Modeling Dependent Outages of Electricity Power Plants

We propose a novel framework to model dependence of outages of electricity power plants. Our framework allows for commonality in outages to be driven by weather events and fuel shortages. We calibrate our model for power plants in the Electric Reliability Council of Texas and the Western Electricity Coordinating Council regions using a unique dataset of actual outages that we obtained from the North American Electric Reliability Corporation. We find strong evidence of dependence in power plant outages both system-wide, and based on the input fuel of the plants. We illustrate the consequences of outage dependence on the reliability of electricity supply for both regions and evaluate policy implications; e.g. the impact of building additional capacity.