The value of electricity reliability: Evidence from battery adoption

To avoid electric-infrastructure-induced wildfires, millions of Californians had their power cut for hours to days at a time. We show that rooftop solar-plus-battery-storage systems increased in zip codes with the longest power outages. Rooftop solar panels alone will not help a household avert outages, but a solar-plus-battery-storage system will. Using this fact, we obtain a revealed-preference estimate of the willingness to pay for electricity reliability, the Value of Lost Load, a key parameter for electricity market design. Our estimate, with an average of $4,980/MWh, suggests California’s wildfire-prevention outages resulted in losses from foregone consumption of $406 million to residential electricity consumers. • We estimate the impact of power outages on the household adoption of solar-plus-battery systems, an emerging technology that serves as a defensive investment to partially or fully avoid outages. • We study Public Safety Power Shutoffs, used to avoid electric-infrastructure-induced wildfires. • The outages affected millions of Californians for hours to days at a time. • The observed adoptions of solar-plus-storage allow us to estimate the willingness to pay to avoid power outages for residential customers, the so-called Value of Lost Load, which we estimate to be approximately $5,000/MWh.