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The power landscape is growing ever more complex due to, among other things, legislation and targets defined at several levels which tend to influence (and sometimes contradict) one another. One can wonder if the different economic agents can still see the wood for the trees and if the lights will stay on all the time. The first in line to worry is the federal government, since it carries the responsibility of permanently guaranteeing the security of supply. In times of increased electricity production by variable energy sources 1 (solar PV, wind) and of distorted investment signals, how to guarantee security of supply is not obvious. The absence of investment in sufficient reserve capacity and – in the worst case scenario – inadequacy of generation capacity may lead to soaring societal costs. This Working Paper focuses on the specific event of things going wrong in spite of all initiatives and mechanisms put in place: a national blackout paralyzing the entire Belgian economy for one hour and its price tag are scrutinised.
Recent events point to the possibility that Belgium’s current electricity system might not be totally immune to failures. On top of that, attracting new investment in power capacity seems arduous given past and future market conditions. Hence one cannot exclude the system not being able to withstand a potential breakdown at some point. Under such circumstances, terms such as “security of supply” and “system reliability” gain importance and lead utilities, grid operators and governments alike to devote time and resources to reflecting on the optimal level of supply and system reliability. This paper is intended to contribute to the debate by determining the monetary impact of a blackout on the national territory of Belgium.
In order to identify the magnitude of the damage that the Belgian society may experience following a complete blackout, a simulation tool is used that was developed by the Energieinstitut of Linz (Austria). This tool, called the Black-out Simulator, was built under the Seventh EU Framework Programme. It allows calculation of the monetary impact of a blackout on different geographical scales (European Union, 27 Member States and provinces). Using this methodology, the cost of a one-hour blackout in Belgium during a winter working day2 while all companies are active is estimated to be around EUR 120 million. Compared to a rough estimate of what could be the hourly GDP, this damage represents over half of what is being produced nationally in one hour. Industry seems to be hurt the most, with estimated damage of some EUR 60 million, followed by the tertiary sector, with some EUR 50 million. Households, although not ‘true creators’ of economic value, also bear the consequences of a large scale power deficit. Their main loss is related to the fact that they can no longer spend their leisure time as they had originally planned. Loss of leisure means loss of utility, in this case amounting to EUR 6 million (representing 5% of the total societal damage).
Compared to the national (not delivered) electricity bill (+/-EUR 1.9 million), the damage borne by society is significantly larger. The value of lost load (VOLL), a term that is often used in the literature to designate the true value of electricity that cannot be consumed due to a power outage, equals EUR 8.3/kWh. Put next to the average price households pay per kWh of electricity consumed, the VOLL is approximately 40 times higher; for industry, even 80 times. Spatial allocation of this damage points to a difference in costs in densely populated and economically very active regions on the one hand (such as Antwerp or the Brussels Capital Region) and sparsely populated and less economically active regions on the other (such as Luxemburg). After 5pm, the damage strongly decreases to reach a level that equals half of the working hours’ loss: around EUR 60 million would be wasted when a blackout occurs between 9pm and 6am. During this period, households assume a bigger proportion of the damage (14%). Next to the Black-out Simulator results, three alternative methods are applied, leading to an interval of societal damage of between EUR 61 million (using a GDP-based methodology) and EUR 278 million (using a methodology developed by the French transmission system operator RTE).
1. The concept ‘variable’ is used to mark irregular (non-dispatchable), intermittent production.
2 Between 8am and 5pm
Energy > Specific energy issues