A proposed LOSBE as a generation “reliability” index for deregulated electricity markets

This paper presents a “Loss of Social Benefit Expectation” (LOSBE) method for measuring the social value of power system production. It is defined as the difference between the societal benefit for the consumption of a certain amount of electricity and the cost of supplying the same amount of electricity, adjusted for power losses. The paper argues that traditional generation reliability indices, such as the LOLP and LOLE, may not be adequate for deregulated electricity markets because they are evaluated at a fixed price for a certain time period. In a deregulated electricity market, price may change rapidly even within a day to reflect variable cost such as marginal cost and other market conditions. Demand varies as a function of prices and this makes the LOSBE a more reasonable measure of the value to the society of generating resources