Trade-offs between system cost and supply security in municipal energy system design: An analysis considering spatio-temporal disparities in the Value of Lost Load

The Value of Lost Load is a key metric to assess the economic impact of power supply interruptions and establish supply security standards within the European Union. Current EU regulations recommend a single average value per country, even though welfare losses from supply interruptions vary significantly across time and space. This study investigates the implications of this simplification by deriving county-level Value of Lost Load estimates at an hourly resolution for the residential sector in Germany through a production function approach. Load curtailment options at different costs are integrated into an urban energy system optimization model to evaluate their effects on system cost and reliability indicators. The findings demonstrate that load curtailment of 0.12% can yield outsized benefits and reduce system costs by 3%, primarily by decreasing storage requirements, thereby alleviating the pressure that is put on the municipal energy systems. Regions with cheaper load curtailment can obtain larger cost reductions, but only at the expense of a disproportionate reduction in supply security. Introducing temporal detail on the other hand results in lower system costs while mitigating customer impacts through fewer curtailed hours and a notable shift towards nighttime periods. Empowering customers through smart infrastructure deployment and tariff reforms to take energy conservation measures is crucial to maximize these benefits. • Hourly-resolved residential Value of Lost Load calculation for all German districts. • Load curtailment offsets storage needs for peak demand events, lowering system costs. • Cheaper load curtailment produces more affordable systems with lower supply security. • Adding temporal detail reduces hours with curtailment and shifts them to the night. • Tariff reform can encourage customer participation to enable load curtailment.