Loss of Load Expectation (LOLE) represents a metric which could be used to measure security of supply as well as to set a reliability standard in the electricity market.

         
          
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According to the Methodology for calculating the value of lost load, the cost of new entry and the reliability standard in accordance with Article 23(6) of Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (Annex I to the ACER Decision No 23/2020 of 2 October 2020 on the Methodology for calculating the value of lost load, the cost of new entry, and the reliability standard (VOL CONE RS)) ‘loss of load expectation’ (LOLE) means the expected number of hours, in a given geographic area and in a given time period, during which capacity resources are insufficient to meet the demand and hence positive ENS (electricity not served) occurs. 

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LOLE represents the number of hours per annum in which, over the long-term, it is statistically expected that supply will not meet demand

 
LOLE represents the number of hours per annum in which, over the long-term, it is statistically expected that supply will not meet demand (DECC Reliability Standard Methodology, July 2013, p. 3). 

The most common LOLE value is three hours per year. As an example, the three hours of reliability standard indicates a level of security of supply, where it is expected that during the year in 99.97 percent of the time there is sufficient capacity to meet the demand (Security of EU electricity supply in 2021: ACER Report on Member States approaches to assess and ensure adequacy, October 2022). The said report of October 2022 notes that fifteen EU Member States have set the reliability standard as LOLE, ranging from one hour in Sweden to fifteen hours in the Czech Republic. 

This is a probabilistic approach – that is, the actual amount will vary depending on the circumstances in a particular year, for example how cold the winter is; whether or not an unusually large number of power plants fail to work on a given occasion; the power output from wind generation at peak demand; and, all the other factors which affect the balance of electricity supply and demand.

It has been underlined by ENTSO-E in the document Frequently Asked Questions on ERAA 2021 (p. 2), which reads: “It has to be noted that any LOLE value is essentially a risk assessment and an economic trade-off to be evaluated by policy makers and regulators. A non-zero LOLE value in an adequacy assessment is by no means an actual prediction of outage expectations as exceptional measures can always be taken, but flags the likelihood of extreme scarcity”. 

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Commission Staff Working Document, Accompanying the document Report from the Commission, Interim Report of the Sector Inquiry on Capacity Mechanisms {C(2016) 2107 final}, 13.4.2016 SWD(2016) 119 final, p. 60 

Putting LOLE in perspective 

LOLE values are generally deduced from a much longer term average. The 3 hours on average per year LOLE standard in France for instance is derived from a calculation that predicts a 30 hour disruption every ten years. To put the LOLE standards into perspective, even the most relaxed standard currently applied in Europe, of 8 LOLE-hours per year, translates into a system security level of 99.90% - i.e. 99.9% of the time no one will be involuntarily disconnected.

Moreover, it is important to realise that LOLE hours should not be viewed as hours in which a major blackout takes place leaving entire market areas without power, but may be solved by TSOs without major impacts, i.e. by using instruments such as temporary voltage reductions or the selective disconnection of large industrial users. When not seen in perspective, a Loss of Load Expectation may give the wrong impression that blackouts are expected.

Indeed, for most Member States network failures, for example after weather events that damage network infrastructure, have historically led to far more involuntary unmet demand than generation inadequacy.

 

However, it is important to note when interpreting this metric that a certain level of loss of load is not equivalent to the same amount of blackouts; in most cases, loss of load would be managed without significant impacts on consumers.

Commission Staff Working Document, Accompanying the document Report from the Commission, Interim Report of the Sector Inquiry on Capacity Mechanisms ({C(2016) 2107 final}, 13.4.2016 SWD(2016) 119 final) refers to a calculation of a loss of load probability (LOLP) as a more sophisticated method to measure generation adequacy.

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See also:

 

Cost of new entry (CONE)

Pursuant to the said document (p. 56) LOLP quantifies the probability of a given level of unmet demand over a certain period of time. The said Commission Staff Working Document explains, moreover, often "LOLP is expressed as a loss of load expectation (LOLE) which sets out the expected number of hours or days in a year during which some customer disconnection is expected. (for example, if 1 day in 10 years some customers would need to be disconnected, LOLE would be 0.1 days or 2.4 hours). This probabilistic approach can take into account variations in demand over the years as a result of climate fluctuations."

LOLP/LOLE do not measure the total shortfall in capacity that occurs at the time when there are disconnections, and neither LOLP/LOLE nor capacity margins measure the amount of unmet demand. This would require a measurement of expected energy not served (EENS) which would be expressed in MWh over a specific time period (eg. a year).

 

 

Regulation EU 2019/941 of the European Parliament and of the Council of 5 June 2019 on risk-preparedness in the electricity sector and repealing Directive 2005/89/EC, Recital 12

A common approach to electricity crisis prevention and management also requires that Member States use the same methods and definitions to identify risks relating to the security of electricity supply and are in a position to compare effectively how well they and their neighbours perform in that area. This Regulation identifies two indicators for monitoring the security of electricity supply in the Union: ‘expected energy non-served’, expressed in GWh/year, and ‘loss of load expectation’, expressed in hours per year. Those indicators are part of the European resource adequacy assessment carried out by the ENTSO for Electricity, pursuant to Article 23 of Regulation (EU) 2019/943. The ECG should carry out regular monitoring of the security of electricity supply based on the results of those indicators. The Agency for the Cooperation of Energy Regulators (ACER) should also use those indicators when reporting on Member States' performance in the area of security of electricity supply in its annual electricity market monitoring reports, pursuant

 

 

The EENS thus also makes it possible to monetize the shortfall in a system where Value of Lost Load (VoLL) indicator has also been calculated since the amount of EENS can then be multiplied by VoLL. In the EU Member States that calculate a LOLE in the context of their adequacy assessment, the standard is often expressed as a tolerated level of LOLE-hours. Targets generally range from 3 to 8 hours (Commission Staff Working Document, 13.4.2016 SWD(2016) 119 final, p. 58). For example, the Belgian LOLE refers to a 95th percentile standard according to which during severe conditions of which the chance is 5% (i.e. a very cold winter that occurs once in 20 years) the LOLE must be inferior to 20 hours. The reliability standard set for the Polish electricity market is equal to a LoLE of 3 hours per annum, this translates to a system security level of 99.97% (see European Commission Decision of 7 February 2018 on Polish capacity mechanism, C(2018) 601 final (State aid No. SA.46100 (2017/N)), p. 9).

The so-called 'Winter Energy Package' applies LOLE as the key metric for European resource adequacy assessments. The said estimations cover the overall adequacy of the electricity system to supply current and projected demands for electricity. Article 19(4)(h) and Article 19(5)(c) of the Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast) of 30 November 2016 (COM(2016) 861 final 2016/0379 (COD)), required the use of LOLE (and EENS) as reliability standard indicators (the rule implemented in Article 25(3) of the final Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (recast)). According to Article 23(5)(j) of the said Regulation (EU) 2019/943, the European Resource Adequacy Assessment (ERAA), carried out by the ENTSO for Electricity on an annual basis, is to be based on a transparent methodology which must include, among other indicators, also the LOLE. Regulation 2019/943 further sets out a detailed framework for the assessment of resource adequacy. This includes meticulous steps to identify and address any potential resource adequacy concerns. As part of this framework, ENTSO-E has been tasked with developing a methodology for calculating VOLL, the CONE and the reliability standard.  Pursuant to Article 25(2) of the Regulation 2019/943, the reliability standard shall be set by the EU Member State or by a competent authority designated by the Member State, and shall be based on the methodology for calculating the reliability standard. Pursuant to Article 23(6) and (7) of the Regulation 2019/943, ENTSO-E shall submit the proposal for the VOLL/CONE/RS methodology by 5 January 2020 for ACER’s approval in accordance with the procedure set out in Article 27 of the Electricity Regulation. As specified in Article 27 of the Regulation 2019/943, within three months of the date of receipt of this proposal, ACER shall either approve or amend it. In the latter case, ACER shall consult ENTSO-E before approving the amended proposal.

According to the said ACER document of October 2022: “15 EU Member States have set a reliability standard defined as loss of load expectation (LOLE). The most common LOLE value is 3 hours per year implying that in 99.97 percent of the time there is sufficient capacity to meet demand”.

 

 

Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (recast)

 

Article 25

Reliability standard

1.When applying capacity mechanisms Member States shall have a reliability standard in place. A reliability standard shall indicate the necessary level of security of supply of the Member State in a transparent manner. In the case of cross-border bidding zones, such reliability standards shall be established jointly by the relevant authorities.

2.The reliability standard shall be set by the Member State or by a competent authority designated by the Member State, following a proposal by the regulatory authority. The reliability standard shall be based on the methodology set out in Article 23(6).

3.The reliability standard shall be calculated using at least the value of lost load and the cost of new entry over a given timeframe and shall be expressed as ‘expected energy not served’ and ‘loss of load expectation’.

4.When applying capacity mechanisms, the parameters determining the amount of capacity procured in the capacity mechanism shall be approved by the Member State or by a competent authority designated by the Member State, on the basis of a proposal of the regulatory authority.

 

 

 

 

 

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