Value of Lost Load (VOLL): Literature Review and Adoption Pathways for Alaska

This report supports the Railbelt Reliability Council (RRC) in estimating the Value of Lost Load (VoLL)
in Alaska and integrating it into the Integrated Resource Plan. VoLL ($/MWh) represents the value
customers place on reliable electricity and reflects how much they are willing to pay to avoid outages (or
the amount they would accept as compensation to endure an outage). Integrating VoLL into planning can
help the RRC evaluate the costs and benefits of reliability-focused transmission investments and assess the
economic impacts of short, targeted outages such as those caused by underfrequency load shedding.

The Alaska Center for Energy and Power (ACEP) examined theoretical and empirical VoLL estimation
approaches used nationally and internationally, including in islanded and remote communities. Globally,
four main approaches emerged: (1) survey-based methods that directly capture customers’ willingness to
pay (WTP); (2) revealed preference methods based on observed behavior; (3) macroeconomic models that
relate output or GDP to electricity use; and (4) case studies that analyze real-world outage impacts.
Crucially, the literature consistently reports that there is no universal VoLL: estimates vary widely by
methodology, customer class, outage characteristics, backup availability, and local context. Thus, a range
of VoLL estimates should be used to capture the customer mix, outage durations, and event types being
evaluated for reliability planning and market design—particularly in Alaska due to its harsh climate, limited
grid redundancy, seasonal economy, unique customer mix, and high curtailment exposure.

ACEP surveyed three commercial and industrial (C&I) customers in Fairbanks in September 2025. These
surveys served to field test an Alaska-adapted version of the survey questions that underlie the ICE 2.0
model and provided insights into businesses’ outage tolerance, operational impacts, and economic losses.
Though limited in scope, these surveys provided initial VoLLs for C&I customers in Alaska, suggesting
pronounced variation in outage tolerance and cost sensitivity. Outage tolerance declined sharply with
duration and even short interruptions could be disruptive, particularly for businesses relying on electric
heating or sensitive equipment. Per-MWh VoLL estimates declined with outage length, consistent with
national studies, except when infrastructure damage increased losses. These early findings illustrate how
customer characteristics influence outage costs in Alaska and highlight the need for regionally
representative data to refine VoLL estimates for the Railbelt.