Energy Systems Engineering, Bahcesehir University.

Abstract

The increasing penetration of intermittent renewables and the accelerated climate change are challenging the power system operation in China, and understanding the cost of reducing power outage durations is essential in supporting the equipment maintenance, infrastructure investments and regulation policies. Therefore, this study first uses production theory combined with a parametric distance function approach to estimate the marginal costs (MCs) of reducing power outage durations by 1 h. Then, we establish a fixed-effects panel data model to investigate the impacts of different environmental factors on the estimated MCs. Finally, the estimated MCs are applied to the evaluations and designs of interruption compensation prices in the demand response mechanism. The significant findings are that: (1) The national MC shows an increasing trend during the period from 2002 to 2017 in China, ranging from 1.27 billion yuan/hour to 11.63 billion yuan/hour. (2) The MCs vary substantially among different provinces, and provinces with better reliability levels will have higher MCs. (3) The current compensations for power outages are only about 6% to 61% of the estimated MCs, indicating that grid companies would like to pay for the compensations rather than to enhance the system reliability from the supply side.

Other information

Publication Date:2021

Journal:Energy Policy

Journal Issue: 155（2021）

DOI: https://doi.org/10.1016/j.enpol.2021.112366

Read the paper here.