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ID:
166476
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| Summary/Abstract |
Distributed energy resource technologies (DERs) allow consumers to generate, trade, reduce, and shift their electricity consumption, largely bypassing traditional utilities. DERs can reduce consumer reliance on the grid, and in the most extreme scenario self-sufficient consumers could disconnect from the grid and avoid all external charges. However, since most DERs delivers energy, but not reliable capacity, it would be in the interests of most of these consumers to stay connected to the networks, in the event their system fails. Such a ‘pay as you go’ price scheme would not reflect the opportunity cost of electricity firms' sudden idle infrastructure though
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| 2 |
ID:
176710
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| Summary/Abstract |
High penetration of distributed technologies would call for a different way to manage electricity reliability for semi-independent households. One option could be to allow customers to withdraw power from the grid when their home system fails. This behavior, however, could constitute an existential threat for utilities: if consumers use the network less, and continue to pay according to their usage, the utility might be unable to recover its costs. This paper investigates whether the creation of a reliability insurance market would help to deal with these concerns. We propose a business model where utilities offer insurance to semi-independent, yet risk averse households, against the prospect of a blackout, when a pay as you go system is no longer available. With the use of an Agent Based Model, we test if contracts from this market can converge into a theoretical optimal contract where bounded perception of risks and losses impact the price of insurance and potential revenues of utilities. We find that such a market could exist as consumers efficiently transfer all or a portion of their risk to the utility, based on their willingness to pay and risk profiles, which allows them to avoid blackouts at the margin.
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