True Cost of Major Power Outages Remains a Mystery, Report Finds

AUSTIN, Texas – As lawmakers grapple with the aftermath of a generational snow and ice storm that knocked out electricity, heat and water to millions of Texans for the better part of a week, a recently released report finds that even years after disasters occur, the complete costs of major power outages remain unknown.

The report, authored by researchers from The University of Texas at Austin and Lawrence Berkeley National Laboratory, studied major outages caused by weather events in Texas and five other states in recent years. In each instance, the costs of repairing the electrical grid were clear and well documented. But, lacking in these estimates were the costs to consumers who sat without power for days at a time and businesses that were unable to continue operating.

“We have a very incomplete picture of the full economic cost of big power outages,” said Ben Leibowicz, an assistant professor in the UT Austin Cockrell School’s Walker Department of Mechanical Engineering who co-authored the report. “Very relevant to the recent blackouts in Texas, we find that people aren’t really estimating the costs borne by electricity customers of being without power for a long period of time.”

Regulations play an important role in this information disparity. The data for grid repairs is so robust in the Texas case study, which focused on two utilities responding to Hurricane Harvey in 2017, because the utilities had to convince regulators of the need to raise rates to recover their costs.

This process in Texas involves hearings, which are sometimes contested. Utilities have to supply significant data to justify charging more.

Texas, and many other states, don’t have regulations in place that mandate utilities to consider human and business interruption costs from effectively being shut down for extended periods due to power outages. According to the report, these costs don’t have a direct impact to the utilities themselves, so there’s no incentive to take them into account.

However, options exist to understand costs customers face due to shorter duration outages lasting 24 hours or less. Lawrence Berkeley National Laboratory created a tool that estimates these costs. But, Leibowicz said, this type of tool does not consider the indirect costs – ripple effects across the broader economy – or the impact of longer outages.

Because utilities aren’t required to consider the human and societal implications of major outages, they’re not getting the full picture of costs and benefits of significant infrastructure investments, Leibowicz said.

“It’s easy to imagine that utilities are under-investing right now because they are only factoring in part of the costs and benefits,” he said. “If we could get them to internalize the broader cost to customers and society into their decision-making, then we might see quite a bit more investment in grid resilience.”

The report, authored in November, was funded by the U.S. Department of Energy’s Office of Electricity. In addition to Hurricane Harvey in Texas, the researchers examined Hurricane Sandy in New York, a series of hurricanes in Florida, wildfires in California, a derecho storm event in Maryland and snow and ice storms in New Hampshire. Leibowicz and Qianru Zhu, a doctoral student in the Cockrell School’s operations research and industrial engineering program, led the UT Austin portion of the research.

Read the full report online here.

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