Berkeley Lab estimates sustained electric power interruptions cost the U.S. approximately $44 billion annually—a 25% increase since 2006.

October 4, 2018

Interest in electricity reliability and resilience in the United States has increased dramatically since Berkeley Lab first estimated the national cost of sustained power interruptions in 2006. “Yet, we’re not aware of any peer-reviewed literature on the economic impacts of these power interruptions since our prior work” says author Kristina LaCommare.

This report presents an update of our 2006 estimate of the cost of power interruptions to U.S. electricity customers and is based on the best data available in the public domain. Specific enhancements made to this report include the following -- the use of more consistently reported reliability metrics using the IEEE Standard 1366 as reported in DOE/EIA Form 861, use of updated individual outage costs based on a broader pool of utility-administered customer surveys including a more sophisticated statistical modeling approach, and consideration of the vulnerability of customers to utility service interruptions.

Key Findings

  • The total U.S. cost of sustained power interruptions is $44 billion per year (2015-$) — 25% more than the $26 billion per year in 2002-$ (or $35 billion per year in 2015-$) estimated from sustained interruptions in our 2006 study. Sustained power interruptions, as defined by IEEE, are interruptions lasting more than 5 minutes.
  • The majority of the costs (70%) are borne by customers in the commercial sector. This is due to the high cost of power interruptions on a per customer basis coupled with the large number of customers in this sector. The industrial sector accounts for 27% of the total cost while the residential sector accounts for only 3% of the total cost. Despite the fact that 90% of all customers are residential, the direct economic costs they experience on a per customer basis are low. 
  • Accounting for customers who take extra measures to ride-through power interruptions by installing backup generators results in an 18% decrease in the estimated cost of sustained interruptions.

Putting this Study in Perspective

It is important to keep in mind that the cost estimate we present is not intended to represent the amount of money that needs to be spent or even should be spent in the U.S. to eliminate all costs related to power system reliability. It is neither economically viable nor technically feasible to invest billions of dollars to create an electricity system free from power interruptions. Instead, this work is meant to put into perspective the decisions that utilities, regulatory agencies, local government, and policy makers need to make when prioritizing the needs and safety of U.S. electricity customers.

In this regard, we believe that it is useful to recognize that addressing the costs of power interruptions is actually a shared responsibility involving multiple entities. Often, the overall responsibility for managing reliability rests with the utility, which in conjunction with the regulator or oversight authority, then determines how much to spend on efforts such as storm hardening, equipment upgrades, or automated outage-management systems to maintain a standard of reliability for customers. However, in some cases, the costs are more appropriately addressed jointly by the utility in conjunction with the local, state, or even federal government, especially when the cause involves severe or extreme weather, which affects more than just the electric infrastructure of a community or region. It is also important to keep in mind that costs can be addressed, as we have shown, when customers take direct action by investing in mitigation options such as installing a back-up generator.

Additional Information

For more information, contact Kristina LaCommare (510) 486-4718, KSHamachi@lbl.gov.

A link to the report can be found here.

This study was funded by the U.S. Department of Energy’s (DOE) Transmission Permitting and Technical Assistance Division of the Office of Electricity.

Berkeley Lab is a U.S. Department of Energy national laboratory located in Berkeley, California. It conducts unclassified scientific research and is managed by the University of California. Visit our Website at http://www.lbl.gov.

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