Economic Consequence Analysis of Electric Power Infrastructure Disruptions: An Analytical General Equilibrium Approach
- Post by: Stephen Gee
- April 28, 2020
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We develop a stylized two-sector analytical general equilibrium model of regional economic adjustment to widespread long-duration electric power outages. Algebraic solutions highlight the relative importance of costless inherent resilience and deliberate costly investment in backup infrastructure capacity in moderating the economy-wide costs of electricity disruptions. Numerically parameterizing the model to simulate the effects of a two-week power outage on California’s Bay Area economy yields modest welfare losses that are substantially smaller than stated-preference estimates of willingness to pay. The model represents a transparent approach to analyzing the tradeoffs between reliability and resilience in electric power provision and utilization.