Cost of Deficit Function: Conceptual and methodological aspects with an evaluation of impacts on the operation and expansion of the Brazilian electricity sector

Whenever an electricity system fails to attend its demand, several impacts are verified, mainly economic and social costs. For the Brazilian Electricity Sector — BES these costs are called electricity deficit marginal cost and its discretization in steps are represented as a function named Cost of Deficit Function — CDF. In Brazil, optimization models are used for operating and planning the expansion of its electric power system through the search of the minimum operation marginal cost. The CDF, which represents how much different economic sectors are willing to pay for electricity, plays a strategic role for that optimization, since it is a restriction of the objective function. The purpose of this work is to recalculate the CDF considering the latest input data for it and evaluate its impacts on the BES operation and expansion planning, as well. Furthermore, it also evaluates the operation sensitivity to the variation of the CDF, both with a four-step curve and a flat curve.