ERCOT presents initial estimates of Value of Lost Load

ERCOT filed its initial Value of Lost Load (VOLL) survey instruments on January 3, 2024. These surveys, designed for residential, small and medium commercial, and large commercial and industrial retail electric customers, present outage scenarios with questions about their potential impact.

The filed survey instruments are not the final versions, which will be presented to customers in electronic format. The final survey instruments will be submitted before the customer deployment phase.

In the PUCT's January 18 open meeting discussion, ERCOT staff covered the VOLL literature review, interim VOLL estimate, and the VOLL survey. The literature review summarized 11 VOLL studies from the U.S. and Europe, identifying the "stated preference approach" as a best practice. VOLL tends to be higher for commercial and industrial customers, especially energy-intensive industrial customers. A correlation was noted between socioeconomic status and willingness to pay.

For the interim VOLL value, The Brattle Group used an econometric model from Lawrence Berkeley National Laboratory, adjusting for ERCOT-specific outage data and customer characteristics. VOLL estimates were established for residential, small industrial and commercial, and large commercial and industrial customers, considering 30-minute, one-hour, and eight-hour outages. Results showed a wide range of VOLL estimates, with the highest in small commercial and industrial customers exceeding $100,000 per MWh, and $9,000 per MWh for residential customers.

Brattle suggested two options for interim VOLL value calculation: taking a weighted average across customer classes or capping the high commercial and industrial value, then applying the same weighted average. Considering different studies, an estimated VOLL of $25,000 to $50,000 per MWh was recommended as interim. ERCOT proposed launching the VOLL survey in mid-March, with the final report expected in August 2024.