Considering extreme outage events in cost-benefit analysis of distribution systems

To find an acceptable level of reliability in distribution systems, cost-benefit analysis using customer interruption costs can be applied. In a case study of a test distribution system, investment in cables instead of overhead lines, aimed to increase reliability, is investigated. In addition to considering average values of reliability indices, tools for risk analysis in the financial industry, value-at-risk (VaR) and conditional value-at-risk (CVaR), are also used for the evaluation. Applying these tools allows for extreme events to be given more weight in the investment decision-making process. Even though these kind of events are very infrequent, the consequences are devastating and extreme cases should be included in cost-benefit analysis. By the help of VaR and CVaR the case study shows that cables can cause higher customer interruption costs for some load points in the system during extreme years.